Modern slavery exists somewhere in the supply chain of every company in Britain today, according to Peter Hugh Smith, CEO of investment firm CCLA. “It’s an endemic problem and it’s not just happening in sweatshops in the Far East.”
Modern slavery is the severe exploitation of people by criminals for personal or commercial gain and includes human trafficking, forced labour and criminal and sexual exploitation. It is thought that around 40 million people around the world are victims – with 25 million of these in forced labour – forced to live and work in squalor, trapped as their earnings are siphoned off by criminals. A staggering number of these people appear in the supply chains of the companies listed on the capital markets.
In a recent survey conducted by Hult Research in partnership with the Ethical Trading Initiative, 77 per cent of companies said they considered it likely that modern slavery was taking place in their supply chains. Evidence, collected by charities and academics, would suggest that this is likely to be even more widespread than this.
Of course, it can be difficult to identify the victims, especially within large corporations whose supply chains have multiple tiers and are structurally complicated. Firms supplying even the simplest products may have up to a thousand other firms supplying their products, so investigating a supply chain is an immense task for any organisation to undertake. But CCLA, which manages investments for religious organisations, charities and the public sector, is helping to raise awareness of the problem in the financial world by actively pressurising companies to identify instances of modern slavery within their supply chains.
“It’s not just about businesses,” says Dame Sara Thornton, Britain’s independent anti-slavery commissioner who works closely with CCLA. Her 2020 report on modern slavery emphasises the role that businesses and financial institutions can play in uncovering and stopping criminal activity. “It’s about the financial institutions who either lend or invest in businesses, who are in the perfect position to require that business take modern slavery seriously and do their due diligence.”
Thornton says CCLA is a leader in the fight to stop slavery in its many forms taking place in Britain and around the world. In 2019, they launched the “Find it, Fix it, Prevent it” initiative which aimed to mobilise companies to identify problems with modern slavery in their supply chains. The initiative, initially focused on firms in the hospitality industry has applauded Intercontinental Hotels for their efforts in identifying modern slavery, and is in line with the growing trend for ESG (environment, social and corporate governance) investing, which involves taking such non-financial factors into consideration when investing in a company.
While ESG data is not commonly part of mandatory financial reporting, companies are increasingly making disclosures in their annual reports or in a standalone sustainability report. This is especially the case when it comes to environmental concerns. CCLA is trying to focus on the social aspect, which is much less developed at the moment.
“To put it bluntly,” says Hugh Smith, “we are stealing someone else’s idea.” The initiative is identical in concept to Climate Action 100+, an investor-led initiative which engages with the world’s biggest corporate greenhouse gas emitters to encourage them to take action on climate change. Climate Action 100+ now has 575 investor funds, with $54 trillion of assets, and is as a result becoming increasingly effective.
“Climate Action are big, so people at big firms like Nestlé listen,” says Hugh Smith. “We are doing the same – we can act as the sort of catalyst in the modern slavery arena by bring investors together to work with a single voice, to engage with organisations, increase the volume.”
The problem at the moment is that modern slavery is not yet seen as a financial risk to the investment industry. “Because the financial profits of slavery don’t go to the companies we invest in, they go to middle men, they do not have a financial impact on the firm,” he says. But as investors are increasingly focused on good, ethical practice and sustainability, companies will start to pay attention.
Data is also key to change, and CCLA is in discussions with independent organisations who deliver hard data on individual firms and their exposure to slavery. “If you can’t measure it, it doesn’t happen,” says Hugh Smith. “Bad data will start to affect their share price.”
There is, however, still a lot of work to be done spreading the word, says Thornton, who while working on her report was struck by some “disappointing” findings. Results showed that 45 per cent of senior managers are unaware that there is slavery in the UK, while 30 per cent of employees said there was no slavery in the UK today.
The reality is very different. Last year, 10,613 victims were identified in the UK, according to the Home Office, a large number of which were children who are groomed and used to move drugs and money around the country. A notable case of modern slavery in the UK was uncovered last year in the West Midlands where 400 trafficked men and women from Poland were discovered living in squalid conditions, working in factories and on farms during the day, with all their earnings taken out of their bank accounts every Friday. When one man asked his oppressors if he could return home to Poland, he was told: “Only dead in the back of a van.”
These people were lucky, many aren’t. But there are now systems in place to help victims who have been identified thanks to the work of the Home Office. The National Referral Mechanism, set up by the Home Office in 2009, is a framework for identifying and referring potential victims of modern slavery and ensuring they receive the appropriate support. This can include healthcare, legal advice and money, as well as a caseworker to support them throughout the process.
Thornton says her job comprises three parts, the first of which is prevention, which is where CCLA comes in. The second part is victim protection which involves helping them to live independently after the trauma by providing access to work and education. The third and final part is prosecuting the perpetrators who view the risk as low, says Thornton. CCLA’s work is to get the ball rolling, which will eventually see victims liberated, their oppressors behind bars and the practice of modern slavery curbed at the least.
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