2
Joint Committee on Human Rights
Oral evidence: Human Rights and Business, HC 443
Wednesday 25 January 2017
Written evidence from witness:
– Mike Barry, Sustainable Business Director, Marks & Spencer
Members present: Ms Harriet Harman (Chair); Fiona Bruce; Ms Karen Buck; Baroness Hamwee; Baroness Lawrence of Clarendon; Jeremy Lefroy; Baroness Prosser; Amanda Solloway; Lord Trimble; Lord Woolf.
Questions 62 - 76
Witnesses
I: Rob Billington, Group Production and Sourcing Director, Mulberry; Mike Barry, Sustainable Business Director, Marks & Spencer; Nick Beighton, Chief Executive, ASOS; Chris Grayer, Global Code of Practice Manager, Next.
Rob Billington, Mike Barry, Nick Beighton and Chris Grayer.
Q62 The Chair: Thank you very much indeed to you four and to your teams for taking the time to come here to give us your evidence on human rights and business. We very much appreciate hearing about your experience and objectives. We know that you are busy retailing and have taken time to help us with our inquiry.
In the room next door—because there are too many to come in—are about 36 Members of Parliament from other Commonwealth countries, including Bangladesh, many African countries, Australia and New Zealand, who have come as part of a Commonwealth Parliamentary Association conference on human rights committees. They are all members of human rights committees or human rights caucuses. They have come to a conference in London and to see us in action. I welcome them indirectly, as they are in the next room.
We are being broadcast. This is a Joint Committee, half Peers and half Members of the House of Commons. We have Members from all parties and we work on a cross-party basis. I will ask an introductory question and other Members will come in.
My first question to each of you is about your manufacturing and supply chains and how you operate here and abroad. As briefly as you can, what is your ethos on human rights? What do you feel about human rights? Where do you feel you have got it right? Where do you feel concerned that you might not be getting it right? What drives that ethos? Is it your personal views and morals? Is it a sense of legal jeopardy? Is it a sense of the bottom line? What are you doing by way of manufacturing? What do you feel in your hearts and in the ethos of your organisations about human rights in respect of your businesses, and what drives and underpins that? Perhaps you could give a brief introductory answer.
Nick Beighton: My name is Nick Beighton, and I am chief executive of ASOS. To give a very brief history of ASOS, it was 16 years old last year. Last year, we achieved revenues just shy of £1.5 billion, of which 60% were exports. We sell predominantly to a fashion-conscious, fashion-loving, socially aware twentysomething audience. We are pure play; we are all online, so we trade by the internet and mobile. We source from 27 countries around the world and Turkey is about 14% of our mix. The biggest overseas market is China, followed by Turkey and Mauritius, and a plethora of other countries. Indirectly, about 100,000 people around the world work on our products. Broadly, 3% of our manufacturing is in the UK.
To go to your first question, fashion with integrity was a principle on which ASOS was built. Delivering fashion with integrity for a twentysomething socially aware, more connected than ever before consumer is an absolute business imperative. It was how we built the business and how we intend to carry on building it, so getting that right and protecting human rights around the world, wherever our product falls or work is done on our product, is not an option; it is a business imperative. Our customers demand it, our staff demand it, and the board and I demand it. We know there is an awful lot of work to do. We do not claim to have it right yet, but one of the reasons why we were happy to contribute to this inquiry was to help share our thoughts and learning on how we can get it better.
Rob Billington: I am Rob Billington from Mulberry. Mulberry started making leather goods in the UK in 1971, interestingly only two miles from where my office is now. We have grown up as a UK manufacturing business, and we still manufacture over 50% of our leather goods in the UK. That drives our view on how we treat our own employees and our supply chain. We like to feel that we look after our suppliers and apply the same standards to them as we would to our employees based in Somerset.
Currently, we have two factories in Somerset employing 600 people. The business has grown over the years, but we are quite small, with a turnover of £160 million. We source leather goods from Turkey, mainly for the skill set; the Turkish industry grew up by learning from the Italians, so we source from Turkey on that basis. We also source from two third-party companies in China and two in Italy. We have a small, quite narrow, supply base, although it is global.
