The Modern Slavery Act 2015 (the Act) was the UK's latest step towards eliminating slavery, in all its forms. Since then, many UK construction companies have reviewed their own businesses and supply chains and published statements about the approach they have taken, with the aim of ensuring that modern slavery, including human trafficking, is not taking place within their business or supply chain.
What do you need to know about the Act, and what more can be done to prevent human rights abuses on sites and in the construction supply chain?
The Home Office estimates that there are between 10,000 and 13,000 victims of modern slavery in the UK, with 45 million estimated victims across the world. Worryingly, some consider the UK estimate to be a conservative one. The construction sector employs a significant proportion of the global workforce (estimated, for example, at 7% by Building and Woodworkers International) and it is one of the sectors identified as high risk for modern slavery practices.
In a 2015 research report by the European Union Agency for Fundamental Rights, construction was number two on the list of economic sectors in the EU most prone to labour exploitation. Modern slavery presents itself in a number of forms, whether it's bonded labour, poor wages, working and living conditions, intimidation and violence or human trafficking. But what makes the construction sector so susceptible?
This high level of risk is perhaps not surprising given that construction is a sector which requires a fully flexible and often temporary labour force to meet constantly fluctuating demand. That model creates greater cost certainty for construction businesses but contributes to a lack of transparency in the labour supply chain. Additionally, it's a sector heavily reliant on the procurement of materials sourced through multiple suppliers which exacerbates that lack of transparency.
Looking at this in more detail, tackling the risk of modern slavery in the construction sector is particularly challenging, on both these fronts:
- The supply of a flexible labour force. The prevalence of outsourcing of workforces to third parties - whether subcontractors or agencies, the use of temporary and often migrant workers - means main contractors often have little direct control or transparency over the identity of its workforce or their working and living conditions. Although the main contractor may operate in accordance with its legal requirements, the risk of unethical recruitment practices will prevail where the driver is cost. Those involved in the supply of labour will be looking to make money, while there is the additional risk that those seeking that labour will be looking to save time and money. All of this significantly increases the risk of the exploitation of those making up that flexible labour force.
- The supply of the building materials themselves. In the construction sector, traceability - knowing where in the world materials originate - can often be a problem because there are so many links in this fragmented chain. Whether it's bricks, timber, glass, granite or a myriad of other products, it's often difficult to trace raw materials. These materials are often produced in countries where forced and child labour is rife.
What are the legal obligations under the Act?
Prohibition against modern slavery in any form
The Act makes it a criminal offence for a person or organisation to engage in any form of "modern slavery" practices, which includes slavery, servitude, forced or compulsory labour and human trafficking. These are not new offences, of course - rather the Act brought together various earlier prohibitions and made a strong statement about the UK government's commitment to ending modern slavery in all its forms.
The Slavery and Human Trafficking Statement
Where the Act goes further than previous legislation is by requiring certain larger organisations to publish, annually, a statement which sets out the steps the organisation has taken during that year to ensure that slavery and human trafficking is not taking place. Crucially, the Slavery and Human Trafficking Statement (the SHT Statement) must cover not only the organisation itself - including parts of the business not based in the UK - but also its entire supply chain.
The Act is not prescriptive about the content of the SHT Statement, but it does provide guidance on the information that organisations should consider including - which we summarised in our insight Modern Slavery and Supply Chains - Updated government guidance and transitional measures.
The SHT Statement should be approved by the organisation's board of directors and signed by a director (or equivalent). A link to the SHT Statement should be published in a prominent place on the organisation's website.
Which organisations are covered?
The requirement to publish an SHT Statement applies to any organisation which:
- carries out any or part of a business in the UK;
- supplies goods or services; and
- whose aggregate annual turnover is not less than £36 million.
For further detail of how this test is applied, see our previous insight Modern Slavery and Supply Chains - Updated government guidance and transitional measures which summarises the official government guidance.
While it is estimated that some 12,000 UK companies are required to publish an SHT Statement, only around 10 per cent have done so to date.
Sanctions for failing to publish an SHT Statement
Although the government can take out an injunction to enforce publication, there is no other prescribed penalty for failing to publish an SHT Statement. Technically, it is even possible to comply with the Act by simply publishing a statement that your organisation has taken no steps to prevent slavery in the business or its supply chain. As we predicted in our previous insight Modern Slavery and Supply Chains - Legal requirements to apply in UK from October 2015, legal enforcement is likely to be a last resort.
