Advice that helps a business avoid a commercial mess is much cheaper than the cost of cleaning up that mess after the event. Following the introduction of the UK’s Modern Slavery Act three years ago, and the increasing number of news stories exposing modern slavery and human trafficking abuses across various sectors, increasing numbers of businesses are recognising the risks associated with human exploitation in their supply chains. However, due to the inherent complexity of extensive and intricate supply chains – and the many reasons why modern slavery may exist within them – when it comes to taking steps to eradicate abuses many feel it is too difficult, too expensive, too time consuming. This leaves those businesses at risk.
Penningtons Manches partner Chris Syder and Safe Space Collaboration founders Marion Durose and Sheila Bates discuss how facilitated meetings between companies and their suppliers, based on the principles of mediation, can reduce those risks, help businesses fulfill their responsibility to respect human rights and avoid the cost and risks of litigation and/or crisis management to protect their brand.
Why should modern slavery concern business?
When leading companies consider risks to the business, their senior executives focus on finance, bribery and corruption, information security, privacy, speed of innovation and technological change. However, increasingly human rights abuses and the crimes of modern slavery are being included on the risk agenda because businesses operating in the formal economy and/or relying on a supply chain web that is in fact operating in the informal economy are vulnerable to greater of risk of human rights abuses and modern slavery crimes.
Globalisation and megatrends around the casualisation of labour, unprecedented migration levels, poor enforcement of worker rights, ageing populations and the constant commercial requirement to buy more at lower costs has contributed to increased abuses of human rights around the globe. In the UK, public sector organisations, food and agriculture, hospitality and social care, construction and mining, to name a few, are all industries at increasing risk from labour shortages and therefore at risk of human rights abuses. Whatever business you are involved in you are likely to encounter modern slavery within your supply chain, whether that is the product or service you provide to customers or it is the products and services you use going about your activities.
Modern slavery is damaging commercial organisations
Reputations are built on trust earned from stakeholders. Trust is secured where a business not only performs well and profitably against financial and efficiency targets but also against its commitment to employees, customers, suppliers and the wider community and civic society. Retailer Sports Direct, for example, performed well against financial targets and the market but when it was exposed as having a poor culture towards staff in its warehouses, the resulting damage to reputation and consequent negative effect on share price was evident and expensive. That Sports Direct was then shown to have modern slaves working in their warehouse further damaged its brand reputation and by association that of its owner. Equally, multinational fruit business, Fyffes, (Fyffes has been suspended from their Ethical Trade Initiative (ETI) membership), has been a focus for the GMB Union, fair trade organisation Banana Link and the media for some years due to their poor industrial relations with farmers and workers in some of the most deprived parts of the world. Retailers John Lewis Partnership and Next were embarrassed by their trading association with Kozee Sleep, a Derbyshire bed manufacturer, whose owner was jailed for people trafficking after forcing Hungarians to live in squalor and work 80 hour weeks for £10. UK construction companies working in Qatar, UK garment companies with supply chains in Bangladesh, the list of businesses affected by modern slavery is growing.
Once sullied by a connection with modern slavery or human rights abuses, it is difficult for any organisation to wash the stain out. Social media is very effective at spreading bad news fast, so what would once have been a few column inches in the middle of a newspaper can now take on a life of its own and attract attention from a broad and international audience.
Business continuity and resilience are the two sides of the same coin. Supply chain webs that collaborate to share information and horizon scan together to anticipate what and where challenges may arise, and are proactive in dealing with that information are more likely to be resilient to crises. Where incidents occur, collaborative supply chain webs that learn through their shared experiences and learnings are most likely to see continuous improvements in their organisations ability to deal with the risk of modern slavery challenges.
Beyond the annual modern slavery statement, why have so many businesses avoided developing and implementing human rights strategies?
The expression “you can’t eat all the elephant at once” is apt. The subject is challenging and complex and organisations often do not know where to start which is further compounded by inertia or lack of effective engagement at board level and/or by senior executives. There is often a lack of resource and capability in terms of professionals who can facilitate the developing and implementing of human rights strategies within businesses. This results in organisations having limited visibility of the level of risk they are involved with or of the level of investment required to be effective in proactively tackling the risks. Ethical trade, human rights and modern slavery are often viewed as topics that can be dealt with as a tick box exercise through a social compliance audit rather than establishing, implementing and monitoring policies and procedures to ensure an effective strategy is in place.
Audit alone will not remove the risk of modern slavery
Responses to risks should be proportionate, competent and constructive, and understood across multiple business functions. This builds resilience and drives continuous improvement within the business and through the supply chain web. In the long term it is not sustainable for businesses to terminate contracts with trading partners shown to be involved with human rights abuses; an alternative is to deal with the challenges therein and effect positive change for the workers and organisations involved. Addressing human rights abuses is uncomfortable and difficult for all parties involved and responses rarely fit a one size fits all template. The wide spread publication of template tools for managing abuses can re-enforce the stereotypical view that contraventions and non-conformances always share a commonality which is easily solved and shelved. This is not usually the case.
The most effective responses to human rights and modern slavery abuses are usually bespoke to the situation in hand and require time above all else to explore and understand the root cause in order to take the appropriate remedial actions. Reaching the root cause necessitates transparent and open conversations within trading relationships. This requires a “safe conversation”; in other words, an express understanding that the conversation cannot be used against either party for the purposes of arbitration or litigation. Businesses willing to invest in a safe conversation with their suppliers to investigate where, how and why abuses have occurred will achieve greater transparency and therefore implement stronger corrective actions in a specific, realistic and timely manner. The process of having a safe conversation enhances relationships and builds trust, which is key to business continuity and resilience.
