Brands must establish practices to identify, audit and monitor their supplier base, including subcontractors, if they are to flourish under the British Modern Slavery Act.

The Act, which will apply from October, requires retailers to publish an annual statement outlining the steps they have taken to ensure slavery and human trafficking are not taking place in their businesses or supply chains. It is a world first and impacts companies with a turnover of GBP36m (US$56m) or more.

A recent report by cloud-based supply chain platform Segura Systems asks 'What does the Modern Slavery Act mean for brand protection?' - and suggests brands need to be better prepared if they are to manage their supplier base effectively.

“This new legislation will place a spotlight on how companies monitor every link of their supply chain, far beyond their immediate suppliers. Companies will need to identify current areas of risk in order to make improvements, but this relies on them having a good level of supply chain visibility,” Segura says.

It adds that UK businesses need to establish practices that will effectively identify, audit and monitor all players within the extended supply chain, including subcontractors, which can often pose the greatest risk.

The report states that having an auditing process in place is a start, but questions whether companies can be sure that approved manufacturers are actually making their products, or that every component is sourced from ethical suppliers.

“This is particularly problematic in the case of multiple tier supply chains. Primary suppliers are often fully audited and approved, but complex sourcing strategies can still allow unknown and unauthorised subcontractors to silently enter a company’s supply chain. Widening the supplier base has been cited as a strategy to mitigate external threats, but this approach can also cause a multitude of problems by reducing supply chain visibility.”

Segura explains that intricate chains of contracting and subcontracting, both within the UK and abroad, often mean companies are unaware of the conditions under which their goods are produced.

“Many [companies] simply don’t know what happens beyond their tier one suppliers,” it notes.

Establishing practices to identify, audit and monitor all players along the supply chain, Segura says, provides companies with an opportunity to demonstrate their ethical standards, and could help to improve quality standards as well.

“By achieving greater control over the supply chain, organisations can keep suppliers in check and enforce stricter sourcing guidelines. UK companies must consider what investments are needed to adapt their current operating model to the new reporting requirements. Data collection and analysis will help to drive change.”

Under the new Act, businesses can comply simply by stating that no actions have been taken to protect their supply chains from modern slavery. But as Segura points out, this will only reflect poorly on the brand, particularly in comparison to market competitors.

As one industry observer recently wrote on just-style, legal niceties won’t determine the law’s impact; public opinion will.