As the business has grown, we have established a set of global sourcing principles, very much led by international convention and law, which we hold dear. Because we feel we have a responsibility to our own employees in the UK we apply those standards to our suppliers, contractors and subcontractors, and it is a measure of success when we achieve that level of transparency, fairness and responsible sourcing in our partner factories abroad. We are still very much a family company, although the business ownership structure has changed. As we have grown, we have tried to hold dear some of those core values, which are important to the board of directors and our new chief exec. We have what we believe is a long-standing and pretty rigorous due diligence process that ensures that our supply chain upholds the standards our suppliers share with us and that we demand of them.
Mike Barry: I am Mike Barry, director of sustainable business at Marks & Spencer. The business is now 133 years old and turns over about £10 billion a year. A little over half our businesses are food businesses and the other half are clothing. Crucially, at least 98% of what we sell in our shops and on our website is our own private label product; it is Marks & Spencer product. We do not own any of our supply chain; we buy from factories all round the world, which I will touch on briefly in a minute.
Integrity and trust have always been at the heart of the business for 32 million customers. Ten years ago we launched something called plan A, because there is no plan B for the planet, with 100 environmental and social commitments to improve the business, including human rights, which we have delivered—175 different things over the past decade. We recognise that human rights are becoming ever more important. Last year, we published our first stand-alone human rights report containing 58 pages about what we stand for and what we do. It was backed up by a statement on modern-day slavery. We got that out as soon as the legislation came in.
We buy from hundreds of factories around the world, none of which we own. We have seven big core sourcing officers. China, Vietnam and Cambodia are one cluster; Bangladesh, India and Sri Lanka are another cluster, and Turkey is another. Before it joins the business as a supplier, every Marks & Spencer factory is independently audited once a year, and our regional compliance teams go in unannounced at least once a year to check up on them. We are very clear about what we are doing.
The final part of the introduction is about transparency. Last year, we put on our website every Marks & Spencer factory supplying food and clothing. That is in the public domain. On an interactive map you, our customers or anybody can see where Marks & Spencer sources from. We are very clear that this is a critical issue. We are delighted to be here, because we will not solve this alone. It is about businesses working together with the policy system.
Chris Grayer: My name is Chris Grayer. I work for Next. Next was founded in 1982 and is now a business with a £4 billion turnover. Our head office is at Enderby in Leicestershire. We operate on two platforms: retail and the internet. We are predominantly a fashion business and we have a home fashion division as well.
I echo the sentiments of my colleagues this afternoon. Our approach is to ensure that our supply chains are managed effectively. I speak for Next when I say that, from the very top, our reason for doing that is that the business totally believes in it. Our chief executive’s understanding is that what we call our code of practice, which is our due diligence process, is a fundamental part of the business. We work with our suppliers on design, quality of product and on-time delivery, but also on the basis that it is a given that our supply base is ethical. I have a team of 46 people around the world. We are based in all our major markets. The top 10 countries that supply us provide 90% of the product we sell in our stores and on the internet.
Having that intelligence in the marketplace and having our own employed auditing and due diligence team allows us, we believe, to go beyond the basics of just checking, to take a significant stakeholding in the differing issues we find in, say, Bangladesh, the Far East and the UK. We believe that by having that dedicated team we glean information, but we are also able to work proactively. That means supporting and partnering our suppliers not just when they come on board with us but when we have problems. We do not work on the basis that there are no problems; there are problems. We work in a very complicated world, and its dynamics are significant. The role we must have, and the reason why I have come here today, is to make sure that we can talk from a level of expertise and understanding. Having worked in manufacturing for 20 years and been in retail for 15 years, those 35 years should have given me the understanding to enable me to make a contribution to the business and lead my team.
Q63 Lord Trimble: Have any instances of child labour, forced labour and workers not being able to join a trade union been reported to you?
