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Is the Modern Slavery Act Changing Anything for UK Supply Chains?

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Now that companies in the U.K. are required to find and eliminate any instances of modern slavery in their supply chains, most are paying much closer attention to potential supply chain risk issues, though few are doing much about it.

A report published Wednesday by labor rights consultancy Ergon Associates and supply chain technology firm Historic Futures said leaders at the director level especially, have been on greater alert about what instances of unethical labor could mean for their business since the passing of the Modern Slavery Act (MSA).

The U.K. passed the Modern Slavery Act last year to help tackle trafficking and forced labor. The Transparency in Supply Chain Provisions that are part of the act require businesses with an annual turnover above 36 million pounds ($44 million) to publish an annual statement outlining the steps they’ve taken to be sure no slavery or human trafficking exist in their supply chains, or tell the public that they’ve taken no such steps.

Now, 76 percent of respondents said directors at their company are more engaged with issues of supply chain risk, while 62 percent said buyers have been more involved since the act took effect and 58 percent said their ethical trading teams are paying greater attention to the matter.

“These findings demonstrate the importance of the requirement that MSA statements should be signed off at board level as a catalyst of change,” the report noted.

Because companies are now more sensitive to the issue, many are taking another look at their policy development, risk assessment and risk monitoring, but fewer companies have taken the necessary actions to address those risks.

Though 62 percent of respondents felt either confident or very confident about where the risks are in their supply chains, less than half were confident about being able to take more definitive action in light of any identified risks. More than half said there has been no change at all in efforts to take corrective and remedial action to eliminate risks.

“Because most companies are still at the stage of assessing what policies to put in place and stepping up their risk assessment and risk monitoring activities, there has been less change regarding remedial action” according to the report. “Until businesses know whether they have a problem, they are unable to define what steps to take to overcome that problem.”

The MSA stipulates that companies need to show how they’ve obtained the findings about their supply chains, but the trouble with that level of transparency is that most companies can’t get a good grasp on what’s happening beyond their tier one suppliers.

Eighty-two percent of those surveyed said they have good information about their direct, or tier one suppliers, but more than half (56 percent) said they hardly get any information about who is involved in their extended supply chain—which is where the problems can often arise. Only 29 percent said they “sometimes” get information about suppliers further down the supply chain.

Data collection about what’s happening in supply chains is passive at best. Most companies are relying on questionnaires and spreadsheets that only get sent to tier one suppliers and only as needed. Other companies are collecting data from their tier one suppliers using those questionnaires every six months or once a year—which still doesn’t address the extended supply chain or factor in false representation on those questionnaires that are often being transmitted from thousands of miles away.

“Surprisingly, few companies reported using third party management tools consistently, which indicates that suppliers will be receiving overlapping requests for data from brands, rather than being able to use tools that enable them to reduce duplication efforts,” the report noted.

That duplication in compliance has put an added strain on suppliers that are already battling to keep up with buyers’ consistent requests for ever-lower costs.

The process as it currently stands means most companies can hardly say they can effectively assess where instances of modern slavery could exist in their supply chains.

While the Act has certainly served to heighten awareness—or at least fear of repercussion—surrounding the issue of modern slavery in supply chains, companies don’t have enough visibility into those supply chains or enough internal backing for necessary action to do anything about it.

The report outlined four key practices that could improve on that fact: better and more consistent risk assessment; more use of collaborative risk assessment and due diligence processes; detailed action plans and focuses responses to identified risks of modern slavery and; more transparency in MSA statements on specific instances where companies have taken defined steps to prevent risks or respond to specific scenarios.

“It will be interesting to see whether companies start to take a more systemic approach to collecting data about where the risk of modern slavery within their supply chains and direct operations are,” the report noted.

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