Business risk

Why businesses need to act now to stop modern slavery

Over 21 million people today are trapped, victims of forced labour and human trafficking.

Yet their work creates profits of $150 billion for global business and organised crime. It is hard to imagine, but such numbers surpass those at the height of the slave trade over 200 years ago.

This situation has occurred because of what we refer to as globalisation. What it has meant in practice is that leading organisations have sought to meet the growing demands of customers, forever cheaper products and shareholders greater profits. Doing this has created global supply chains which aggressively look for lower product and labour costs from suppliers anywhere in the world.

These practices have undoubtedly created new markets and helped to open up economies to new growth, but in the process they have created the scourge of modern slavery, which now reaches into all parts of our economy. Its presence “is an affront to the dignity and humanity of every one of us,” said Theresa May, then Home Secretary, in 2015.

The Anti-Modern Slavery Act

The UK’s Anti-Modern Slavery Act (2015), which became effective in March 2016, is a significant step towards ending human exploitation. The legislation is the first of its kind in Europe, bringing a single focus to ending slavery and trafficking, enabling companies to play a leading role in eradicating slavery from their global supply chains.

It’s on this latter point, however, that I believe optimism about the end of slavery may be misplaced.

Modern slavery is a hugely complex, highly dispersed and very lucrative activity. It has successfully infiltrated the third and fourth tiers of outsourced global supply chains. Working at the margins, unscrupulous businesses and serious organised crime have been able to extract a great deal of value simply by exploiting lives.  Against this networked model of supply, I believe that individual corporate action using conventional compliance-based approaches, dealing primarily with the letter of the law, will struggle to have impact.

If we want to end slavery we need to rethink our approach.

Supermarkets and modern slavery

These days we pick up a packet of fresh prawns without thinking much where they came from.

They are healthy, cheap and always available. Nevertheless, their low price comes at a high cost. The world’s largest prawn producer is the Thai-based CP Foods: a £20 billion business that brands itself as the ‘Kitchen of the World’. It supplies all the big supermarkets, including Asda, Tesco, Morrisons, Aldi and the Co-op.

Its operations highlight why the issue of modern slavery is complex. CP Foods does not have slavery directly occurring in its own workplace. It wouldn’t be so blatant. Yet to operate efficiently, it relies on fishmeal from boats trawling international waters – boats often manned by slaves.

The Guardian spent six months tracing how this modern slave supply chain worked, discovering how Burmese and Cambodian migrants paid ‘brokers’ to smuggle them into Thailand for a better life.

The traffickers bring these invisible migrant workers over the border where they are ‘bought’ by trawler captains who keep them on board their vessels, often in chains, frequently working for up to 18 months at a time. Thai government figures reveal that there are 300,000 people employed in the prawn industry, mostly migrants – often slaves in a part of the supply chain the world would prefer not to see.

This is not an isolated example. Materials used in car seats, for example, have been shown to be sourced from the cotton fields of Uzbekistan, harvested by people in bonded labour. The cocoa industry receives beans from Ivory Coast, often harvested by children trafficked into the industry, held against their will and kept unpaid. Examples like this are almost countless.

Intentions v reality

There are several lessons from the slave trade, past and present. The most obvious point is that the pure economics of slavery mean the incentives for business and organised crime, either passively or actively, are huge. With an abundant supply of people desperate to find a way out of poverty, the trade in ‘human commodities’ has seen the price of a slave drop from the equivalent of $40,000 in 1830 to $90 today. At those prices, it is perhaps ‘easy’ to see how economics can drive behaviours of unscrupulous people to make a lot of money and for ‘good people to do nothing’.

Passing legislation and having good policies in our corporations, no matter how difficult their implementation, is really the easy bit. When the laws of the land meet the laws of economics, it often results in a long and difficult fight. Today’s governments, businesses and civic leaders will need to treat legislation as only a beginning.

Because slavery is such a globally dispersed activity operating through many countries and via almost invisible connections, the scale and complexity of such a challenge is immense. Companies acting alone are likely to use up significant resource without necessarily being able to isolate where traffickers and slavers are involved along supply chains. In other words, individual action may well be ineffective.

