In 2017/18, the government spent around £284 billion buying goods, services and works from external suppliers, accounting for around one in three pounds of public sector spending[i]. The money is spent on everything from schools, medicine and social care, through to roads, defence and IT. Although the use of suppliers from the private sector is a well-established practice, here is increasing public debate about the quality of government supervision of its suppliers, and its ability to manage risk, particularly in the wake of instances like the collapse of Carillion[ii].
With regards to modern slavery, this weak supervision raises a particular concern. It is estimated that around 40% of the 40.3 million victims of modern slavery around the world are in the private sector. The UK’s Modern Slavery Act 2015 (MSA) marked a turning point in the fight against modern slavery and recognised the role of the private sector, through mandating the publishing of a slavery and human trafficking statement for businesses with a turnover of £36 million and over. It is essential that everything possible is done to enforce the provisions of the Act and ensure spending on public services does not inadvertently enable modern slavery.
Building on this and the recommendation from the independent review of the MSA that the public sector entities publish a statement on a mandatory basis, Sancroft and Tussell have produced a second edition of the report: Eliminating Modern Slavery in Public Procurement [hyperlink]. The Sancroft-Tussell reports examine the modern slavery reporting of central government’s top 100 suppliers. And this year’s assessment reveals that a stark reality remains. Almost a third of the modern slavery statements produced by the top 100 suppliers to central government were not legally compliant.
Four years on since the Act’s launch, this report explores how central government’s top 100 suppliers are tackling the challenge of identifying, managing and eliminating modern slavery risk in their operations and supply chains. Moving beyond legal compliance, it analyses how companies are using performance indicators to demonstrate commitment to tackling this serious crime and measure progress over time. It sets out some of the key drivers for both non-compliance and good practice. It also provides practical guidance for business to develop better statements and for government to improve legislation that levels the playing field and enables business to act to protect vulnerable people.
Key findings
- High spending power: UK government spent £9.6 billion on its top 100 suppliers in 2018.
- Legal compliance remains low: almost 1/3 of the UK government’s top 100 suppliers were not compliant with the MSA.
- Suppliers with no-statement: Three companies supplying government have no statement at all.
- Spending on non-compliance: Government spent £2.8 billion on non-compliant suppliers within top 100.
- Failure to measure performance: Only nine companies reported on progress in preventing modern slavery over the last year.
- Few businesses committing to operational change: Just 34% of compliant companies state plans for coming year that involve a change in business practice.
Taking the necessary steps to eliminate modern slavery from supply chains should be a priority for any business, not only because of the severity of the crime but also because it can benefit a business in the long-term. Our analysis found that many businesses are not doing enough and are not recognising the business case for action.
Effective modern slavery reporting has the following benefits to business:
- Compliance with UK legislation, alignment with the global legislative landscape and lower risk of public scrutiny.
- High level endorsement leading to improved outcomes. When businesses follow the requirements of the law, the issue of modern slavery is raised at boardroom level. This not only raises the issue of publishing a modern slavery statement but can build a stronger business case for implementing changes to business operations.
- Improved risk management. By complying with the requirements of the MSA and taking meaningful steps to addressing risks of modern slavery in supply chains, businesses can reduce reputational risk from benchmarks and public scrutiny as well as financial risk through putting preventative measures in place before issues disrupt operations.
- Competitive advantage. Businesses that demonstrate best practice and commitment to continuous improvement can gain a competitive advantage. Businesses that exceed the requirements of the Act and innovate in this area can also future proof their operations by anticipating further changes to the Act and being ahead of the curve.
With more countries passing legislation, the likely strengthening of the Act to include public disclosure of non-compliant companies, and ever-increasing public awareness of the issue, the business case for action is getting stronger. We agree with the recommendations of the independent review of the Act and think that if these changes are implemented, government suppliers may re-think their approaches to fighting this serious crime.
At the same time, we urge government to review its own supply chain management and accelerate plans to put more stringent requirements on suppliers and mandate compliance with the MSA before they can be granted a contract. We also welcome the commitment for government to publish its own transparency statement. Until we see government leading by example, we are unlikely to see a major change in compliance.
[i] https://www.instituteforgovernment.org.uk/sites/default/files/publications/IfG_government_procurement_web3.pdf
[ii] https://www.theguardian.com/business/2018/jul/09/carillion-collapse-exposed-government-outsourcing-flaws-report
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