February 23, 2016

The UK’s Modern Slavery Act and Supply Chain Transparency: A Focus on Tanzania

According to the 2014 Global Slavery Index there are an estimated 35.8 million men, women and children trapped in modern slavery globally – a concept encompassing slavery, servitude, forced and compulsory labour and human trafficking - with an estimated 350,000 in Tanzania alone. No country is immune from modern slavery, but each is likely to have its own particular issues.

Tanzania has been identified as a source, transit and destination country for modern slavery. Its export economy is built on commodities that are vulnerable to labour exploitation in their supply chains, including gold, coffee, cotton, tea and tobacco. For organisations with supply chains in Tanzania there are likely to be particular concerns around forced and child labour. For example, child labour in small gold mines remains a very public problem albeit the Tanzanian Government is taking active steps to try and address the issue.

The Modern Slavery Act

The UK’s new Modern Slavery Act 2015 (MSA) includes landmark supply chain transparency provisions that require ‘commercial organisations’ (body corporates and partnerships) supplying goods or services, with a global turnover of GBP 36 million or more, and carrying on business in the UK to publish an ‘annual slavery and human trafficking statement’ on their website. This is a statement of the steps taken to ensure modern slavery is not taking place in their business and supply chains anywhere in the world. It is designed to incentivise large organisations with the resources and market leverage to influence their suppliers to take responsibility for eliminating modern slavery in their supply chains.

For those satisfying the reporting requirements, the issue of what they are doing to prevent modern slavery from occurring in their global supply chains is about to become very public and will inevitably have a ripple effect down multiple tiers of their supply chains, including those in Tanzania and East Africa. Organisations with a financial year end of 31 March 2016 will be the first required to publish their reports, which must be approved at board level and signed by a director or partner. Of course, any Tanzanian company (or one registered in any other country) that has a demonstrable business presence in the UK and has a turnover equivalent to GBP 36 million or more will also need to report.

Complying with the reporting requirement

An organisation’s statement must set out the steps it has actually taken to tackle modern slavery, and although there is no prescribed layout or content of a statement, the MSA provides non-compulsory examples of what a statement may contain. This includes information on:

  • The organisation’s structure, business and supply chains
  • The company’s policies in relation to slavery and human trafficking
  • The due diligence undertaken across its business and supply chains in relation to slavery and human trafficking
  • The parts of the company’s business and supply chains where there is risk of modern slavery taking place and what steps have been taken to assess and manage that risk
  • The effectiveness of the steps the organisation has taken, measured against performance indicators it considers appropriate
  • The training on modern slavery available to staff

Statutory guidance issued by the UK Home Office provides further details, tips and case studies on these themes as well as guidance on how to respond to modern slavery if it is identified in a supply chain.

Action steps

A statement must be underpinned by action which should be defensible and based on a proportionate and risk-based approach taking into account sectoral and jurisdictional risks, as well as the complexity of the organisation’s supply chains. A clear policy on modern slavery, whether stand alone or integrated into existing CSR policies, will be essential, as will enhanced human rights due diligence for those operating in high risk sectors in Tanzania. Supply chain mapping to understand risks, clear rules for procurement, contractual protections in supply contracts (including warranties, audit rights and obligations to comply with applicable codes of conduct) and consistent messaging throughout the supply chain will all have a role to play.

Organisations could consider partnering with local NGOs in Tanzania to better understand local conditions, provide sensitisation training to the organisation and its suppliers, and to provide independent monitoring of supplier compliance with good labour practices. Partnering with local industry bodies and, where appropriate, collaboration with competitors to increase market pressure for change can also be useful. Organisations should also critically reflect on how they will respond to identified cases of modern slavery, what level of support they are willing to give to suppliers to remediate issues identified, and how they will adapt their incentive packages to mitigate against supplier reliance on forced labour.

Some considerations for suppliers

Suppliers will almost inevitably be required by those subject to the MSA’s reporting requirement to give assurances that their own business and, in turn, supply chains are slavery free. For example, suppliers may be required to warrant that their business and those of their suppliers are free of modern slavery, to allow their books, employment contracts and premises to be audited, and to agree to comply with their buyer’s modern slavery policy and codes of conduct.

Suppliers should be realistic about what they can and cannot achieve in terms of influencing their own supply chains and should engage in an open dialogue with their buyers to ensure there is a common understanding of expectations and to seek assistance where necessary. It is important for suppliers to discuss labour related issues and how buyer demands may be driving labour exploitation down the supply chain (eg, because of unrealistic production deadlines or unfair market prices).

Where to from here?

Although the UK is leading the charge on supply chain transparency, pressure from other international jurisdictions is only likely to increase, including from the US who are considering national legislation that builds on the California Transparency in Supply Chains Act 2010, on which the MSA was based. Local and international NGOs, activist shareholders and customers are all likely to be at the forefront of policing compliance and corporate governance in this area.

Tanzania is one of many countries (including the UK) in the spotlight for labour exploitation and trafficking related issues. While the Tanzanian Government is making a concerted effort to tackle the issue locally, the MSA’s transparency in supply chains provisions should now incentivise organisations satisfying the reporting requirement to also play their part in influencing change.