Mike Barry: If I may answer—I am sure my colleagues will chip in—we hear of such instances; they crop up. In a supply chain of several hundred factories, with probably 1 million people across our food and clothing supply chain in the world, inevitably there will be issues. One of the things we did last year for transparency was to put on our website where we found issues and what we did about them. Many of them are minor, but we become aware of them. We look for signals. If several different small things are happening, they may be telling us that systemically we need to address an issue in a particular country, or in a particular way. We are constantly looking out for noise. Our audit system picks up several thousand small instances a year. We might find one or two bigger issues. In November, “Panorama” raised issues in Turkey. There were massive issues to do with Syrian refugees coming across the border. I think all of us had spotted those things emerging a few months before, but that made us redouble our efforts in that space. We want to hear about issues and use the intelligence we get from small issues to spot the risk of big ones as well.
Lord Trimble: What is the position of your colleagues?
Chris Grayer: From Next’s point of view, we have established that there have been child labour cases globally. We had eight instances in 2016, but each involved either one or just two children. We found that there were no systemic issues in our supply chain; the cases were predominantly due to the fact that children were coming in to work during a holiday or to earn some pocket money. We have to understand where there is systemic exploitation of children in a supply chain, or where they may have been attracted to it to earn some pocket money.
Rob Billington: In Mulberry, we have never found through our due diligence process any instances of child labour. We believe that we have a rigorous enough process to establish that. I did not mention in my preamble that we employ Mulberry employees in our partner factories primarily on a quality basis, but they have a broader remit to work with local management to ensure compliance with our principles. On child labour, no.
In Turkey, we had an issue last year on freedom of association with union membership. It was resolved through the local legal mechanism, but we were very conscious of what was going on. We were in constant dialogue with the management. We take a very collaborative approach. As the main brand, we ensure that our suppliers are truly transparent with us about what is going on, so we are aware of the issues, as the other two gentlemen explained. It is not just through an audit process that we find a potential issue; it is constant. We do not necessarily allow people to deal with it themselves; we want to be involved to ensure they come to a satisfactory resolution.
Nick Beighton: In ASOS, we have never found any child labour in Turkey in our approved factories. Several years ago, we found an instance in the Far East and we suspended working with that factory. The issue highlighted in “Panorama” was about unapproved outsourcing arrangements that were explicitly against our terms of trade and code of conduct. In the instance highlighted in “Panorama”, we found eight Syrian adolescents.
Amanda Solloway: Mike, I am trying to establish how big a problem it is. It sounds as though it is not a big problem but it could be. I was struck when you said, “We cannot do this alone”. How big a problem is it in reality?
Mike Barry: That is a really good question. One of the other hats I wear beyond Marks & Spencer is chairmanship of something called the Consumer Goods Forum. The CGF brings together the world’s biggest food and drinks industries: Coca-Cola, Pepsi, Walmart, Tesco, Nestlé and Unilever. They are huge competitors, but all of them recognise that when it comes to climate change and human rights we cannot solve things alone.
Let me use the example of the commitment that we have made as businesses turning over collectively $3 trillion per year around the world. We recognise that at the moment at least 21 million people around the world are living as slaves or under enforced labour. Much of that is distant from the clothing supply chains we are talking about here; it is deep in food supply chains—for example, cocoa—around the world, but we are very clear that there is an issue. Marks & Spencer and the businesses here are relative leaders in this space—I use the word “relative” cautiously—but for every step we have taken there are many more to be taken in future.
To cut to the chase, whenever I move round the world with those global brands, which operate in every jurisdiction of the world, the UK is repeatedly held up as a relative leader when it comes to the policy system. With the Modern Slavery Act and the Gangmasters Licensing Authority we have done more than most at the beginning. Everything we explore over the next hour will be about how to take a good start and make it even better, but I want to be very clear that human rights in global supply chains are an issue; water, climate change and all those other things are issues, and none of us should walk away from them.