The real risk in not taking positive steps to comply with the Act - and the reason very few businesses would publicise that they have taken no steps - lies in the significant reputational damage it might cause to an organisation's brand if the Anti-Slavery Commissioner names it as non-compliant or an investigation was to reveal modern slavery offences. Reports of "no-notice" site inspections by public authorities have hit the headlines. Increasingly, pressure groups are also challenging companies directly in order to blow the whistle on human rights abuses.
Failing to engage with the supply chain to put the right checks and balances in place may lead to loss of future business as developers are increasingly asking for such assurances during the tender process, partly driven by increased appetite for responsible investment schemes.
What should organisations be doing now?
The most immediate step for many larger companies will be to prepare and publish their SHT Statement, if they have not done so already.
However, all organisations - even those not required by statute to publish an SHT Statement - should be encouraged to continue to consider and address the issue of modern slavery within their supply chains if they wish to win new work and avoid potentially severe brand damage.
Create internal multi-disciplinary teams to co-ordinate efforts to identify and eradicate modern slavery. Avoid a silo-ed approach and draw on the expertise that sits within the business - HR, legal, risk and compliance and procurement, for example. That may involve building capacity within those teams, so plan internal or if necessary external recruitment.
Through the use of that internal multi-disciplinary group, review your risk assessment processes.
Is the focus of the risk assessment on people, policies and procedures as well as commercial agreements? Do the recruitment practices of suppliers meet your ethical standards, do you fully understand how the workforce (which may be sourced from many labour providers) will be remunerated, and what do you know of the conditions in which those workers will be working and (possibly) living? Are they acceptable?
Internal reward systems and performance reviews
Do your internal remuneration practices encourage the right behaviours? What is rewarded and do bonus arrangements, for example, unwittingly encourage cost saving at the expense of transparency in the supply chain, whether that be people or product?
Is good practice recognised in the internal performance management process being operated?
Organisations may wish to review their standard contracts with subcontractors with the intention of requiring greater oversight of the contracts operating down the supply chain. This will ensure that the arrangements for the supply of labour and the sourcing of products provide sufficient transparency.
If there is no transparency - because most standard forms of construction contracts seek to push responsibility down the chain - developers, contractors and funders should consider requesting new provisions which deal with issues such as:
- Obligations on subcontractors, suppliers and consultants to comply with their respective obligations under the Act;
- Requirements for contractors to sign up to the organisation's anti-slavery policy (if any) or independent 'best-practice' codes on procurement and ethical sourcing of raw products to increase transparency;
- Provision of assurances that all subcontractor/agency staff are legally able to work in the UK. If organisations wish to go even further, they could include a right to call for certain employment information, such as names, addresses and verification that all staff have written contracts of employment, are paid in accordance with the national living wage (or national minimum wage depending on age) and are afforded safe working conditions; and
- Requirements for reporting procedures to ensure those workers are able to raise potential issues confidentially.
A survey of the construction industry by Supply Chain Sustainability School - an initiative representing a common approach to sustainability within supply chains - found that, although most respondents (three in four) were generally aware of what the Act covers, less than half of those surveyed said they knew what action to take if the issue arose in their organisation.
A combination of induction training, refresher training and briefings to employees and awareness campaigns will ensure employees are aware of the risk of modern slavery and know what to do if they are concerned they have spotted signs of modern slavery in the workplace. Make reporting those concerns easy, whether through a dedicated helpline, whistleblowing hotline or by publishing the Modern Slavery Helpline number - 0800 012 1700.
If construction companies can educate their workforce so that managers, site supervisors, fellow workers and those involved in recruitment are able to spot early warning signs, it will help to alleviate the risk of modern slavery creeping into the supply chain. This will benefit both those the Act is intended to protect and businesses who are working to ensure that ethical practices can be demonstrated, as well as ensuring that any human rights abuses are resolved sooner - for the benefit of victims - and with hopefully reduced negative exposure for the business.
If you have any queries on the Modern Slavery Act, please contact Andreas Steffensen or Anna Fletcher.