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Modern Slavery – a term which covers forced labour, child labour and child slavery, forced/early marriage, debt bondage/bonded labour, and human trafficking – is thought to affect over 40 million people worldwide.

Engaging on Modern Slavery in the UK’s Construction Sector

Jon Mowll Jon Mowll Responsible Investment Analyst
Engaging on Modern Slavery in the UK’s Construction Sector
Opinion

Engaging on Modern Slavery in the UK’s Construction Sector

Jon Mowll

Jon Mowll
Responsible Investment Analyst

Modern Slavery – a term which covers forced labour, child labour and child slavery, forced/early marriage, debt bondage/bonded labour, and human trafficking – is thought to affect over 40 million people worldwide. Reliable figures for the number of people affected by Modern Slavery in the UK are not available. The UK Government estimates it to be in the “tens of thousands”. A Home Office report in 2014 put the number at between 10,000 and 13,000.  The Global Slavery Index suggests that there were “136,000 people living in modern slavery in the UK on any given day in 2016.” This highlights that Modern Slavery, by its very nature, can be difficult to uncover. 

A number of sectors in the UK are at heightened risk of Modern Slavery, predominantly those which are characterised by low-skilled, temporary and contracted/sub-contracted labour. One sector particularly at risk is the construction sector. Therefore, between September and November, we conducted a sustained thematic engagement stream with 10 construction sector companies on Modern Slavery. 

Our engagement was focused principally on disclosures made by companies under the requirements of the Modern Slavery Act 2015. These are published annually, and are known as Modern Slavery Statements. 

Analysis of the companies’ Statements revealed some pockets of strength in terms of mitigating Modern Slavery risk, as well as significant shortcomings.  The companies displayed varying degrees of Modern Slavery due diligence: conducting audits on suppliers, contractors, and business partners, providing employees with training on risks, their rights at work, and so on, or working on collaborative initiatives such as the Supply Chain Sustainability School.  There was a notable absence of unannounced audits, with some companies citing logistics issues which mean that they need to pre-announce audits in order to gain access to site, view the correct paperwork, and so on. Random sampling of site workers to assess right to work, wages, and familiarity with whistleblowing hotlines was a more common approach.  There were a handful of instances where companies’ representatives indicated that a relationship with a supplier had been terminated (or a prospective supplier rejected) based on insufficient evidence of Modern Slavery mitigation.

Some worrying statistics are worth highlighting. One company, for instance, found through its site audits that 58% of interviewees said they had not been asked for appropriate “right to work” documentation, and fully 88% of interviewees were unaware their company had a Modern Slavery Policy. Disclosure of figures such as these is still nascent, partly because the Modern Slavery Act 2015 does not mandate reporting on specific indicators such as these. (The Act does require a company to include “key performance indicators to measure effectiveness of steps being taken”.)

Ultimately, none of the companies contacted reported any instances of Modern Slavery in their own operations, among contracted workforces, or in supply chains in the latest reporting year. In many instances, this is not explicitly stated in the Statements. However, as instances of Modern Slavery can be hard to uncover, we pressed companies to tell us how these results were viewed internally. Is this showing that the due diligence processes, policies, and other initiatives are working? Or perhaps that the company has simply been unable to identify instances of Modern Slavery which may be occurring?  

The candour of many responses demonstrated that there is an acute understanding of the shortfalls in existing due diligence processes, particularly deep within supply chains or among sub-contracted workforces. It is important to stress that we are not looking to ‘blame’ companies for ‘found’ instances of Modern Slavery in their supply chains or in sub-contracted workforces, but to encourage and work alongside them to help identify risks, free victims from all forms of slavery, and prevent re-occurrence. 

One company, for instance, found through its site audits that 58% of interviewees said they had not been asked for appropriate “right to work” documentation, and fully 88% of interviewees were unaware their company had a Modern Slavery Policy.

This engagement stream appears to have been timely. We read recently about how ‘exploited' workers are “propping up the [UK’s] building sector”. CCLA has recently announced that it will be leading a coalition of stakeholders on a new ‘Find It, Fix It, Prevent It’ engagement stream designed to tackle Modern Slavery, initially with a focus on the hospitality sector. Anticipated to run through to 2022, their proposals in turn were spurred by the Liechtenstein Initiative’s Blueprint for Mobilizing Finance against Slavery and Trafficking

There are four parts to the initiative – (i) an investor statement, which EdenTree has signed; (ii) an investor engagement group which will initially target 16 companies in the UK hospitality sector; (iii) an investor group which will seek to drive public policy change, focusing on strengthening the Modern Slavery Act; and (iv) a group which will bring together academics, ESG ratings providers, and investors,  to develop metrics on Modern Slavery which can be incorporated into ESG ratings. This type of multi-stakeholder approach is welcome, and EdenTree will be supporting the initiative across all engagement strands.

Yet despite this uptick in investor interest, we seem to be still in the early stages of Modern Slavery focused engagements.  A representative of one of the companies we spoke to in this engagement stream told us that we were the first investor to ask questions around the company’s Modern Slavery Statement.  Perhaps this is a result of the language of ‘financial materiality’ creeping into a sector – responsible investment – which used to speak the language of morality; of ethics; of ‘right and wrong’.

Whatever the reason for the historic lack of investor engagement in this area, we as an industry can –and must – do much more to tackle this affront to society… starting now.