Jeremy Lefroy: Presumably, if you are contracting out to factories, there will be others from other countries buying items from similar factories. Do you work together with those other organisations? Do you find there is pressure on them to have lower standards for the products being sourced from those factories for them, as opposed to having, say, a Marks & Spencer line that has everything in order and other lines that are not as good? How do you react if you come across that?
Mike Barry: Ten years ago, there was a bit of an issue about that. We would walk into a factory and see the M&S line and maybe a couple of other global brands. Generally, across the sector—it is big and daunting—everybody has improved together. I laud some of the things that have happened in the UK. The Ethical Trading Initiative has brought trade unions, civil society and businesses together in a very useful tripartite agreement to tackle the issues. They do not always get on and agree with one another, but it is a big tent in which we can come together and move the issues forward.
I talked about looking at the little signals out there that we pick up. Next, Mulberry, ASOS, Tesco, Sainsbury and everybody else pick them up. We all chip in and begin to understand the big issues we need to look out for. We also have the Sedex system, which means that when, say, Tesco, audits a factory I do not need to re-audit it. I trust the Tesco system; it does a good job. We will then go in and use that factory, and vice versa. We are not asking suppliers to do dozens of different audits each year; we are all working to the same high standard. The ETI and Sedex, certainly in the UK, have brought businesses together to work better.
Rob Billington: Mulberry works in quite a limited sector. Our competition is generally European, and we tend to use the same suppliers. Because we make a luxury product, we all demand high quality standards, so we all share the same values and generally take the same approach. We do not liaise with our competitors on a lot of things, apart from CSR. That is one thing on which we are completely aligned; there is no competition. There is strength in numbers, and we try to move forward together. Certainly, in the luxury business, our customers are very aware of the supply chain, which is why Mulberry makes our product in the UK. Our customers would generally like to have a bag that is made in Somerset rather than in Turkey, but we have a supply chain to manage. Certainly in my industry there is very close collaboration.
Nick Beighton: I echo that.
Chris Grayer: I will answer the question in two parts. You spoke about the differential in standards. Prior to joining Next, I worked for five years in the United States with the same responsibility. Although the approach there is different, the standards, for the most part, are the same. We see a global approach to the ILO standards that everyone puts in place. The principal standards that we adopt, which are aligned to the ETI and the ILO, allow us, for the most part, to work on a level playing field for standards across our industry. There has been a collaborative spirit over the last four or five years. I echo the point that there is no value in competition on ethical standards or values. We work together; we collaborate, and the ETI is an excellent forum where people come together to discuss issues collectively and try to find collaborative solutions.
Q64 Ms Buck: Other members of the Committee will ask you some questions about auditing in a moment, so I do not want you to get too much into the detail on this. Picking up something Nick said, if the issue is, as I suspect it will be, overrepresented in unauthorised subcontracting, can you clarify exactly what processes you all adopt to establish where and when the unauthorised subcontracting may be occurring? It is not just about management of the supply chains you know about, but the actual audit process that determines whether or not there is unauthorised subcontracting.
Nick Beighton: I want to go back to what Amanda said earlier. We are all here because there is risk of human rights abuse in everyone’s supply chain. I do not want you to think that we do not believe there is a problem. We know there are more things to do, and the highest risk is in unauthorised subcontracting. Sometimes that happens when we have done all the right things, but in factories that are not owned by ASOS there are individuals who sometimes apply a different set of values from those we want. That is where we get caught out, which was what happened in Turkey.
As to how we prevent what you just described, it starts off with very clear Ts and Cs. We say, “This is the way we would like to do business with you”, making it very clear that if there is any unauthorised subcontracting there is a consequence.
Lord Woolf: What are the consequences?
Nick Beighton: I will come back to that. If it is an aberration, we say, “Come on guys, let’s work together on this one”. If it is a cultural, systemic approach to bend the rules of the contract, I am afraid we have to suspend doing business with those people because we can no longer place our business in an environment where we feel they will jeopardise human rights and other terms of trade.
Ms Buck: Given both those examples, how often has either of them occurred in the last three years?
