Bringing Modern Slavery Compliance Within Reach
There’s been a dynamic shift away from an acceptance of platitudes to an expectation of action and results. The pressure is on. What will it take to get it right? Stuart O’Neill, APAC MD for Coupa, explains.
The rationale for removing modern slavery from your company’s supply chain is simple. It’s the right thing to do. There is a clear expectation from the public and from stakeholders that business and supply chain data should be easily accessible, used and reported against. In keeping with the Australian Government’s leading stance in implementing regulation to take action against modern slavery, Australian businesses have begun to do their part.
In the first full year of compulsory modern slavery reporting in Australia, nearly 2000 statements have been lodged by companies that are mandated to do so by the Modern Slavery Act. In fact, nearly 300 additional businesses that are not required to produce these reports have submitted modern slavery statements, voluntarily.
However, according to research released by the Australian Council of Superannuation Investors and conducted by human rights advisory firm, Pillar Two, there is much room for improvement.
Significant among the critical challenges explained in this report, many ASX200 companies are struggling to demonstrate an understanding of their supply chains beyond the Tier 1 level. While this is understandable for the first year of reporting, it is likely that modern slavery risks lie deeper in these supply chains.
According to KPMG, more than 75 percent of executives responsible for third party risk management (TPRM) identify it as a strategic priority because of the impact it can have on a business’ reputation, yet half of businesses lack sufficient capabilities for this level of risk management in-house3. Only 25% are using technologies for workflow automation or monitoring, and more than 60% said they would invest in such tools when the funding becomes available.
In a recent WBR Insights survey of 200 CPOs, over 80 percent reported supplier diversity as a top initiative for executive boards and investors4. Increasingly – especially when it comes to societal issues like modern slavery – reputations and bottom lines are on the line.
Consider the risk associated with just one supplier that may be involved in modern slavery, or tacitly supporting a third-party that is practicing it in some way. Now, multiply that risk by the number of direct and third-party suppliers a company has and those it adds as it diversifies, including all the organisations along each of their supply chains, and you can see why the strategic priority that is risk management must be supported with the necessary tools and automated workflows.
Being able to confidently report that there is no modern slavery in the supply chain means gaining visibility across a network that encompasses third-party suppliers. Truly getting that right will take a combination of working smarter and spreading the responsibility across the business and the supply chain, with user-friendly technology as the enabler. It means accessing your suppliers at every level.
7 Ways to Improve Modern Slavery Management
Even if your company has already begun reporting, but is struggling to establish a repeatable process, it’s not too late to create a structured Modern Slavery Reporting program.
1. Map the organisation’s entire supply chain structure. Consider all aspects of your company’s relationships with its suppliers and, by extension, all of their suppliers. Require the completion of a Materiality Questionnaire by each supplier and third party.
You need this understanding of supplier relationships to be an ongoing process, regularly and consistently updated. Implement a process of continuous management and design to fill gaps, diversify and mitigate risk.
Automation will be critical. Ditch spreadsheets and start using data-driven workflows. Make it user friendly, to drive compliance along your supply chain.
2. Formulate modern slavery policies and procedures. Collate current policies, identify gaps, seek out best practices, adapt outdated and sub-standard policies and write new ones as required.
Surround these policies with the appropriate procedures and workflows, and ensure they are visible to business users at the point of transaction.
To ensure the processes will be adopted and used consistently, give users integrated, simple tools, rather than cumbersome, manual workflows.
3. Carry out a modern slavery risk assessment. Determine the potential impact / risk level each supplier and third party supplier may present.
Organisations the world over are in the same boat, doing what they can to assess a variety of risks within the supply chain. The ideal solution will allow you to tap intol up-to-the-minute community market intelligence about and experiences with the suppliers you use – as well as alternate suppliers – to help you select the ones that align best with your corporate values.
The solution you choose should allow for the sharing of that information amongst the procurement and supply chain management community. It should allow for the intake of data feeds from ratings platforms such as EcoVadis, for the assessment of corporate social responsibility and risk monitoring for societal issues like modern slavery.
4. Assess and manage identified risks. Develop a plan of action for each issue, to mitigate existing risks and close gaps. This may include carrying out things like further due diligence, taking a legal or contractual approach, establishing codes of conduct etc. Discontinue supplier relationships as necessary.
All this should be supported with an automated documentation and communication framework to trigger, collect, approve and flag due diligence information from staff and third parties.
Thanks to AI and machine learning functionality, the right solution will allow you to identify the highest priority risks for management. If flagged, issues should be automatically routed to internal subject matter experts for action.
5. Establish processes and KPIs. This isn’t just about record keeping, but rather auditing to ensure compliance and action. Ensure that all transactions have an easy-to-report audit trail that shows user, old value, new value and timestamp for creation and modification of all data fields.
6. Factor in residual risk. It may take time and a series of actions to successfully solve for risk within supplier relationships. You’ll need to calculate residual risk left once the first steps are taken and implement a system for scheduling re-assessments. It’s important to develop a consistent system for scoring your risk relationship with each supplier in terms of financial, reputational, availability of supply etc. and one that will automatically calculate a residual risk score to attach to each supplier.
7. Develop and deliver training for all staff, so they understand the risks and impacts of modern slavery, know what to look for and understand their role in any remediation process.
Managing modern slavery in your supply chain requires a consistent, governed, and auditable system and set of protocols. One thing that business decision-makers and those managing the technology investment purse strings need to understand is, if it remains siloed within a procurement community working with inefficient processes and systems, it’s a problem that will be incredibly difficult to solve.
Technology and automation can be used to make modern slavery management a shared responsibility, acting as the enabler to make the related processes easy to follow, user-friendly, repeatable and reportable to drive adoption and real change.