UK firms working in the Gulf have been hit with a new requirement to investigate their supply chains and prove they are not exploiting laborers as modern day slaves.
It comes amid ongoing debate on the need to improve conditions for construction workers in the Gulf.
Last month, the Dubai government launched a welfare ratings system under which construction companies are ranked according to how well they treat their labourers, with high-scoring firms winning preferential treatment in government tenders.
Qatar this month also unveiled the first pictures of its $825 million ‘Labour City’ – new improved accommodation for up to 100,000 workers with shops, cinemas, theatre and cricket ground, as the country continues to fight international criticism over how low income workers are treated.
Earlier this month, the UK’s Slavery Act came into force, placing new obligations on any British firm operating overseas to take responsibility for working conditions in their supply chains – not just within their immediate workforce.
The act has implications for Middle East-based firms that contract with UK companies in the region, as well as those that own or operate business interests in the UK.
Under the act, UK firms must publish information on their websites showing they are taking steps to ensure that none of the businesses with which they contract or trade with are using ‘slave labour’.
For the first time, members of the public will be able to take legal action against any company perceived to be failing to comply with the law.
The act is designed to increase transparency and, ultimately, improve conditions for low-income workers across the world.
Labour and risk management experts this week warned that the act “may not even be on the radar of local businesses in the Middle East” – but that it has significant implications.
James Lewry, Dubai-based associate director of Control Risks, told Arabian Business: “The act will increase pressure on businesses and investors to get to know their supply chains in more detail.
“It will present a challenge to those businesses that do not fully understand their supply chains or that lack assurance controls regarding partners and suppliers.
“And, while much of the focus of the new UK Slavery Act will be on UK-based companies, businesses that are based in the Middle East may not be aware that this act could apply to them if they operate part of their business in the UK.”
John Stamper, senior legal consultant at law firm Hadef & Partners, explained: “Much of the danger of this new law comes from not having robust measures in place [to adequately scrutinise supply chains], from a public perception point of view.
“Because, for the first time, ‘Joe Public’ will be able to launch legal action if he believes that a company is failing to comply.”
‘Joe Public’ will also include laborers themselves.
Lewry said the act will become increasingly important to shareholders and foreign investors “who will be keen to avoid the reputational risks of unclear positions and action under international Slavery and Human Trafficking laws”.
Businesses with mature legal, risk and compliance functions will be well placed to incorporate the act’s requirements into existing corporate social responsibility functions, he added.
However, the obvious challenge is proper policing and verification of supplier activities over which a business does not have direct control.
For example, construction firms working in the Middle East typically employ recruitment agencies in India, Bangladesh, Nepal and elsewhere to recruit labourers; these agencies often in turn pay “casual” middlemen to do the work for them – a practice of which many companies are not even aware and which, under UAE law, is not even legal, Lewry says.
“Supply chain risks are often managed through contracts, which require suppliers and partners to provide policies or statements on how issues such as bribery and corruption or labour welfare are being addressed. “But we are increasingly seeing investors and shareholders seeking assurance that risks are being managed in the supply chain beyond this traditional, ‘arms-length’ approach.
“They will require evidence that all parties in their investment are not only aware of slavery and human trafficking, but have controls in place to effectively monitor and manage the risk.”
The longer the supply chain, the greater the challenge will be in scrutinising activities.
However, Hadef noted that the law does not require the commercial organisation to “guarantee” its supply chain is free from slavery practices; only that it has the measures in place to explore whether it does or does not.
He also explained that “no UK business will yet be in breach of the requirement”, because they only need to publish a statement of their activities within six months of year end.
“However, it is entirely possible that at this stage many businesses will not be fully aware of the labour conditions and employment practices of some links in their supply chain,” he said.
“This law should help to raise awareness of the importance of keeping ‘boots on the ground’.”
Source: Arabian Business