Nick Beighton: The most recent one is the example in Turkey. That was set up with a supplier that we thought shared our principles. It was bound into the contract. We then found, through the help of the “Panorama” programme, that the way of working we wanted, which was legally binding, was not happening. We sat down and met the supplier—I have met every Turkish supplier since—and reiterated our principles and contractual terms. We got to the point where we did not feel that the factory would conduct business in a way we thought was responsible, so we pulled business from it. Does that answer your question as well?
Ms Buck: You have not found any examples yourself; it has always been externally through the media.
Nick Beighton: No, it has not always been by the media, but in the case of Turkey an extra spotlight was shone by the programme.
The Chair: The point is that, if you and they are signing a contract, why do you have to explain it to them again? Is it not simply a matter of saying, “You signed the contract. If you fundamentally breach it, the contract is broken”?
Nick Beighton: Agreed.
The Chair: I am curious about the idea that people can commit a breach like that and you carry on dealing with them, assuming it was just a one-off. Would you not feel more secure if everybody knew it was one strike and you’re out? Does that not raise their level of commitment?
Nick Beighton: That would most definitely be our preferred way of working. Regrettably, to reinforce contractual terms often needs reaffirmation of our approach and reconfirmation of compliance to ensure that it is always front of mind.
The Chair: But if you said to them, “Here’s your contract”, and there is a big bit on the front page that says, “By the way, if you breach clauses 1, 2 and 3 about unauthorised subcontracting, we are not interested in your excuses or your misunderstanding about how important it is. You’re out”, word would travel among suppliers like wildfire and they would all become hyperconcerned about it. If your response is just to remind them of your ethos, they are not particularly in peril; they just have to mend their ways, hopefully.
Nick Beighton: We always remind suppliers of their obligations, because circumstances change. For example, in Turkey the whole supply chain has been stressed by the influx of Syrian refugees. We continue to remind them of their obligations. In that example we had a conference several years ago when we said, “We are identifying a key risk. Please remind yourselves of our trading terms”. We held a seminar in Turkey during February last year and again in November last year. If there is a breach of contract, we terminate the relationship with them. That was exactly what we did in that example, and it is probably the best deterrent.
Baroness Prosser: Is one of the reasons for going slowly and stepping lightly, if I can put it that way, over some breaches that you may not see as fundamental that it is hard to find other contractors and suppliers?
Nick Beighton: No, it is not. It is not always binary; there are always shades of grey, and it depends on the breach of the contract term. Sometimes we can do more good by reaffirming the Ts and Cs and saying, “If this happens again, you need to do X, Y and Z”. I should have mentioned earlier that, if we find a breach of contract, there is a recovery plan. Depending on the severity of the breach, it is either a short-term recovery plan with a follow up, or a longer-term recovery plan.
Mike Barry: To build on that very good answer, often one of the worst things you can do is cut and run. It is very tempting when there is a problem in the press to say, “Our brand is at risk here. These guys will be on us like a ton of bricks. Let’s just run tonight to get away from it”. That supplier will go off and peddle its goods in the same way to somebody else unsuspecting, and nothing will change. Therefore, within reason you stay and put it right. Occasionally, you come up against a supplier who just refuses to work with you to put things right. At that point you say, “We give up. We’re going”. Our suppliers are very clear that there are draconian requirements in meeting our standards. If they do not meet them, ultimately they will lose business, but we have an obligation as a responsible business to try to put things right first.
To build on Karen’s very good question about how we look out for subcontracting, every time a new factory joins us there is an independent audit. Once a year there is an independent audit to check it, but every one of our regional sourcing teams, who visit those factories weekly to talk about buying, design and the number of products to be imported to the UK, has been trained to know what to look for as good ethical standards. We cannot rely just on once-a-year audits; there has to be a year-round culture of working with the factory. There are certain warning signs we can pick up that something has been subcontracted. We too find it very infrequently, but we appreciate that when it happens there are serious problems.
