Introduction
Earlier in the year the UK Government published guidance entitled “Tackling modern slavery in government supply chains – A Guide for Commercial and Procurement Professionals” (“the Guidance”). This article looks at this important material.
Background
Under the UK Modern Slavery Act 2015 (the 2015 Act), compliance disclosure and transparency requirements mean that an organization with an annual turnover of £36 million (approximately USD $45 million and €41 million at today’s rate) or more that sells goods or services in the UK is required to annually publish a slavery statement demonstrating what they are doing to ensure that there is no slavery or human trafficking in the business or the supply chain. This also applies to organizations based outside the UK selling goods or services into the UK.
As the UK’s official accompanying guidance on the disclosure/transparency requirements states, organisations must “paint a detailed picture” of all the steps that they have taken. This compliance obligation has now been in force since 29 October 2015 and many organizations who fall under it have already previously published their statements in the last few years.
What’s this all about?
In the UK there is a procurement context to modern slavery – procurement legislation has been amended to make certain modern slavery offences under the 2015 Act as grounds for the mandatory exclusion of bidders from public procurement.
Further, procurement has a role to play in the fight against modern slavery – the UK government can use its extensive buying power to help mitigate the risks of modern slavery occurring in the government’s supply chain by adopting new processes and procedures, in both procurement and supplier management.
Accordingly, the UK government has issued the Guidance aimed at procurement and commercial practitioners operating in government, but which may also be applied by any organisation in the public sector and may also be relevant and useful to organisations in the private sector too.
It should be noted that the concept of forced or compulsory labour is most relevant to the Guidance, because it is the form of modern slavery which suppliers are most likely to come across.
Modern slavery risks can be found in contracts and suppliers of all sizes. However, in applying the Guidance, the UK government wants commercial teams to also consider the impact of its implementation on Small and Medium-Sized Enterprises (“SMEs”) and Voluntary, Community and Social Enterprise (“VCSE”) sector organisations.
What are the suggested actions?
The Guidance sets out four key areas of activity, as set out below.
- Identifying and managing risks in new procurements, namely:
- Reviewing and amending operating procedures, processes and any related documentation in line with the Guidance;
- Assessing modern slavery risks in new procurements using Table 1 in the Guidance (see below);
- Designing new procurements in line with the associated risk level including (if appropriate) application of the so-called “Social Value Model”; and,
- Reviewing and amending contract management processes and any related documentation in line with the Guidance.
This part of the Guidance is the most in-depth part.
According to the UK government, although modern slavery can affect virtually any industry and economic sector, there are a number of core characteristics that place workers at heightened risk of being exploited. These characteristics are set out in the Guidance in a table, Table 1, to help organisations identify which of their procurements may be at higher risk and are divided into the following: industry type; nature of workforce; supplier location; context in which the supplier operates; commodity type; and, business/supply chain model. Links to various tools to help with these issues are provided here in the Guidance.
Here the Guidance also has a detailed approach in looking at how modern slavery risks can be addressed during the actual procurement process, namely: pre-procurement planning and early market engagement; the specification stage; the selection stage; the award stage; and, contract conditions and contract management. The Guidance sets out a procurement planning checklist for this process along with a flow-chart for the procurement process.
In 2020, the UK Government set out social value priorities relevant to delivery of its commercial activities. The so-called “Social Value Model” is a tool which provides a menu of social value outcomes for commercial teams to review and select with their internal clients and any other stakeholders. Where outcomes are identified, evaluation criteria should be developed and applied to evaluate suppliers’ tenders as part of the award stage. All procurements above the relevant thresholds should be considered for delivering social value outcomes.
One aspect of the evaluation stage and additional tender evaluation questions that can be asked which is worth highlighting concerns recruitment. As the Guidance says, “recruitment is often the stage at which workers in supply chains can be most vulnerable to modern slavery. It is where practices such as charging recruitment fees to workers and confiscating identity documents can take place, compelling workers into debt bondage and forced labour. Understanding recruitment methods is key to reducing risks.” The Guidance provides in an annex a set of useful recruitment questions that can be put to a contract tenderer.
The Guidance also provides in an annex a template of modern slavery contractual clauses to go in an awarded procurement contract.
2. Assessing existing contracts:
- Carrying out a risk assessment on existing contracts;
- Conducting supply chain mapping exercise(s);
- Inviting suppliers to complete the so-called Modern Slavery Assessment Tool (if appropriate); and,
- Applying strengthened contract management to manage risks, working with suppliers to progressively improve.
