How confident are you in knowing the ins and outs of your suppliers’ working practices? Confident enough to stake your reputation on them?
New rules, which came into force at the end of October under the Modern Slavery Act 2015, will place an obligation on companies to publish the steps they have taken to ensure there is no modern slavery in their supply chain. Do you have the level of transparency into your supply chain to meet this new Act?
According to our recent research, 70% of the average company's revenues are spent on suppliers, this represents thousands of companies across the UK that are affected by the new Act and face the challenge of gaining transparency across their entire supplier base ahead of agreeing contracts. It’s an unenviable task.
Ensuring compliance with the Act is no mean feat, bearing in mind there is no one-size-fits-all approach to getting this right – each supply chain is a web of organisations of varying size and function that now need to pay heed to this Act. With corporate reputation on the line and a Government determined to name and shame those who fall short of their legal requirements, companies would do well to start planning to tackle this new challenge now.
Where to start?
The starting point has to be for companies to identify the key risks in their supply base, bearing in mind that certain types of products or services might be more prone to slavery than others. Similarly, procuring products from - or outsourcing to - certain geographies may result in increased risk.
Companies should request and review copies of their suppliers’ Modern Slavery statements and conduct audits of those falling into the highest risk categories. Include consideration of modern slavery within your supplier risk reviews and maintain a register of key risks and actions. This is where those businesses that have already invested in supplier information management systems are likely to have the upper hand.
Forward thinking companies should see this as an opportunity to get their procurement house in order and develop robust and strategic solutions to supplier management, particularly as the regulatory pressures regarding supply chain transparency are only set to increase.
Still unsure how to approach this new challenge to the business? Here are six simple takeaways to follow that will start addressing the challenges the Modern Slavery Act as it relates to your suppliers.
- Step 1: Integrate procurement activity into the company wide response; being clear on the approach, requirements, responsibilities and timetable.
- Step 2: Perform a risk evaluation of your suppliers to understand exactly which are the suppliers and contracts at the highest risk in order to prioritise effort and focus.
- Step 3: Incorporate a consideration of modern slavery risks within ongoing supplier risk reviews and maintain a register of key risks and actions.
- Step 4: Identify requirements for an audit of the highest risk suppliers - e.g. unscheduled spot checks.
- Step 5: Establish an ongoing programme for ensuring compliance of key suppliers with Modern Slavery Act obligations - e.g. annual request for copies of suppliers' Modern Slavery Act statements.
- Step 6: Include Modern Slavery Act related questions in all future Request for Proposals and incorporate relevant provisions in all new contracts.
To learn more about the Modern Slavery Act, or its implications for your business, contact us here.