The Chair: You are all such important global players that I want to hear a bit more from you about why you think that the best way of preventing suppliers from doing that is not making it absolutely clear that they know that they will not be able to enter a remedial process. Obviously, there are other purchasers from all around the world, and you cannot take responsibility for them, but you could say, “If we find you have breached this, we are not interested in the reasons”. Leave aside the media. This is not necessarily about you being prompted by the media; it is about you finding that something is happening and caring about it. The higher the level of jeopardy, the more suppliers will respond, because you are big and important customers. If I was in their situation—I know that is a ludicrous thing to say—I would think, “I have lots of other things to worry about, but I don’t need to worry about that because they are really decent, caring people. They are with us for the long term and we’ll just have a remedial strategy”. It makes it of less concern to them to check that somewhere down their line there is not unauthorised outsourcing. Once you have that, you are totally in the dark; you can have no confidence at all when you do not know what is going on.
Mike Barry: That is a fair challenge. Let me reiterate that the first screening we do is to decide whether we want the supplier in our supply chain at all. That initial independent audit will flush out an awful lot of the potential bad guys. Some might get through, but we get rid of a lot of the problem early doors. We then check and check again to find whether there are problems. If at the end of the day there is still a problem, we give them a chance to put things right with us. Few people out there in the supply chains would deliberately try to avoid that and pull the wool over our eyes. Sometimes people make mistakes. What happened in Turkey is a great example of a systemic political issue that has swept across a whole region over a period of 12 months. Some 3 million or 4 million refugees have come across the border. For the average Turkish factory to absorb and deal with that is very challenging in the confused political system out there. We have to work with people. If at the end of the day people are not willing to work with you, you walk away. We are very clear about that, but I never want to be in a position where for every small issue that emerges we walk away. That is challenging for us commercially, but it is just as bad for human rights because the issue never gets resolved.
Q65 Baroness Prosser: Going back to trade unions, I think all of you are if not members of then supportive of the requirements of the ETI for fair trading in the broadest sense. This particular point is addressed to you, Rob, for Mulberry. I told the Committee that I would show you my handbag.
Rob Billington: Do you want me to check it?
The Chair: It is only a small one.
Baroness Prosser: I wanted to show you that I am not hostile to Mulberry by any stretch of the imagination.
An issue was raised with us about something that went wrong in a leather factory in Turkey, SF Leather, when a number of people working there who joined a trade union were dismissed. You may not know all the details.
Rob Billington: I know the details and can talk about it.
Baroness Prosser: The international trade union IndustriALL, with which I used to be involved before I retired, became involved and yet some people still lost their jobs through trade union membership. Clearly, there was a row between some people in the workforce and the employer, your contractor, but what people were complaining about and anxious about was that Mulberry did not seem to be concerned about it.
Rob Billington: This is about the intervention element. If I can take you through the story, back in March 2015 we as Mulberry were informed through one of our audit partners that some members of the SF workforce had notified them that there was an issue about dismissals. Interestingly, we found out about the issue through our audit partner. When we do audits, the audit partner hands out cards to the employees so that they can anonymously and without prejudice flag issues through the audit company directly to us. That was when we first found out about it.
We were aware that SF had to reduce its capacity, because it did not have the orders. It had more customers than just us, but its capacity requirement was dropping. We understood that it was going to release some people through a redundancy process to reduce capacity. We knew that was going on, but on the very same day our audit company flagged up with us that there was a potential issue, I received an email from the union, Deriteks, saying, “This is grossly unfair. People are being dismissed for union membership. What are you going to do about it?” I responded to the union on the same day, saying, “Thank you for bringing it to our attention. We will start our own investigation”. We immediately contacted the SF management. Coincidentally, we had already organised for our annual audit to take place a couple of weeks after that point.
We went into investigation mode. We did not want to respond in any detail to a Turkish union without knowing the facts. The culmination of our investigation was that, yes, 12 workers had been released from employment with our supplier on the basis of capacity, because there was no requirement, and two for performance reasons. We did an audit. The findings of that audit were that there was no discrimination against any individual based on union membership. The company supported our freedom of association policy through our global sourcing principles and allowed union membership.
