Understanding the precise definition of slavery and trafficking is essential if companies are to balance the requirements of compliance with reasonable commercial competition.
Slavery — the legal ownership, wholly or in part, of an individual by another — rightly results in severe presentational and reputational damage to businesses, together with appreciable commercial disadvantages — even when companies are legally compliant.
Partly, this is because modern slavery is an umbrella term that includes a wide range of exploitative behaviors and practices which, depending on context, have not traditionally been considered indicative of slavery.
Today, the exploitative practices associated with slavery are most prevalent in those countries or regions where the rule of law within states has broken down, where there is a prevalence of conflict and economic stagnation, and there are opportunities for migration.
Slavery is normally accompanied and illustrated by a variety of exploitative practices, such as low-pay, high-risk employment; forced begging, prostitution and marriage; bonded labor and recruitment into crime.
The UK’s Modern Slavery Act
In classifying these practices, the most widely and readily used definition of slavery is contained in the UK’s Modern Slavery Act (2015) as the “status or condition of a person over whom all or any of the powers attaching to the right of ownership are exercised”.
Watch video — Implications of the Modern Slavery Act
The legislation defines servitude as “the obligation to provide services that is imposed by the use of coercion and includes the obligation for a ‘serf’ to live on another person’s property and the impossibility of changing his or her condition”.
Crucially, the Act also introduces two new features:
- Forced or compulsory labor, under international law, which involves coercion, either through direct threats of violence or more subtle forms of compulsion, whereby work or service is exacted from any person under the menace of any penalty and for which the person has not offered him/herself voluntarily.
- Human trafficking, which involves the arrangement or facilitation of the travel of another person with the aim of that person being exploited, even when the victim consents to the travel.
Therefore, slavery is deemed to exist when individuals are unable, through compulsion or coercion, to make a free choice about the terms within which they work.
However, with the expansion of the original and intuitively understood meaning of the term “slavery” to take in a range of interpretations, companies will need to exercise judgement and discretion to fulfill the moral expectations of society about whether transactions are considered legitimate in the eyes of a socially active and connected public and a company’s client and partnership network.
In parallel, it is important that businesses and financial institutions do not erode their competitive advantage and commercial agility by failing to understand the fine differences that exist between illegal and morally unacceptable practices on the one hand and legitimate competitive operation on the other.
In assessing an appropriate balance, a precise understanding of definitions, contexts and public opinion is essential, accepting that all three are likely to evolve over time.
Limited visibility of supply chains
Unfortunately, many companies have limited visibility and capacity in relation to what is occurring in complex multi-tier and multi-component supply chains, particularly where there is outsourcing or subcontracting.
Best practice indicates that a vulnerability-based approach is required to assess the exposure of a company to the possibility of modern slavery, both within the business and among its partners.
In particular, companies can usefully include in their decision-making matrices about transactions, partnerships and the procurement of goods and services the requirements of dealing with modern slavery and of acceptable corporate responsibility, alongside other governance and due diligence procedures.
Watch video — Do You Really Know Who You’re Doing Business With?
Supply chain analysis
Most importantly, businesses need to be alert to suppliers actively deceiving their partners about working conditions, subcontracting in breach of contract terms or using unauthorized third-party recruiters.
Those sectors and countries with weak institutional oversight and imperfect regulatory scrutiny present particular risk.
Therefore, in assessing vulnerability to accusations of employing or exploiting illegal or illegitimate labor in their operations and supply chains, it is essential that compliance professionals analyze critically their own company’s operations and also access country, partner and industry intelligence, to provide broader contextual indicators, especially about their third parties, subsidiaries and partners.
They must also be able to differentiate with authority and conviction between what is — and what is not — slavery or trafficking.
Companies need tailored policies
As such, company policies with regard to modern slavery should be tailored to the international and national contexts within which a company and its subsidiaries and partners operate.
They should take into account both legislative requirements and public perceptions and expectations about fair trade in skills and labor.
However, it is emphasized that compliance and reasonable operation will require sophisticated understanding, access to databases and a degree of insight that can only be gained through intelligent, rigorous exposure and analysis of the multi-layered connections that exist between suppliers and customers, the providers and users of labor, and between institutions and individuals.
In this regard, more detailed guidance, useful structural mechanisms and suggestions for reasonable checks are available in the Thomson Reuters White Paper Modern Slavery – What it Seems, More or Less.