This part of the Guidance is also quite in-depth. As the Guidance says, working with suppliers even when they are mid-contract is crucial, “and at all times remembering the risk of insufficient or ineffective action is not reputational, it is human i.e. the victims of modern slavery.”
For contracts where the risk of modern slavery is high, the Guidance encourages including information relating to modern slavery issues to the management information requirements in the contract. Suppliers should also be asked to provide assurance on the processes in place to identify and address modern slavery risks in their supply chains, which can be done through regular contract management meetings. Close contract management of high risk agreements, combined with use of key performance indicators (KPIs) should reduce the likelihood of modern slavery occurring in supply chains – suggested KPIs to consider on contracts are set out in an annex.
As the Guidance says, audits are a useful way of verifying a supplier’s own assessment of their approach to tackling modern slavery and so the Guidance encourages opportunities to conduct supplier audits. Details of the types of audits and considerations to take into account when conducting one are set out in an annex.
The Guidance here stresses encouraging suppliers to be proactive and open, and report risks of modern slavery as they come to light.
As regards the delicate issue of contract termination, the Guidance says that “taking immediate action to terminate a contract can have a drastic effect and risks causing further harm to those involved. Even if a supplier is suspected of being complicit in the crime, the priority should be to work closely with the supplier to help the victims, and ensure it does not happen again. Reactive contract termination can lead to fear and concealment by suppliers, which in turn puts victims at greater risk. Maintaining transparency of the issues and risks is important and working with suppliers offers the best chance of helping victims and preventing re-occurrence. Other than in extreme cases, terminating a contract for reasons linked to modern slavery should only be considered where the issues continue to occur and the supplier is unwilling to co-operate and change, despite receiving help and support from you and where you have considered all of your other contractual rights. You must first check that you have a right to terminate the contract and take legal advice. You should also ensure you have considered the potential detrimental effect on workers, particularly if these are overseas and consider:
– Will contract termination stop the abuses occurring or will it result in working conditions worsening?
– What will happen to the workers if the supplier’s business closes? Will they be able to find alternative employment?
– Will the workers be paid for the work they have already undertaken?
Where termination does occur, it does not discharge the responsibility to report alleged modern slavery conditions to the appropriate authorities to be investigated.”
Interestingly, the Guidance also says that consideration should be give to the “impact of [the contract awarding organisation’s] decisions on the supply chain as these may contribute to increasing modern slavery risks, including factors such as: short lead times; late payments; demand for high flexibility, including last minute changes to orders; downward cost pressures – if a supplier has agreed to reduce costs, how do they plan to recoup?”
The Guidance also encourages supply chain mapping, for high- and medium-risk suppliers) to establish more precisely the risks in relation to suppliers and their supply chain on the particular contract.
3. Taking action when victims of modern slavery are identified:
- Working openly and proactively with suppliers to resolve issues and changing working practices; and,
- Considering terminating a contract only as a last resort.
As the Guidance says, when specific instances of modern slavery are uncovered in the supply chain, they must be addressed immediately and in a manner that is proportionate and adapted to the circumstances of the case.
The Guidance encourages working collaboratively with the supplier and in accordance with the terms of the contract to address instances of modern slavery. The Guidance suggests adopting a blueprint remediation plan for handling such occurrences should be in place which sets out the process for dealing with such instances, and set out roles and responsibilities – the Guidance provides a blueprint in an annex.
The core practical action points to consider taking when modern slavery is uncovered are as follows:
- If you suspect workers are being subjected to modern slavery, you should involve law enforcement;
- In the UK, if someone is in immediate danger, report it to the police;
- If you are concerned about a potential victim, or suspicious about a situation that is potentially exploitative, in the UK you can call the Modern Slavery Helpline on 08000 121 700, or call the Gangmasters and Labour Abuse Authority on 0800 432 0804 or submit a report online. If overseas, then the response should be tailored to the local circumstances; and,
- In cases of suspected child labour exploitation in the UK, Local Authority Children’s Services and the police should be notified immediately.
The Guidance recommends that once you have identified an incidence of modern slavery and the victim has been safeguarded, you should consult your own legal teams, who can advise on the specific contractual mechanisms in place to handle instances of modern slavery that have been uncovered.
The Guidance says that if contract termination is not exercised (and bear in mind as set out above that this may not be the best option), “where possible and practical to do so, you should work with the supplier to put in place an action plan specific to the type of incident and to prevent recurrence once investigations have concluded. This action plan should at least set out:
- How to remediate the workers involved (this may include involving police and judicial system);
- A review of the suppliers’ policies and systems to ensure that these are appropriate to prevent incidents from occurring in the future;
- The introduction of credible, independent grievance mechanisms to mitigate any reoccurrence.”
