Detecting unethical business practices can be difficult in your own business. It’s especially challenging when your suppliers are trying to hide unscrupulous activity from you.
The issue has been brought into sharp focus following the recent revelation that both Next and John Lewis have failed to detect a ‘slave workforce’ among one of their UK-based suppliers, Kozee Sleep. What makes this unsettling news even more concerning is that both retailers carried out ethical audits that failed to uncover the illegal activity.
Businesses can learn some important lessons from this case.
What does modern slavery look like?
Mohammed Rafiq, the owner of Kozee Sleep, was found guilty of human trafficking. He will be sentenced next month.
It’s reported that the trafficked workers were promised good wages, housing and food in the UK, but the reality was quite the opposite. Some men were paid as little as £10 per day for a 16-hour shift, which they worked five to seven days per week. They lived in cramped housing with 40 to 50 people under one roof.
It appears that Next, as a large firm, is making an effort to improve systemic issues in a complex, globalised market. But despite its efforts the impropriety that went undetected was close to home. This calls into question how thorough an ethical audit should be, the ability of auditors to detect bad practice, and how effective the new legislation is.
Is the legislation sufficient?
When the Modern Slavery Act came into force the government announced that the law would apply to about 12,000 active companies who are carrying out business, or are part of a business, in the UK.
Under the Act, which came into effect in July last year, businesses with a turnover of more than £36 million must publicly state what measures they are taking to eradicate slavery from their supply chains. The Act has been criticised for not going far enough to eradicate unethical standards as it focuses on large companies, and does not require businesses to address human rights breaches if found.
Next states that it recognises its responsibility to people in its supply chain and is fully committed to ensuring products are made by workers who are treated honestly, fairly and with respect for their human rights. The retailer also has an ethical trading programme, which aims to provide support to its suppliers through collaboration and training on ethical values.
The Next Code of Practice (COP) for suppliers is enforced by a global team of 45 members. Last year 1,945 compliance audits were carried out to ensure standards were met.
How can I create the ideal ethical audit?
Here are some quick tips to ensure better detection of unethical practice within your business:
- Enlist an independent external auditor – This is an extremely important part of the audit process as it ensures greater objectivity and transparency. It also signifies to staff that the audit is being taken seriously and that the reports will reflect unbiased findings.
- Unannounced audits – If there is any impropriety within the business operation an announced audit defeats the opportunity of observing standard day-to-day behaviour.
- One-to-one interviews – Ideally the independent auditor should be permitted to conduct one-to-one interviews with selected members of staff from the payroll. This allows the auditor to get a better representation of the firm’s activities from different points of view. Interviews also allow employees to candidly express any concerns to an objective third party.
- Monitoring continuing performance – Throughout the course of busines, many things can change and only regular assessments will ensure that ethical practice is being upheld.
Elkan Abrahamson is head of business ethics at law firm Jackson Canter
