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07.06.2017 | Labour offers new thinking on addressing supply chain risks

If, as expected, the Conservatives triumph in Thursday’s general election, they would do well to consider adopting some of their rivals’ ideas around corporate accountability, a growing concern among the general public.

The reliability of election polling has been called into question over the past year, although it would mark a new low for the form if Jeremy Corbyn’s Labour party – at one point forecast to secure around half of the vote share of Theresa May’s Conservatives – was to find itself in position to form a government after 8th June.  As the gap between the parties has narrowed, however, one thing which seems undeniable is that the left-leaning manifesto Corbyn has promoted has proved unexpectedly popular.

If the Conservative Party does go on to form the next government, Labour’s surge may have its greatest significance in policies pursued by its main rival.  Over the past decade, successive Conservative leaders have made a habit of cherry-picking modest Labour proposals to bolster their own credentials.  Most recently, May has sought to promote an energy price freeze strikingly similar to that put forward by Ed Miliband before his defeat in the 2015 election – a policy which her party at the time derided as ‘Marxist’.

One interesting area of the Labour manifesto – unlikely to grab any headlines in an election dominated by Brexit, budgetary and security issues – is its emerging policy on supply chains, for which it proposes to develop the principle of corporate accountability.  One eye-catching proposal is the suggestion that companies be forced to report on the due diligence research that they have conducted on their suppliers’ exposure to environmental and human rights abuses.

Some of the more distinctly left-leaning elements of this policy area are unlikely to strike a chord with Conservatives, but others, especially in the area of human rights, have been the focus of recent legislative initiatives led by the party.  For example, Labour is proposing to expand the enforceability of the Modern Slavery Act – sponsored by May’s Home Office in 2015 – and the remit of the Groceries Code Adjudicator – which was introduced by the Tory-led coalition government in 2013 – beyond the UK border.

Labour’s position on these questions reflects a growing consciousness of supply chain risks, both among the general public and in business circles.  International scandals, such as the ongoing death toll of South Asian workers constructing infrastructure for Qatar’s planned hosting of the FIFA World Cup in 2022, and the spate of suicides in 2010 at the Foxconn industrial park in Shenzhen, China, have played a major role in this, alongside the work of charities and NGOs seeking to raise awareness of the prevalence of human rights abuses in much of global trade.  In July 2014 the Chartered Institute of Procurement and Supply published the details of a survey which found that 11% of business leaders believed that modern slavery played some role in their supply chains.  These problems are likely to worsen as global supply chains are further disrupted by regional conflicts, economic turbulence and new sanctions programmes.   

These policies would also have a direct application in the UK – both for consumers and businesses.  The impact would be perhaps most visible in the grocery sector, which in 2013 saw major public outrage following the so-called horsemeat scandal, in which four major supermarkets were found to be selling contaminated or mislabelled meat products.  In an attempt to control the damage to its reputation in the aftermath of the affair, the largest supplier, Tesco, issued printed apologies in national newspapers and instituted an immediate review of its procurement policies.  Despite the actions taken by Tesco and others to reform their practices, an independent review of the sector commissioned by the government following the scandal stated that huge risks remain due to gaps in enforcement.

The position of groceries suppliers is of particular relevance to the Conservative Party, as much of its core constituency has ties to farming and the countryside.  In 2016, not long after May succeeded David Cameron as Prime Minister, the Department for Business Energy and Industrial Strategy announced that it would begin a consultation on expanding the role of the Grocery Code Adjudicator – currently empowered only to review issues between supermarkets and tier 1 suppliers (usually one step removed from the farms which produce the food) which are covered in the relatively narrow Groceries Code.  Moves to strengthen the regulatory powers of this organisation may sit well with the agenda of a party seeking to prioritise domestic production, and about to get to grips with the thorny issue of redesigning a system of agricultural subsidies which has been implemented for decades in line with EU policy.

Regardless of which party leads the effort, action to improve accountability for global supply chain integrity represents a potentially very positive development for the UK.  In the financial sphere, multilateral development organisations, in general considered to present a high standard of compliance practice, already look at these issues as a matter of course when considering investments.  Strong policies in this area imposed by governments and international institutions help to cement good practices and isolate criminal or unethical actors in a similar way to increasingly stringent anti-corruption laws, many of which have a very broad reach.  New legislation on supply chains would thus in practice represent merely an extension of a growing – and increasingly accepted – burden of regulation on businesses with extensive foreign dealings, and in areas where more responsible companies will already be compliant.

The Bribery Act, the UK’s flagship anti-corruption law, was one of the last acts of the previous Labour government, passed with cross-party support.  Perhaps it is too much to say that ethical foreign investment practices are the one thing that both Labour and the Conservatives agree on, but, cross party co-operation on this issue would be a welcome development in the next parliament, whoever ends up forming a government.