The fourth and final area of activity is:
4. Training:
- Raising awareness of modern slavery and human rights abuses amongst staff and delivering/making available appropriate training.
Needless to say, commercial and procurement teams involved in contracts must be trained in order to raise awareness of the issues, how to identify the risks, and ensure that suspected instances of modern slavery are handled correctly.
The Guidance provides links to various charged-for and free training resources.
What are the takeaways?
Although the Guidance is aimed at modern slavery in the context of procurement, there are many useful practical aspects in it that businesses can use directly or adapt to their vendor contracts.
What can be done in any event?
Even if your business doesn’t meet the annual turnover of £36 million requiring the business to publish annually publish a slavery statement demonstrating what the business is doing to ensure that there is no slavery or human trafficking in the business or the supply chain it should still consider publishing such a statement because modern slavery/forced labour/ESG/supply chain due diligence is now an entrenched feature of the compliance landscape.
It also goes without saying that compliance teams also need to be on the constant lookout for and train staff to recognise the signs of forced labour or modern slavery, including:
- The vulnerability of some workers;
- Threats, coercion, deception and physical punishment carried out against workers;
- Working and living conditions;
- High recruitment fees;
- Withholding of wages;
- Salary deductions;
- Confiscation of documents;
- Absence of work permits;
- Absence of regular employment contracts; and,
- Limitations to freedom of movement.
See our film about spotting the signs of modern slavery here https://www.corderycompliance.com/spotting-the-signs-of-modern-slavery/.
Cordery’s Modern Slavery Action helps organizations meet their modern slavery reporting requirements for a fixed fee. There are more details here https://www.corderycompliance.com/solutions/modern-slavery-action/.
Resources
We write about modern slavery/ESG/supply chain due diligence and compliance issues here https://www.corderycompliance.com/category/modern-slavery-supply-chain-management/.
Recent modern slavery articles that we have written include the following:
- Modern Slavery/Forced Labour/ESG/Supply Chain Due Diligence and Compliance Legislative News Roundup https://www.corderycompliance.com/uk-ms-esg-dd-0223/;
- Litigation to Impose UK Ban on Xinjiang Products Fails https://www.corderycompliance.com/category/modern-slavery-supply-chain-management/;
- UK Modern Slavery Update – Reforms Finally On The Way? https://www.corderycompliance.com/uk-modern-slavery-update-3-reforms/;
- The Financial Reporting Council/UK Anti-Slavery Commissioner/Lancaster University report to prompt boardrooms to do more to eradicate modern slavery https://www.corderycompliance.com/uk-modern-slavery-update/;
- The proposed EU rules about Human Rights & Environmental Adverse Impacts Supply-Chain Due Diligence https://www.corderycompliance.com/eu-hr-eai-and-supply-chain-dd/;
- Greenwashing https://www.corderycompliance.com/greenwashing-power-modernslavery-esg/;
- The EU Proposed Forced Labour Products Ban https://www.corderycompliance.com/eu-labour-products-ban-1/;
- The EU’s Forced Labour Guidance https://www.corderycompliance.com/eu-modern-slavery-guidance/; and,
- Previous UK plans to overhaul the UK modern slavery compliance regime https://www.corderycompliance.com/uk-modern-slavery-compliance-rules-draft-amends/.
The UK Government’s Procurement Policy Note “Guidance PPN 02/23 – Tackling Modern Slavery in Government Supply Chains (HTML)” can be found here: https://www.gov.uk/government/publications/ppn-0223-tackling-modern-slavery-in-government-supply-chains/ppn-0223-tackling-modern-slavery-in-government-supply-chains-html, and the UK Government’s actual guidance can be found here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1135523/PPN_02_23_-_Update_to_Tackling_Modern_Slavery_in_Government_Supply_Chains_2023_-_Guidance.pdf
For more information please contact Jonathan Armstrong or André Bywater who are lawyers with Cordery in London where their focus is on compliance issues.
Jonathan Armstrong, Cordery, Lexis House, 30 Farringdon Street, London, EC4A 4HH | André Bywater, Cordery, Lexis House, 30 Farringdon Street, London, EC4A 4HH | |
Office: +44 (0)207 075 1784 | Office: +44 (0)207 347 2365 | |
Jonathan.armstrong@corderycompliance.com | Andre.bywater@corderycompliance.com | |
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