Consumers more than ever are looking for businesses to take more responsibility for problems that exist deep within the global supplier network, from worker exploitation, sustainable sourcing to single-use disposable products. Join SAI Global and Verisio for a free 1-hour webinar, to learn how to embed an ethical approach to your business. To request the recording link please email information@saiglobal.com.

1. How to Adopt an Ethical Approach to your
Supply Chain
April 17th, 2018

2. Welcome
• Kerry Futter, SAI Global
• Participants will be on mute during the webinar
• Q&A session at the end – please use the ‘Question’ button on the
right hand side of your screen, click ‘Ask’ to submit.
• The webinar will be recorded and the link sent out after the webinar
with the slides.

3. Our Presenters today
David Capperauld Chris Riley

4. Agenda
• What is the Modern Slavery Act?
• Practical steps you can take to help in the fight against Modern
Slavery
• How to ensure you are compliant
• Background, why adopt an ethical audit programme?
• Common issues
• Setting up and managing an ethical audit programme
• Q&A

5. The Modern Slavery Act
• What does Modern Slavery look like?
• How you can help in the fight against Modern Slavery
• How to be compliant

6. Poll questions
#1: Do you have a Modern Slavery statement?
#2: If you don’t, do you have plans in place to start?

7. What is slavery?
• Forced to work – through mental or physical threat. forced to work
in mines, make cement, harvest crops, fish, stitch and sew products
for global supply chains.
• Owned or controlled by an ”employer” usually through mental or
physical abuse or the threat of abuse
• Dehumanised, treated as a commodity or brought and sold
as property
• Physically constrained or has restrictions placed on his/her
freedom of movement.
• Looking for modern slavery may not be an easy task, but all
businesses need to do it.

8. Facts
• 21-30 million in slavery
• Traffickers earn 150 billion dollars each year
• 78% are labour slaves, 22% are sex slaves
• 26% are children under the age of 18
• India has the largest number of slaves in the world (14 million)
• UK is believed to have 13,000 slaves, probably more

9. Businesses Addressing their Supply Chains
• Audits provide one element of a strategic programme
• We need to be influencers – Internally & Externally
o It needn’t depend on your spend
• Review Buying / Procurement Practices
o Planning & Buying Cycles
o Supplier Selection Processes
o Supply Chain Transparency – build your knowledge
o Rewarding high performing responsible suppliers
• Collaboration is key
• Promote your commitment
‘A Modern Slavery Statement is an outcome of a strong
responsible programme’

10. Modern Day Slavery Statements

11. Due Diligence

12. What should the statement contain?
• Detail the organisation’s structure, business and supply chains
• Policies in relation to slavery and human trafficking
• Risk assessments and due diligence processes
• Details of where there is a risk of slavery and human trafficking
• Steps taken to assess and manage that risk
• Details of taining and awareness-building for staff

13. Mapping the supply chain
1. Contact suppliers
Ask them to fill-in a self assessment questionnaire. This includes information
on their Tier 2 and Tier 3 suppliers
2. Review the SA
Establish weakness and potential risk factors
3. Further in-depth investigation
A site visit (an audit) involving interviews and document review

14. Summary
• We need to be the leaders of responsible business
• Having a strong balance of activity provides the biggest impact
• Investment can have multiple forms
• We need to change our practices
• A modern slavery statement should reflect your business behaviour

15. Ethical Auditing - Background
• Increased awareness with brands, retailers & customers
• NGOs and Media encouraged the topic by revealing abuses.
• There are many different standards being used: ETI, BSCI, ICTI Care
Process, SA8000, WRAP, FLA etc.
• Most of the ethical sourcing standards are based on the ILO (International
Labour Organisation) Core Conventions.
• There are about 3500 social compliance auditors registered world-wide
with APSCA (Association of Professional Social Compliance Auditors) and
about 400,000 audits are being conducted per year, mainly in China and
Asia.
• Auditing in the UK and Europe is more focused on food standards but
recently there has been an increase due to the Modern Slavery Act.

16. Why ethical audits are important
• Understand what levels of risk exist in your supply chain
• Begin a dialogue for implementing due diligence processes in your
suppliers’ organisations
• Set a standard to be attained
• Use the audit process as an education tool.
• Provides reason to return (every 3-4 months) and re-audit pushing
for steady continuous improvement.
• Make compliance a condition of all future business contracts

17. Setting up an Ethical Trade programme
• There are many different audit standards however they all share the
same core values.
• Mostly these standards refer to the International Labor
Organizations (ILO) Declaration on Fundamental Principles and
Rights at Work.
• In the United Kingdom most retailers use the Ethical Trading
Initiative (ETI) Base Code as a reference.
• SEDEX also uses the ETI Base Code.
www.ethicaltrade.org
www.ilo.org/declaration/lang--en/index.htm
https://www.sedexglobal.com/

18. Standard Audit Process

19. Clear communication is key
• Send a letter 2-4 weeks before the audit program is due to start to
every supplier, agent and factory who is to be audited
• Using client’s letterhead, include the following:
1. Reasons for auditing
2. Time frames expected and how to book audits
3. Confirm who will pay for the audit
4. What will happen during an audit
5. Expectations for audit follow up
6. Code of Conduct, so that the factory can prepare for the audit

20. • High priority – High risk countries, large business volumes etc
• Low priority - They have recently been audited or are low risk
countries such as UK
• Populate spreadsheet with the following details
Which companies should be audited?
Factory
Name
Factory
Address
Main
Contact
Tel/Email
Urgency:
Hi/Med/Low
Remarks –
Size/product
types
Managed by
Agent or
Supplier?

