Picture some of the most populated cities in the world - Mexico City, Mumbai, New York City, Cairo, Paris or London. Now, imagine an even larger city, filled with men, women and children who are being compelled to provide labor or other services by force, fraud or coercion. That is the ugly reality of modern slavery. According to the International Labour Organization (ILO), over 21 million people - or three of every 1,000 people globally - are trapped in such circumstances.
Human traffickers know no boundaries; forced labor occurs globally, in wealthy nations and poor, and across industries, from agriculture and domestic work to construction, mining and manufacturing. Awareness of the issue is spreading too. Increasingly, consumers expect brands to maintain corporate social responsibility (CSR) programs - and they aren't alone. Just last fall, Parliament passed the UK Modern Slavery Act 2015, with requires any organization that conducts business in the UK with a turnover of more than £36M globally - approximately $51M at current exchange rates - to produce an annual slavery and human trafficking statement that identifies the steps that have been taken to mitigate modern slavery risks in its business and supply chains.
How the UK Modern Slavery Act 2015 Works
As the economy has evolved to a truly global, interconnected business landscape, companies must be increasingly vigilant to third-party risk - and the risk of forced labor is no exception. The Act requires that organizations meeting law's criteria file an annual statement for each fiscal year ending on or after April 1, 2016. What must the statement entail? Section 54.5 of the Act, which deals with Transparency in Supply Chains, outlines the information requirements:
Map out your organization's structure, its business and its supply chains.
Identify the supply chain slavery and human trafficking policies, due-diligence processes and training that your organization has in place.
Note areas of your business and supply chains that may be vulnerable to modern slavery risk.
Benchmark your organization's effectiveness in mitigating the risk of slavery and human trafficking in your business or supply chains against key performance indicators.
The full statement must appear on the company's website, and to ensure greater visibility, the Act specifies that the company must include a link to the statement from its homepage. Organizations that fail to comply might find themselves facing an injunction from the UK Home Secretary.
Corporate Social Responsibility Offers Dividends
An injunction by the Home Secretary could be the least of an organization's worries. An article published recently by Harvard Business Review identifies some of the pressures that luxury brands face related to sustainability, but the article's insights could easily apply to organizations across a wide range of industries.
Legal pressure - The Modern Slavery Act is not the only law that organizations must consider. Many other countries are considering new laws or beefing up existing ones to combat the problem. In 2014, California Governor Jerry Brown signed seven bills into law to address the growing issue of human trafficking in his state. From improving the State's ability to prosecute the crime to offering sex trafficking prevention education in schools, these laws are geared to draw attention to and combat modern slavery. Compliance will become increasingly complex, particularly for organizations that operate or use third-party resources across jurisdictions.
Social pressure - From celebrities who use their fame to bring public attention to social causes to the enormous pool of Millennial and Gen-X consumers that expect "...brands to do more good, not just 'less bad,'" awareness into critical social and environmental issues is on the rise. Today it is more important than ever for organizations thoroughly vet their third-party networks to avoid public backlash and the ensuing reputational and financial harm that arises when bad actions come to light.
Investor pressure - Likewise, the Harvard Business Review notes that the investment community has begun to recognize the value of proactive management of such issues in their supply chains. For example, the article says, "There are some early shoots of evidence to back this idea up: in 2015, a Morgan Stanley analyst raised the price target on some mainstream apparel players like Nike based on their sustainability performance."
What Does This Mean for Your Due-Diligence Process?
Due diligence is not a one-and-done process. The requirement to submit an annual transparency statement demands deep investigations, audits and reporting into the current state of your third-party network - plus on-going monitoring to support future statements and improve risk awareness for the long term. You'll need to have the right tools and systems in place, including comprehensive, global news and information sources to ensure you capture the big picture of risk in your supply chain, even when it is well-hidden. It's well worth the effort when you consider the alternative - a world where one new man, woman or child becomes a victim of modern slavery every five seconds of every day.