Does Modern Slavery impact Small Medium Companies?

In February 2017, Australia commenced an inquiry looking to implementing a Modern Slavery Act. Recent forums indicate the Australian Modern Slavery Act would likely contain similar requirements to  the UK Modern Slavery Act.

Although the UK Modern Slavery Act only requires companies with an annual turnover of £36M or more to publish an annual Slavery and Human Trafficking Statement, these statements must set out the steps the organisation has taken to ensure that slavery and human trafficking is not taking place in their business or in any of their supply chains.  As the larger companies are required by law to report and remediate against modern slavery within their supply chain, SMEs which supply to these companies are invariably also caught up with these requirements.

A 2016 survey by the Chartered Institute of Procurement and Supply Chain found that majority (61%) UK SMEs were unaware of the Modern Slavery Act’s impact on their business.  With 67% of SMEs never having taken any steps to tackle the issue, 75% of SMEs would not know what to do if modern slavery was found in their supply chains.

What should smaller business do?

Actions of smaller business will depend on the complexity of their sector and supply chains. A good step will be for SMEs to conduct their own supply chain reviews and identify areas that are at most risk, and implement mitigation and monitoring measures. High risk sectors such as agriculture, fast moving consumer goods, construction and electronics manufacturing will require more auditing and monitoring.

Other practical measures may include:

  1. Map your supply chains to understand where there is highest risk and exposure to modern slavery.
  2. Prioritise and implement remedial measures required to manage and monitor modern slavery risk in your supply chain and business practices.
  3. Complete site inspections and develop due diligence processes for your supply chain
  4. Provide training to employees and local suppliers on modern slavery risks and compliance
  5. Review recruitment practices to ensure legal compliance to prevent labour exploitation
  6. Review supplier contracts and include obligations to comply with the Modern Slavery Act
  7. Publish a statement outlining the steps you are taking to tackle modern slavery.
  8. Consider development and communication of a modern slavery policy

The risk of not being prepared will result in greater scrutiny of your operations by larger companies, which could impact your business economically and operationally and result in reputational damage. Reviewing your operations for the risk of modern slavery could assist in placing your organisation in a preferred supplier position to larger companies.

Should you require assistance or more information in understanding how a Modern Slavery Act will impact your business and to prepare your business to meet future client requirements, please contact cheng.phang@zoic.com.au