Only A Network Can Beat A Network

The new anti-slavery legislation stipulates that all companies should disclose how they are reviewing risk and assuring their supply chains, so compliance should be transparent. They may also engage outside professional services firms to monitor and evaluate their actions.

Whilst this may be adequate to ensure compliance with legislation it is unlikely to be sufficient to end modern slavery. We need to transcend these traditional approaches and consider whether the best – perhaps the only – way of truly combating highly networked threats is through the creation of other networks.

Here are three steps that, together, could take the anti-slavery approach to a different level:

1. Clear and committed voice – fighting a ‘war on slavery’

History shows that passing a law requiring companies to acknowledge the unacceptable nature of slavery and to comply in its eradication will be a strong, but insufficient, step to abolish it.
We need to go further. Businesses need to show commitment not only to the to the letter of the law but also to its spirit. Such shared commitment would see leaders in business, government, and NGOs signing a declaration that jointly declares a ‘war on slavery’.

Here we can learn lessons from Josiah Wedgwood, who showed how business can be a powerful voice in the campaign to abolish slavery, helping to transform a compliance issue into a central tenet of how a vibrant economy should work.

This would help to gain wider public support, galvanising and educating others to provide a deeper understanding of the challenges. It will be particularly important if actions against slavery take a long time to bear fruit and if cutting out slavery raises prices in the UK.

2. A pre-competitive alliance

This shared commitment must go further than the rhetoric. As in any modern field of conflict, it often takes an alliance to overcome an enemy.

The war on slavery needs to be fought by an active alliance between business, government, research bodies, NGOs and the press. Such an alliance would need to share a long-term commitment to invest, collaborate and report on the their actions towards the eradication of slavery in their supply chains.

This should be done collectively and voluntarily, sharing insights and innovative best practice.

Whilst some groupings already exist we can go further. An example of such cross-industry and government collaboration can be seen in the approach taken to waste reduction within the food, clothing and electronics industries. Here, loose alliances developed into a tightly focused and funded body called ‘WRAP’, set up to drive a ‘resource revolution’: re-inventing, rethinking and redefining how packaging materials can be better developed and used to deliver less waste and a more sustainable future.

WRAP acts as a point of public commitment and an action-focus for leading names in UK retail and manufacturing. In a ‘pre-competitive’ way, it has a proven track record and has stood the test of time. Such an alliance in the war on slavery could be co-ordinated by leading organisations under the stewardship of leading business NGO’s and the Independent Commissioner, Kevin Hyland.

3. A concerted use of data – using algorithms, not gun-boats

The power of networks is largely dependent on the richness of shared information. This War on Slavery will be fought with algorithms not gun-boats.

Combining all information on suspected slave traders and traffickers into a single open-access data warehouse, each engaged company, NGO, or government body can use sophisticated analytics to provide an unprecedentedly rich picture of how the trade works and how to end it. It will require a big commitment.

It would enable the alliance to fight the slavery networks with their own information, providing a much more efficient and cost effective way to target resources and identify slave traders, putting them out of business.

To make this happen, it is recommended that the leading accountancy practices, business and NGO’s join forces to create a shared information platform on modern slavery activity, supported by the government and law enforcement authorities.

Summary

The lessons of the first campaign to abolish slavery show that the commercial forces benefitting from slavery are many and powerful. This is still the case. The potential financial gain of organisations operating at the margins of global supply chains mean that human exploitation is considered by some to be fair game. It is unpalatable to think that UK companies and the British public are benefitting from this trade through higher margins and lower prices, but that is the truth of the matter.

The 2015 legislation is a unique opportunity to create a new way of doing business in which the humanity and dignity of every person is made central to our thinking and actions. Making the most of the opportunity will require a very different approach. Higher levels of commitment, greater collaboration and total sharing of information will be needed to turn the tide.

The accounting profession has an important role to play by not seeing this legislation as simply an opportunity to achieve a new stream of professional service fees for conducting more risk and assurance work. The bigger opportunity requires a move beyond a compliance mind-set, to contribute to the common good, actively working to create and support an alliance of partners in a cross-industry approach.

Putting an end to modern slavery will need more commitment from business and civic society leaders. It is a moral as much as a practical issue. And we can only win this fight if we work together.