Company directors need to be certain contractors across their supply chain comply with modern slavery and other labour protections
The allegations against Stagecoach co-founder Dame Ann Gloag last month threw company director responsibility into sharp relief. She and her family have been charged in connection with a human trafficking investigation relating to the charitable Gloag Foundation. Understanding your suppliers' labour practices in a complex, sometimes global supply chain can be tricky. But it's essential to do in order not to fall foul of modern slavery and other legislation. For companies as a whole, this sort of scandal can have serious financial consequences. For individual directors, there can be prison time as well as personal fines. In this latest blog, we review UK modern slavery legislation within the broader context of optimum working practices. And we investigate how company directors can protect their own position by ensuring compliance across all their suppliers and contractors.
The lowdown on modern slavery
The UK introduced Modern Slavery legislation in 2015. It aims to encourage organisations to take action to eradicate modern slavery from their operations and supply chains. A key provision in the legislation is around transparency in supply chains. This requires companies to publish a statement of steps taken during the financial year to ensure slavery and human trafficking is not taking place in its operations or supply chains. The onus has been on companies to act voluntarily in being transparent that their supply chain is free of exploitative practices.
In practice, many companies are non-compliant with the legislation, if you take stock of their entire supply chain. Indeed, estimates from the Business and Human Rights Resource Centre (BHRRC) show up to 40% of UK companies were non-compliant in 2021. (Link to report here>> https://media.business-humanrights.org/media/documents/MSR_Embargoed.pdf). Interestingly, no notices have been issued under the legislation; indeed, the BHRRC calls for strengthening of the regulations. However, there can be huge commercial consequences to a company accused of turning a blind eye to poor practices in their supply chain. A high-profile investigation into one of Boohoo's suppliers in 2020 showed the hit that a company can take. The Boohoo share price suffered an immediate 40% drop and has trended further downwards since. And exporters must be aware of the standards they need to meet in other countries' labour protection regulation around modern slavery (notably, the US and Australia).
Compliance with legislation across the board
Beyond modern slavery, there are a host of other regulations that could also have serious consequences for company directors. In some cases, directors are individually liable for breaches of compliance with regulations, as they have a duty to exercise reasonable care, skill, and diligence. Many of these cases relate to labour practices, as well as broader business operations. From anti-bribery and corruption (ABC) to health and safety, this can stretch from financial fines to prison time. These matters can be particularly difficult to police when it comes to a broad cross-border supply chain.
Ultimately, if you're a company director, you must be able to prove you’ve asked the right questions. When you bring a supplier onboard, you must do more than assume your contractors are acting in good faith. This goes all the way up and down your supply chain. Your suppliers may be compliant, but what about their sub-contractors? For certain sectors, huge numbers of sub-contractors will be on site at any one time. And then what happens when legislation changes? While a supplier may have been compliant when you onboarded them, you need confidence that your business processes can adapt to new regulations.
Canopy lets you take care of compliance
With Canopy, you can get that reassurance you need. You can automate processes that reduce the risks of you dealing with a non-compliant supplier. For instance, if a supplier has failed to update their modern slavery statement, or faces elevated risk with regard to HSE incidents, the platform triggers notifications immediately. You can place a block on issuing new POs, informing everyone in the business and suspending a supplier from availability until they're back on track. The onus is on the supplier to provide you with accurate information, and to do their due diligence on their own supply chain.
It's critical to consider the long-term consequences of decisions too. One of the key issues for companies - and by extension, for companies who have contracted them to supply a product or service - is an audit trail. With Canopy, you can have a log of all decisions, including board minutes, to mitigate corporate and personal risks. If you've asked the right questions, and you've made your decisions in a transparent manner acting on that information, you can limit liability.
Being in business is risky at the best of times. There can be all sorts of consequences for companies - and their directors personally - if they fail to ensure best practice when it come to compliance. With Canopy on your side, you can minimise these risks with best business practices across your supply chain.
To find out more about how Canopy, our award-winning supplier management platform, can protect company directors from legal liability, contact one of the team today.
Post by Nick Verkroost
Nick is an experienced business leader and the CEO for Canopy (OCG Software), the rules-based Supplier Management platform. Nick's focus is on commercial and operational excellence and ensuring our clients maximise the opportunities that Canopy offers.