Managing increasing vulnerability in supply chains
Migration Watch figures show that net migration to the UK for the year ending June 2017 reduced across all groups identified but significantly for workers from the EU8. As migration levels reduce so does labour availability in the UK which increases the opportunity for exploiters and enslavers to increase their illegal trade and abuse of people. Problems associated with inadequate labour inspection and enforcement, despite increases in funding, means businesses will be required to do more to police and monitor their labour supply and labour providing agencies, so detecting and identifying risks will gain greater importance to prevent infiltration of modern slavery into all supply chains, not just the UK.
Where strong and enduring trading relationships exist based on mutual trust and success then termination of contracts is rarely a concern for either party if modern slavery or non-conformances in practice are encountered. It is often the case in less strategic or informal business relationships, where the associations are loose and price is the focus, that suppliers fear weaponisation of social compliance audits or risk assessments by their customers in order to terminate contracts. The nature of this fear and doubt within the relationship often constricts transparency, prevents identification and action on modern slavery which neutralises the ability of business to adapt and progress and so a vicious cycle ensues.
Shifting the focus from remedy to root cause
Logic determines that as risks increase so will the need for business to remedy modern slavery and human rights abuses as outlined in the UN Guiding Principles. Key tools are those that relate most directly to the victim and their right to access the appropriate authorities to have their claim fairly heard and decided and to the redress or relief that they can receive as a result. Additionally of course, remedy is about righting a wrong in the business itself. Therefore, consideration must be given to approaches and tools to remedy the behaviours, cultures and practices that allow modern slavery and human rights abuses to take root in supply chain webs in the first place. Remedy must always guarantee the victims’ rights but it also has to address the root cause to prevent constant re-offending. Consider the questions “who’s to blame where constant re-offending occurs and why?” “How many times can you or your suppliers offend before your business collapses?” Auditors do not have the skill sets to address these issues.
Many businesses are now publishing, or are in the process of publishing, their third annual modern slavery statements, and commentators will wish to understand what commercial organisations are doing in terms of remedy and whether the methods used align with the Government’s recommended guidance. Committing to use facilitated meetings as part of standard governance and operating procedures and therefore due diligence is a first step. Utilising facilitated meetings increases the likelihood of uncovering where there are risks of slavery and human trafficking in supply chain webs. With risk identified and root causes understood business should be able to report that reasonable actions to remediate and prevent such risks will be investigated and implemented. Furthermore, through sharing knowledge and creating the conditions for greater understanding, facilitated meetings can build a knowledge base, which can inform training and capacity building within the supply chain web, which is another key driver in achieving effective risk identification and remedy.
Commit to facilitated meetings
A facilitated meeting, based on what is commonly known as mediation, is a very effective remedy tool providing a constructive and powerful non-judicial mechanism for individuals, companies and their stakeholders within different supply chain webs to raise concerns. The facilitated meeting can also be used before remedy needs to be considered. Using a neutral third party to facilitate a safe meeting in a neutral place can be used to identify risk in the first instance by creating the conditions that allow parties to share information without prejudice and in a confidential environment.
Facilitated meetings allow tiers within the supply chain web to share information in both directions creating greater understanding of the issues while building trust. Trust enables systemic solutions to problems that are often more complex than initially assessed. Businesses that align to a safe facilitated meeting process are committing to a long-term approach to transparency and remedy rather than ordering in a distress purchase. The deployment of soft skills such as mediation to achieve understanding and action creates greater value to relationships than those achieved through audit. Through soft skills many more nuances and undertones can be uncovered which can lead to better understanding of the root causes. If collaborating with suppliers on human rights through facilitated meetings becomes part of an organisations modus operandi and general expectations of how business will be done then members of staff can then be trained appropriately to use those soft skills in their day-to-day roles.
The principal features of a facilitated meeting are that it:
- involves a neutral third party to facilitate honest, open discussion and collaboration;
- is without prejudice and confidential
- involves spokespersons with sufficient authority to agree and commit to an action plan;
- is flexible, enabling the process to be designed and managed by the facilitator/mediator to suit the parties, in consultation with them;
- enables the parties to devise solutions which are practicable, creative; and
- ensures equal voice to all parties, addressing power imbalances.
At its heart, a facilitated meeting is tough on the issues and kind to the people involved. It encourages resolution to deliver significant change and improvement whilst taking into account reputational risk, allowing business and operational continuity and doing what is right for the potential victims involved. Remedial mechanisms that provide accountability and a clear action plan to enable the correction and prevention of further modern slavery practices or adverse human rights impacts are fundamental to systemic change.
The alternative to the proactive method of facilitated meetings and the resulting positive actions are complex grievances, lost management time in crisis management, unbudgeted costs such as deep dive audits, litigation/arbitration risk and cost with the associated reputational damage and loss of customers or suppliers. What responsible business would take on that type of risk especially when unbudgeted costs come out of the P and L account?
The facilitated meeting process, where the facilitator enables social, cultural, religious and economic differences of the parties as well as power imbalances to be addressed safely, leads to more effective and practicable outcomes than the more limited audit tool. Facilitation works to get the parties to consider the heart of the matter. It builds understanding, bridges gaps and fosters action and change with the parties in the driving seat unlike audit non-conformances. In today’s globalised world where communication is more frequently via email or software application due to geographical time zones and speed of business, effective dialogue and conversation is often lacking. Skilled facilitators can bring parties together and helping them reflect and have meaningful meetings to achieve joint solutions, which sustain business relationships and share long-term strategies. This is surely a better outcome than decisions imposed, because of litigation or arbitration.