Is your toy supply chain ready for the Modern Day Slavery Act?

Mark Robertson

By Mark Robertson

March 31st 2016 at 11:38AM
UPDATED April 14th 2016 at 11:50AM
Is your toy supply chain ready for the Modern Day Slavery Act?

ICTI Care's Mark Robertson outlines how a raft of new legislation, coming into effect today, means toy companies must take a closer look at their supply chain.

Modern Day Slavery continues to make the headlines, and for very good reason.

According to International Labour Organisation statistics, slavery exploits 21 million people worldwide, and is a 150-billion-dollar industry.

A raft of new legislation means toy companies must now take a closer look at their supply chain.  

In the US, the Trade Enforcement and Trade Facilitation Act aims to ban imports of goods made, wholly or in part, with forced or indentured labour. This new legislation closes a loophole which, under certain conditions, had previously allowed-in goods made with forced or child labor.

The US Department of Labour has published a list of goods which it has reason to believe are produced with child or forced labor. From coffee in Cambodia, to Egyptian cotton, the list includes over a hundred goods linked to modern day slavery. Toys manufactured in China are included on this list.

Meanwhile in the UK, the Modern Slavery Act creates new responsibilities for any companies with a global turnover of more than £36 million per year based in the UK, or those that do business there.

From May 2016, these companies will be required to report annually on the steps taken to identify and address the risks of forced labor and human trafficking in their workforce, their supply chain and also the workforces of any business partners and contractors.

Read our Q&A below to learn more about the Modern Slavery Act, understand the new disclosure requirements and the implications for the toy industry, and find out how you can use the ICTI Care Process to demonstrate compliance with the legislation.

What is the Modern Slavery Act?

Enacted in May 2015, the UK Modern Slavery Act is a ground-breaking piece of legislation with significant implications for thousands of companies with a business presence in the UK. The Transparency in Supply Chains provision within the Act seeks to engage businesses in preventing modern slavery from occurring in their supply chains and within their operations.

The UK government has estimated that over 12,000 companies will be affected by new disclosure obligations required by the Act.

The government is focussing the Modern Slavery Act on larger companies initially because they have the resources to undertake the necessary due diligence, and also have significant purchasing power and influence to create effective change within supply chains.

Click here for the full text of the legislation (Section 6 specifically deals with supply chain transparency).

How is Modern Day Slavery defined?

The 1930 International Labour Organization’s Forced Labor Convention (No 29) defines forced labour as “All work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily”.

From bonded labor to forced labor, human trafficking to child labor, new definitions have since evolved to reflect the contemporary systems of slavery which exist.

The UK Modern Day Slavery Act defines the offences of ‘slavery, servitude and forced or compulsory labour’ and ‘human trafficking’.

Detailed information on these offences is set out in Section 1 and Section 2 of the Act.

Why do toy companies need to worry about it?

From today, any UK-based toy company or international toy company with a business presence in the UK, and which has a global turnover of more than £36 million per year, will be required to report annually on the steps it has taken to identify and address the risks of forced labor and trafficking in its workforce, its supply chain and the workforces of its business partners and contractors.

The Act covers a variety of areas relating to slavery and human trafficking. Section 54 of the Act requires companies over the £36 million turnover threshold to issue a statement disclosing which activities, if any, they have undertaken to eliminate slavery and human trafficking from their supply chains and their own business.

What level of disclosure is required by the Modern Day Slavery Act?

Companies which fit the criteria above are required to publish a slavery and human trafficking statement each financial year.

This statement should explain the steps you have taken to ensure that slavery and human trafficking is not taking place in any of your supply chains or in any part of your own business. If you have not yet taken any steps, this must be clearly stated.

The Act requires that companies publish this statement prominently on their website.

If a business does not have a website, it must provide a copy of the statement to anyone who requests one in writing, within 30 days of the request. The slavery and human trafficking statement should have appropriate support and approval from senior management, and a company’s Board of Directors must approve the statement, and it must be signed by a director.

What are companies reporting on Modern Day Slavery?

Organisations with a financial year ending March 31st 2016 will be the first to have to publish their statements within six months of that date.

Companies are now beginning to publish their human trafficking statements, see Ford, McMullens and Huntapac for examples.

A recent report from Ergon has analysed a hundred modern slavery statements in terms of who is reporting and what companies say they are doing. Overall, the report finds that, while companies are comfortable stating their policies and describing existing audit processes to detect slavery, they are being tentative in revealing much about the actual risks of modern slavery that might exist in their own businesses or supply chains.

What guidance is available to help me understand more about the Modern Day Slavery Act?

The UK government has now issued new guidance for companies affected by the Modern Slavery Act. The publication Transparency in supply chains: a practical guide is designed to help companies comply with the legislation.

The guide provides information on which companies needs to comply with the act, what compliance statements should contain and how these should be published, and what to do if slavery is identified in your supply chain.

How can toy companies demonstrate compliance with the legislation?

The good news for the toy industry is that you can reference the ICTI CARE program (ICP) to show conformity with the Modern Day Slavery Act.

ICTI CARE Certification requires “no forced or compulsory labor is employed for the benefit of private individuals, companies or associations. The factory should have a written policy concerning forced labor which supports the ICP that no forced labor shall be used. The factory must not use bonded labor in any form”.

Toy brands and retailers who request the ICTI CARE Seal, or undergo the process themselves of gaining the Seal for their manufacturing sites, can, therefore, cite the ICP and Seal as an example of the measures they are taking to effectively assess and ensure their supply chains against slavery and exploitation.

ICTI CARE suggests that a robust program to tackle Modern Day Slavery should include the following include five steps:

1) Supply Chain Mapping - A critical first step to drive transparency, so you know who your suppliers are. Also supports the evaluation of risk.

2) Initial Risk Assessment - This can be achieved using initial site profile information, accessible via ICTI CARE’s new Supply Chain Platform, and collected when a factory registers and starts the process of obtaining the ICP Seal.

3) Auditing - Using the ICP Audit methodology, factories to check for compliance with legal and ICP standards. Section 5 of the ICP Audit Checklist covers Modern Day Slavery issues.

4) Manage non-compliances - Factories are immediately removed from the ICP if they are found to have forced or bonded labour. Corrective actions plans should be created to ensure the factory has adequate policies and practices to prevent the future use of forced labor.

5) Engagement and capability building – Engage with factories to increase awareness and understanding of modern day slavery risks in your supply chain. Use training and support, available via ICP, to raise awareness of, and capability to tackle, modern day slavery within buying teams at brand level and management at the factory level.

Tackling Modern Day Slavery may appear a daunting task, but the potential financial and repetitional consequences of inaction are potentially significant for toy companies.

Modern Day Slavery is best treated in the same way as any other important supply chain issues which your company deals with, starting with high risk areas and moving from there. Establish internal champions, ideally at board level, to tackle Modern Day Slavery and build your organisations capabilities to tackle the issue.

It may make sense to look at your organisations existing supply chain policies and procedures, and then build on these as appropriate.

Finally, share best practice and collaborate, as everyone in the toy industry benefits from a reduced risk of Modern Day Slavery.

Click here for more from the ICTI Care Foundation.