21. Agree on a ‘Grading Table’
• Most non-compliances found during audits fall into different
categories of severity
• We have a standard ‘Grading Table’ that lists hundreds of issues we
have encountered and uses common industry interpretation to
grade these.
Grade Issue
B Minor
C Major
D Critical
E Zero Tolerance

22. Scheduling Audit
• Audits can be announced, unannounced or semi-announced
• Initially they should be announced and the audit date agreed with
the factory to avoid unnecessary tension
• Based on the list of factories to be audited, we will email the
factories with the Introduction Letter and ask them to
complete our online booking form
• If factories are paying for the audit, an invoice is issued and must
be settled before the audit takes place
• If factories repeatedly ignore the request to book an audit the
client is asked to put pressure on them directly

23. Structure of a one - day audit
• Writing up the audit report will take one working day, followed by 3 days
for checking, review and approval
• Critical issues can be reported at the end of the factory visit
• Opening meeting1 hour
• Factory Tour2-3 hours
• Lunch1 hour
• Worker Interviews1 hour
• Document Review2-3 hours
• Closing Meeting1 hour

24. Closing Meeting
• During the closing meeting the factory is advised verbally of the
most important non-compliances such as
o Excessive Overtime
o Non-payment of overtime premiums
o Lack of days off
o Late payment of wages
o Underage or young workers
o Locked or blocked fire escapes
o Inconsistency of Documents
• At this stage factories in Asia often try to negotiate or apply verbal,
physical or financial pressure to change the audit findings
• A checklist of critical issues found can be signed and left with the
factory to provide a record of the conversation

25. Fixing non-compliances
• There is a large sub-industry of consultants who help factories work
through non-compliances and get ready for audits
• Most non-compliances fall into the ‘fixable’ category where the
factory, with minimum effort, time and money can address the
issue and implement a corrective action:
Non-conformance Corrective Action
Insufficient fire extinguishers Install sufficient fire extinguishers
Locked fire escape Unlock fire escape
No policy for collective bargaining Write and implement a policy
document
Inadequate contents of first aid kit Purchase required bandages etc
No potable water for workers to drink Install a water cooler for workers
Hazardous chemicals are incorrectly
stored
Arrange for correct, safe storage of
hazardous chemicals

26. Follow-up reports
• Give the factory time to implement corrective actions . We
recommend a follow-up audit every 3-4 months
• It is best to have a local person (merchandiser or compliance
officer) call the factory and discuss with them regularly what they
are doing about implementing corrective actions.
• The factory will have to decide what investments they may want to
make around the issues that will cost them money - this is a
commercial decision in many cases

27. The problem of transparency
• Some factories in Asia will bring in consultants to help them fake payroll
and attendance records in order to ‘pass’ audits.
• A good auditor will usually find inconsistencies between worker
interviews, production records and other evidence which
does not match with the faked payroll and attendance records.
• The auditor will then report that inconsistencies were found
which implies that the factory is trying to hide issues like
overtime and non-payment of overtime premiums

28. Understanding root causes
Sometimes even knowing the root cause cannot help to solve the
problem. For example: Why does a factory hire illegal underage/
young workers?
• They cannot hire enough legal workers. Fewer and fewer people want to work in
factories.
• They must deliver the product on time, or the buyer will fine them for late delivery.
• They can’t afford to pay all the social benefits required for normal legal workers and
still sell the product at the price demanded by the buyer.

29. Continuous Improvement
• Suppliers have to make their own decisions on how to meet the
ethical requirements of their buyers
• Smart businesses will become more efficient rather than try and
fake documents or bribe auditors
• The buyer should continue doing ‘light touch’, regular follow-
up audits to keep pushing factories towards continuous
improvement

30. Summary
• Risk Assessments will determine which suppliers are high-risk and
should be physically visited.
• Audits should be done by skilled and trained auditors since a
knowledge of local law, local challenges and interviewing skills are
required to get the best out of an audit.
• An audit should never be seen as PASS or FAIL. It is about
determining what can and needs to be improved.
• Sometimes suppliers may be resistant to making changes and this
then becomes a commercial negotiation.
• Audits are intended to provide data and a base line from which to
make changes through understanding the root causes of the
problems.
• Audit programs sometimes don’t work because there is no
appropriate follow up action by the customer.

31. Q&A
www.saiglobal.com I www.verisio.com
Email: information@saiglobal.com