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Creating an ethical procurement policy in light of the Modern Slavery Act update

The introduction of the Modern Slavery Act in 2015 has made UK companies sit up and take notice of their supply chain more than they ever have done before. Companies have been quick to assess their supply chain, but also to ensure that they are adhering to the updated legislation with a code of conduct and an ethical procurement policy.

An ethical procurement policy must make it clear to suppliers that compliance with requirements related to the Code of Conduct is mandatory. This requirement applies not only to existing suppliers but also to supplier selection and retention. This policy will be useful to set out what the process will be when breaches are found.

A report by modern slavery charity, Walk Free Foundation, alongside the Chartered Institute of Procurement & Supply (CIPS), sheds light on the fundamentals that any ethical procurement policy should include. For companies who have yet to create a modern slavery policy, or those who would like to check the validity of their existing policy, here’s the four key areas the policy should include.

Build in systems of ‘sanctions and rewards’

Through purchasing decisions, companies have the capacity to improve the working conditions of those employed by exploitative suppliers whilst rewarding those who treat workers with dignity and respect. The report, Tackling Modern Slavery In Supply Chains, says:

“Many buyers are developing programs that reward suppliers who demonstrate particularly strong social performance. The top suppliers get preferred supplier status and are given priority for new business.”

For suppliers that fail to adhere to the policy, or provide misleading statements, punitive measures could be added to your company policy. Training and guidance should be used to help suppliers and contractors understand modern slavery – only as a last resort should you cease to work with a supplier due to their human right violations.

Discover how UK businesses are rising to the modern slavery compliance challenge across their supply chain >

Contracts and sourcing

An ethical procurement policy needs implementing, and not just putting on the shelf to collect dust. The key standards you’ve highlighted in your policy should flow through all aspects of your company’s supplier sourcing and management.

These key standards, according to the report by Walk Free Foundation, are:

  • The right to request compliance related information and to audit at the discretion of, and at any time chosen by, the contract management;
  • Requirements for the supplier to have adopted the labour policies of the buyer into their Code of Conduct;
  • Ability of the supplier and any subcontractors to be able to demonstrate they have taken concrete steps to implement Code of Conduct;
  • Key Performance Indicators (KPIs) that reflect progress towards implementing Corrective Action
  • Plans and Ethical Procurement Benchmarks;
  • Transparent and frequent reporting, including the results of any social audit conducted, and the status of those suppliers who have implemented new or improved human rights policies.

With regard to sourcing processes, your Code of Conduct requirements should also be built into the Request for Tender (RFT), pre-qualification questionnaire (PQQ) and other application documents you use.

It is important to ensure that these key standards then flow through all aspects of supplier sourcing and management including; your supplier contracts, tender and purchasing processes, auditing and compliance actions, and performance standards for procurement staff too.

Supplier performance targets

Another important part of a procurement policy is to set job performance objectives and targets for procurement professionals in your business, with modern day slavery in mind.

Traditional procurement focused on purchase price, safety and technical capabilities and procurement professionals are evaluated based on acquiring the best product for the best price. As the report by Walk Free Foundation says, this focus needs to change.

“Today, procurement professionals have a critical role to play in preventing modern slavery in supply chains by selecting new suppliers that have properly enforced policies and procedures against slavery and forced labour.”

By keeping ethical considerations at the forefront of purchasing decisions, procurement professionals can promote workers’ rights and decent working conditions. It is imperative that professionals are evaluated based on the successful acquisition of goods and services that are produced using ethical social criteria, as well as the traditional objectives around price and quality.

Communicating the policy effectively

Once your ethical procurement policy framework is in place, this should become the foundation on which the company builds strategy for engagement with internal and external stakeholders and suppliers.

Sharing and communicating the Code of Conduct on forced labour and modern slavery is integral to its implementation. Staff across the company will need to familiarise themselves with its vision and principles.

Of course, the most important staff members that need to fully understand the policy is your procurement and supplier management staff. But your communication shouldn’t be limited to inside the business. As the report suggests, your communication strategy should:

  • Include new and existing suppliers and send them the new Code of Conduct and standards they must adhere to;
  • Be added into all contracts, RFTs, PQQs as well as outline rewards and consequences associated with the updated policy;
  • Policy and code of conduct should be sent to all employees internally and sessions facilitated to ensure everyone understands;
  • Relevant stakeholders are aware of the company’s new policy and are aware of their responsibility towards modern slavery

Gaining procurement clarity

Rightly so, the government’s intervention on modern day slavery has meant that the need for clarity in your supply chain has never been so important. While creating an ethical procurement policy isn’t a taxing task, implementing and getting it understood by procurement staff and suppliers is the hardest part.

New Modern Day Slavery Report released

Discover how UK businesses are rising to the compliance challenge across their supply chain by downloading the inaugural Modern Day Slavery Survey 2017 Report. Featuring key findings from procurement and supply chain professionals such as poor internal policies, failing supply chains, and best practice advice to assure long-term slavery compliance.

What's your supply chain score?

Best practice guide to supply chain compliance now available as a free download.