Companies seeking a slice of the massive public procurement pie should engage in, and report on, modern slavery due diligence; failure to do so may disadvantage bids or result in exclusion from Government contracts. Governments are not only policymakers but also major economic actors. In 2017/2018 the UK Government awarded public contracts with a value of £284 billion which amounts to approximately 10% of the UK’s GDP. Consequently, the UK Government holds significant leverage over business behaviour and is increasingly wielding this power to tackle modern slavery in supply chains. According to a recent report by Sancroft and Tussel, in 2018 one third of the UK Government’s top 100 suppliers failed to comply with the UK Modern Slavery Act.

In response to such widespread disregard for the law, the Government recently announced that it will start to ‘name & shame’ organizations that are subject to the UK Modern Slavery Act and fail to publish a modern slavery statement.[1] In a further development, the Crown Commercial Service (CCS) recently confirmed that companies that fail to comply with the minimum reporting requirements of the Modern Slavery Act will soon be excluded from bidding on government tenders for three years.[2] From the CCS’ announcement it follows, that in order to be eligible for public contracts companies need to do more to mitigate modern slavery risks within their supply chains.

Modern Slavery Due Diligence: opportunity instead of obstacle

  1. Winning government contracts
    Public sector bodies are increasingly prioritising suppliers that prove the social impact of their business activities, via the inclusion of modern slavery and social value criteria in requests for proposals and contract notices. There is presently a lack of consistency in wording and weighting.

    The wording and weighting of these social value criteria vary from notice to notice. A search on the government tender information service Tenderlake reveals modern slavery criteria are already incorporated in a variety of contract notices; ranging from “pass/fail” criteria for compliance with Section 54 of the Modern Slavery Act for a Foreign & Commonwealth Office project to a 2% weighting for modern slavery in a City of Glasgow College contract. [3]

    Competition for government tenders is tough. In order to increase chances of winning government tenders, it is essential for bidders to take action. Enhancing supply chain transparency and identifying risks is an essential first step. Every company, regardless of size and industry, has the responsibility to respect human rights. To meet award criteria and particularly to increase competitive advantage, the implementation of modern slavery due diligence is inevitable.

    In March 2019 the Cabinet Office launched a public consultation on how the Government should weigh social value when awarding government contracts. As a consequence it is likely that the amount of social award criteria -including modern slavery- as well as their weighting, will further increase.
  2. Access to finance
    The environmental and social impact of a business also constitutes an important investment criterion. Investors are increasingly favouring sustainable and ethical businesses. According to the Financial Times, 2018 constituted a ‘record year’ for ethical funds focusing on socially responsible businesses-with an upward tendency.

    Sustainable investments are also of particular interest for ‘Millennial investors’ who are twice as likely to invest in companies that target positive social or environmental outcomes.[4] Consequently, investors encourage organizations to clearly formulate environmental and social strategies and to operate with greater scrutiny by enhancing supply chain transparency. Assessing supply chains for modern slavery risks hence not only minimize operational risks but also opens up new opportunities to attract investors.
  3. Talent Acquisition
    As well as considering an organization's ethical performance when evaluating investment opportunities, millennials are also assessing the environmental and social impact of an organization when weighing job opportunities. A survey by Deloitte outlined that instead of high salaries, young talents are increasingly looking for value-driven employees and jobs with a positive impact on the environment and society. Hence, taking responsibility for the social impact of your business activities not only minimizes legal, financial and reputational risks but significantly enhances talent acquisition.
  4. Driving Business
    Identifying, assessing and managing human rights risks in supply chains is not only a necessity to fulfil the requirements of new laws and regulations but can play a crucial role in driving business. Responsible businesses are more likely to outperform competitors as consumers pressure companies to hold up ethical standards. Hence, companies with a clear positive social impact not only greatly enhance employer trust but also positively impact consumers buying decisions. Companies should recognise that profit-making and ethical business can not only go hand in hand but indeed the latter can foster the former.

The future of modern slavery due diligence in public sector supply chains

By putting greater emphasis on the social impact of businesses in public procurement processes the UK Government can directly enhance the protection of human rights. The inclusion of social award criteria such as ‘compliance with the Modern Slavery Act’ in public sector contracts, monitoring systems and stricter measures against non-compliant contractors are therefore meaningful steps to tackle modern slavery. Additionally, by expanding modern slavery reporting requirements to the public sector, the UK Government will be required to assess its own supply chain with greater scrutiny. This will indirectly also affect small and medium-sized companies because larger companies will pass on the requirements to their business partners and suppliers. Consequently, companies which might not be subject to the UK Modern Slavery Act themselves will nonetheless be required to report on the working conditions within their supply chain. These new and more stringent requirements are often perceived as a great challenge and business obstacle but as outlined above they also open up new business opportunities.

About RightsDD

RightsDD’s modern slavery due diligence platform provides an integrated solution for companies to assess their supply chains for slavery risk, manage remediation and report. We empower companies to tackle modern slavery.

[1]Government will name and shame suppliers breaching slavery law
[2]Government will name and shame suppliers breaching slavery law
[3] Strategic Event Management and Support Tender-Glasgow
[4] Sustainable investing: the millennial investor