How should procurement and supply chain professionals prevent and address modern slavery in their supply chains?
The first day of 2019 saw the implementation of the Modern Slavery Act in Australia, requiring organisations above a certain size – consolidated revenue of A$100 million – to report annually on the actions they are taking to address modern slavery.
The Walk Free Foundation’s Global Slavery Index 2018* estimates:
• In excess of 40 million people globally are subject to some form of modern slavery and approximately US$150 billion per year is generated in the global private economy from forced labour alone
• 24,990,000 people in the Asia-Pacific Region are ‘enslaved’, which accounts for 62 per cent of all modern slavery victims
• 15,000 people are currently victims of modern slavery in Australia
As organisations in Australia begin turning their focus to understanding their risk profile, there could well be a significant rise in these figures. With the legislation ensuring access to a public register revealing all the details of the submitted company statements, we can expect more noise online about the state of the nation when it comes to modern slavery, as well as the organisations implicated.
Organisations might be named and shamed for their lack of reporting, incomplete reporting or lack of action. As a result of the public access, board directors will be acutely aware of the risks to their brand reputation and demand much greater visibility of their supply chains.
Enter the procurement and supply chain leaders who are increasingly becoming the custodians of social responsibility in their organisations. Many organisations will be ignorant as to the scale of modern slavery risks in their supply chains. Forcibly detained adults and enslaved children work in many industries including fashion, fishing, cocoa, cotton, clothing, cannabis, construction and prostitution.
Integrated, global supply chains make it hard to tell whether products, even those that are stamped “Made in Australia” have at some stage relied on slave labour or underage workers as part of the production and supply processes.
Boards of organisations will need to accurately report:
1.The extent of their exposure to risks of modern slavery in their operations and supply chains
2.The action they have taken to assess and address those risks, and importantly
3. The effectiveness of their response
Some organisations may even take the next step and act strongly and visibly to help address the issue and help reduce or eliminate the slavery issue
How should the procurement and supply chain professional prevent and address modern slavery
- Policy and Process Frameworks
It’s important to have a policy of some description that covers all the relevant principles. Policy also needs to extend into action by embedding changes into processes that cover things like supplier due diligence and ongoing performance monitoring
- Understanding forced labour and monitoring slavery red flags in your data
Understand the areas of your organisation’s supply chain that will be particularly vulnerable to slavery practices. Many procurement platforms have additional features that can connect you to suppliers with known issues. There is no doubt that procurement and supply chain professionals will need to conduct extensive research into high-risk areas; certain countries, regions, suppliers, suppliers to suppliers, high risk supply chains, certain industries and products. Ignorance to the issue is indefensible.
- On-site inspections
Determining high-risk suppliers is important but it will also be necessary to conduct on-site inspections to investigate further. On-site audits are one of the key mechanisms for monitoring supplier performance against agreed standards.
- Developing and implementing a corrective action plan
Where an audit or an on-site inspection has confirmed instances (or suspected instances) of modern slavery, it is critical that the supplier develops and implements a Corrective Action Plan (CAP). The purpose of the response should be to clearly define corrective and preventative actions for resolving any non-compliance identified during the audit or inspection.
- Engaging Suppliers
A problem as large as modern slavery will never be effectively impacted by policies alone, setting standards for suppliers, developing action plans and monitoring their implementation. CAPs will only be effective in their remediation activities if they are combined with programs that build a supplier’s capability. The ideal is for the supplier to integrate and drive antislavery policies into their own business. Be prepared to be involved in this activity and in some cases sponsoring the necessary business changes.
- Building supplier incentives
The key to effecting changes needed is to develop supplier incentives, which ensure that the supplier takes ownership of the process and ensures continuous improvement. Improvements need to be measurable to support the reporting and prove that progress is being made.
Such incentives may involve publicly announcing a supplier preference, in cases when the correct steps have been taken to address slavery. An alternate incentive might be to automatically qualify suppliers that have implemented robust procedures into their second tier supply base
What is the bottom line for Procurement and Supply Chain professionals?
While these changes to the regulatory environment are disruptive there is a silver lining in that it will bring new opportunities for the CPO to ensure increased visibility into the supply chain. Larger organisations, that have invested heavily in leading supply chain practices, may find themselves better equipped for responding to these changes. For others, the legislation will mean additional investment in order to play catch up, resulting in higher capital and operational expenditure.
Ultimately, the most effective response is likely to be organisations joining forces and jointly managing the supply-side, thus building an over-whelming demand for suppliers to abolish these practices. A slavery-free catalogue or certification may become the ticket-to-play for suppliers. A co-operative response will have the hardest hitting message of all and now is the time to be working together.
Procure with Purpose
Procurious have partnered with SAP Ariba to create a global online group – Procure with Purpose.
Through Procure with Purpose, we’re shining a light on the biggest issues – from Modern Slavery; to Minority Owned Business; and from Social Enterprises; to Diversity and Inclusion.