UK SMEs overwhelmingly unaware of the Modern Slavery Act’s impact on them, CIPS research finds

The positive cascading effects on SMEs' supply chain management as a result of the Modern Slavery Act are already being called into question by new research compiled by the Chartered Institute of Procurement & Supply (CIPS).

From 1st April this year, under the terms of the Modern Slavery Act, UK businesses with a turnover of £36m or more, will be required to make an annual statement, setting out the steps they have taken to stamp out slave and child labour from their supply chains.

This legislation is designed to have a cascading effect on SMEs that fall below the £36 million threshold, to encourage them to ensure that their supply chains are also slavery-free. As larger businesses prepare their statements under the new rule, it seems that UK SMEs are shockingly unaware of this knock-on impact on them, and are unprepared to deal with forced and slave labour issues. The research, conducted among 263 UK businesses with turnovers under the £36 million threshold, found that 61% of UK SMEs are unaware of the reporting requirement, let alone its impact on them.

While more than eight in ten businesses with turnover under £36 million say that they have yet to discover slavery in their supply chain, this appears to be a result of ignorance over prudence with very few businesses actively looking for slavery in their supply chains. Just under a third of businesses (67%) surveyed, have never taken measures to keep their supply chains free of slavery; while 75% would not know what to do if they discovered slavery in their supply chain.

The UK Modern Slavery Act, passed in March 2015, aims to prevent the use of forced and child labour at home and abroad by putting greater onus on larger businesses to be accountable for the practices of their suppliers. Recent criminal cases have highlighted how forced and slave labour is happening right now in the UK within the operations of UK firms, and SMEs are equally as culpable for fostering the conditions for modern slavery, as their larger counterparts.

Despite this, only a very small percentage of small British businesses are proactively taking steps to tackle the issue. Of the SMEs surveyed, one in ten have ensured all their UK workers are in receipt of the minimum wage and robust immigration checks are in place. Only 5% of businesses have ever mapped their supply chains, in an attempt to uncover modern slavery, and just 4% have provided training to staff or suppliers on how to spot the signs of possible slavery amongst suppliers.

David Noble, Group CEO of the Chartered Institute of Procurement & Supply (CIPS) said: "Though the legal duty to tackle slavery in supply chains is on larger corporates with a revenue threshold of £36m and over, smaller businesses still have a duty to ensure their supply chains are slavery-free, particularly if they supply to businesses that have to comply with the Act.

"Ultimately, modern slavery is not an issue confined to the supply chains of large multinational corporations. On the contrary, SMEs can often have long and complicated supply chains themselves. They are just as likely to find enslavement in their operations, right here in the UK, as recent cases show.

"To truly eliminate this evil from UK procurement, supply chains need to be mapped and simple measures put in place. Partnerships between larger corporations and smaller SMEs will be instrumental in driving out malpractice in the supply chain. The legal duty in the Act must not override the moral obligation of us all to make sure our supply chains are slavery-free."

Despite not having access to the same resources as larger companies, small businesses can take simple but effective steps to protect their businesses starting with:

• Ensure all your UK workers are in receipt of the minimum wage and robust immigration checks are in place
• Map your supply chains to understand where there is highest risk and exposure to modern slavery
• Undertake site inspections
• Provide training to employees and local suppliers on modern slavery risks and compliance
• Review supplier contracts and include obligations to comply with the UK Modern Slavery Act
• Publish a statement outlining the steps you are taking to tackle modern slavery