Diverging Approaches, Shared Goals
On 16 October 2024, the House of Lords Modern Slavery Act 2015 Committee published its report on the UK’s progress in relation to the Act’s goals. The inquiry, launched in January 2024, evaluated the focus of the Act, and looked at potential improvements that could be made going forwards.
Key findings and recommendations
The Committee concluded that the UK’s response to modern slavery has fallen behind its international peers, including in relation to the effectiveness of the supply chain requirements in Section 54 of the Act, which requires certain organisations to develop a slavery and human trafficking statement each year.
It noted that modern slavery statements are inconsistent and that the lack of mandated content undermines the transparency that Section 54 aims to achieve, largely due to inadequate guidance and engagement with businesses.
It was found that voluntary due diligence measures are insufficient, and the Committee advocated for the introduction of mandatory human rights due diligence, along with stricter enforcement rules and changes to immigration policy.
What are the implications of the new report?
Companies operating in multiple markets should aim to adopt comprehensive strategies that will help in ensuring compliance with the relevant laws and guidance in many jurisdictions, to protect their reputation.
They may soon be obliged under law to conduct due diligence on their supply chains, so need to understand not only direct suppliers, but those in Tier 2 and 3 and beyond in the upstream supply chain.
How do modern slavery approaches differ between regions, what can we learn from each other, and how can businesses start doing more now?
The UK and US are key markets for many international firms, but the regions’ approaches to modern slavery and forced labour are different. Because of this, there are several key areas we can learn from each other.
The UK and US ultimately share a joint aim - to prevent modern slavery and forced labour from their regionally HQ’d businesses, and their global supply chains. However, where they differ is in the priorities and tools they employ to do this. The UK prioritises transparency and voluntary corporate accountability, though it is moving toward stricter enforcement. The US focuses on trade enforcement and customs interventions to ensure goods produced with forced labour do not enter the market. Both countries are likely to influence one another, especially as global standards evolve towards mandatory due diligence and stricter penalties for non-compliance.
For all regions, a good starting place is more thorough proactive due diligence and risk assessments. Currently in UK, the guidance is to request sight of, or for the vendor to self-certify that their modern slavery statement is up to date, so largely a tick box exercise. However, legislation within the UK is likely to tighten in the next 12 months, requiring companies to meet set thresholds to undertake modern slavery due diligence in their supply chains.
As part of this, comprehensive supply chain audits can be implemented. However, we know these are complex and it can be expensive when considering the full supply chain. However, auditing just key or critical suppliers to start with, and doing a deeper dive to map the supply chain, (where possible), is a good start. Then on an ongoing basis, the businesses can perform regular audits of those key suppliers and their wider supply chain to identify potential risks of forced labour and modern slavery, particularly in high-risk regions or industries prone to exploitation.
Risk mapping is the next step; this though can only be achieved once there is a comprehensive view of the wider supply chain. Companies should have a clear understanding of where their goods are being produced and the labour conditions in those areas. For example, the Withhold Release Orders (WRO) issued by CBP (US Customs and Border Protection), and the US Uyghyur Forced Labour Prevention Act have been very effective. There is an easy to consume dashboard, showing monthly statistics from June 2022 onwards, see below:
Transparency and Reporting are key requirements in both the UK and US policies, but the UK has a specific legal requirement for larger corporates to publish annual Modern Slavery Statements. Considering the recent findings, businesses may be wise to prepare for stricter UK regulations, likely a more rigorous due diligence requirement, potentially for smaller organisations too, and possibly stiff penalties for non-compliance. To stay ahead, companies could adopt due diligence processes, before they are legally required, to be ready and compliant.
Data and Software solutions are already available to support this, and companies like Dun & Bradstreet can help in mapping of the wider supply chain, providing visibility of shipments between businesses, and then providing risk information for use in the due diligence process so companies can ensure they have accurate, timely data as a foundation on which to conduct their reviews. Utilising our Human Rights Insights data for example (which has been developed to enable risk heat mapping of business populations to better understand the likelihood of Human Rights violations before they happen) can help to mitigate risk and more easily discover incidents if they do occur.
This leads neatly to the next point - Cross-Border Collaboration – as to fully understand such issues we need to look internationally. To some degree this has been made a little more challenging in the UK since Brexit, but both the UK and US are tightening their regulations on forced labour and modern slavery, so inevitably companies should align their practices with international standards like the OECD Guidelines for Multinational Enterprises or the UN Guiding Principles on Business and Human Rights. This alignment helps create a cohesive global approach and ensures compliance across borders.
Being proactive, strong governance and creating a robust foundation of third-party knowledge are key
To meet the evolving expectations of governments, regulators, and consumers, companies should take a proactive approach to preventing forced labour from their supply chains. Focusing on first ensuring they have the most accurate data about their third parties, as a foundation on which to conduct due diligence, increase transparency and boost supplier engagement. Strong governance will not only help companies comply with international laws such as those in the UK and US, but also strengthen their reputations as responsible and ethical businesses in the global marketplace.
To find out more about how Dun & Bradstreet can support you become more proactive in understand third-party risk, including identifying Human Rights issues, please Contact Us today!