11th November 2020
UK government still hasn’t produced a lorry drivers’ guide
In our view, the UK government’s Modern Slavery Act has profound implications for virtually all major garment buyers, sellers and manufacturers – however small their UK sales are.
The UK government announced on July 29 that all businesses operating in Britain with global sales over £36 mn ($56 mn) will need to make an annual public statement of its plans to eradicate slavery and human trafficking throughout their supply chain. The requirement covers all subcontractors to virtually all worldwide apparel retailers – and to many other players in the industry..
The UK Modern Slavery Act requires all businesses with sales over £36 mn and any operations in Britain to prepare an annual report outlining the steps it has taken to eradicate slavery and human trafficking from the whole of its supply chain. The requirement is substantially more sweeping than any other supply chain disclosure requirement anywhere else in four ways:
Though the Act comes into force on July 31, the supply chain disclosure requirements do not require immediate report-writing. In our view, though, they do require any apparel-related business with global sales over £36 mn to review its sourcing and disclosure strategies now. The practicalities are:
So practically every substantial apparel retailer – even businesses like Ali Baba with almost no sales in the UK, or like Macy’s, still testing the waters with a site pricing in GBP – will need to decide how to handle this.
It is important to stress that there is no ingenious way out of the problem. Any business with direct sales over £36mn, or with subsidiaries’ sales adding up to £36 mn, is affected if it does business in Britain. Pulling out of Britain – in theory an option for Li & Fung, Dishang Cherry or Ali Baba – would now be an implicit public admission of an unsupervised supply chain, and an immediate invitation for persecution by activist groups.
Nor, we suspect, is PR waffle likely to help.
The only realistic options, in our view, are to install credible supply chain auditing (if a business hasn’t already) or to admit there isn’t any yet, but that there is a realistic timetable for developing one. By mid-2016, there are likely to be a significant number of public admissions of not-quite-perfect supply chain auditing, so most medium-sized businesses with limited UK visibility are unlikely to attract much hostility if theirs is among them.
Businesses most vulnerable are likely to be those liable to underestimate the problem. Among multi-billion businesses in apparel, the complete supply chains of Amazon, Li & Fung, Dishang Cherry and Ali Baba/Taobao (and their suppliers) are now subject to legal scrutiny in the UK on a scale they have never before been exposed to. For conventional large retailers like Walmart, Primark or Macy’s, though, the Act mandates little more than they do already.
Amazon, Li & Fung, Dishang Cherry and Ali Baba/Taobao could, in theory, publish a “we don’t know” statement – but it is impossible to imagine they could survive it.
Activists are particularly keen on persecuting Li & Fung (which they believe brands use to disguise shady manufacturers) and Amazon (which they see as a hard core tax-dodger) – but will relish the opportunity to make Dishang Cherry and Ali Baba/Taobao liable to human rights requirements activists think they evade.
The Act may or may not reduce modern slavery. But it opens virtually every serious operator in the apparel industry to scrutiny at a previously unprecedented level. And subjects fringe players to the costs of serious supply chain audit they have so far left to mainstream retailers.