However, we found during the audit process that there was some confusion at worker level. Workers were worried about whether, if they joined the union, they would be discriminated against. We found no evidence of that through our audit process, but because there was some confusion we intervened with SF to ensure that through its employee engagement it made it very clear to its workers that, should they so wish, they could join a union, because that is the policy we uphold and it is the local approach. At the same time, because of the union intervention with the Government, the Government instigated a Turkish labour ministry audit, completely independently of us, the union and our supplier. That audit found absolutely no wrongdoing and no discrimination on the grounds of union membership.
We followed our own internal global sourcing principles, which our supplier had signed up to, and through that process we found no wrongdoing. The first stage of the local legal mechanism was that the Government instigated their own audit and found no evidence of wrongdoing. We were comfortable that in legal terms and through our own principles there was nothing wrong. As things evolved—it was quite a tricky situation—the union decided to take legal measures against SF for wrongful dismissal of the workers. At that point, we were very conscious that the local legal mechanism had kicked into full force and we understood that the Turkish legal mechanism, sometimes a bit slow but pretty rigorous, was the default approach we should take. At that point we did not really want to engage with Deriteks. At the same time, IndustriALL contacted us and we were in dialogue with IndustriALL. We explained the findings of our audit, and that the legal mechanism in Turkey had kicked in. It was not so much a light touch as that within our own processes we found nothing wrong. We wanted to allow our supplier and the union to go through the legal mechanism.
As a consequence, there was a settlement out of court. I do not know the details, but clearly that is a satisfactory solution to a legal process. My main board, my CEO and I consciously did not want to enter into any discussion with the local Turkish union. We did not feel that was right. We felt that the rigour of our own internal processes and the Turkish legal system was the best way to approach it. You made a statement that workers were dismissed because of their union membership. There is no legal or internal finding to prove that point.
Baroness Prosser: What do I know? I have not been there.
Rob Billington: We were very conscious that that was the noise.
Baroness Prosser: As a final comment on what you said, before I put a broader question to your colleagues, I do not know the full facts of the matter; I know what I have been told. It is always best to find out what the other side is saying. What I would say is that, if the union felt it was appropriate to take action, there must have been something to take action on, because a union would not waste its money on something it felt was a hopeless cause. Secondly, if there was a settlement, somebody somewhere decided that it was better to get shot of whatever had happened. Common sense feeds into these things.
Rob Billington: That is one interpretation.
Q66 Baroness Prosser: Thank you very much for your explanation. The broader question is how encouraging are you and your companies in ensuring that there is an employee voice in places where you are contracting? In some places it may not be what you might call an organised or registered trade union, but there need to be mechanisms so that employees can be heard and can contribute to the day-to-day discourse in the workplace.
Rob Billington: To revert to—
The Chair: Could I interrupt? There is a Division. The Commons members will have to run down the stairs, vote and run up again, so you have a good opportunity to think about your answer to that question.
The Committee suspended for a Division in the Commons.
Baroness Prosser: Perhaps I could add to my question and save time by doing two in one go. What mechanisms, if any, do you have for whistleblowing? How do you deal with that? If you could include that, it would be good.
Rob Billington: It is good modern practice for an employer to engage productively with employees. In many instances that could be through a union; if not, we encourage our suppliers to have a works council or works committee, which is what we have in Somerset. I personally chair the Somerset works committee for Mulberry. Once a month we meet and talk about everything from the price of chips in the canteen to the latest market statement the finance director has released to the Stock Exchange. We find that modern employees are very interested in the business in which they work.
To go back to the issue in Turkey, our supplier has a works committee. We encourage the supplier to use that mechanism to promote, or certainly explain, its position on union membership. The owner of our supplier stood up in a works committee meeting and explained that there are no restrictions on any employee of that company joining a union. It works both ways: I and the owner of the supplier give employees information about the company, and it is a good mechanism to get feedback the other way so that people higher up the organisation can understand the mood of the business and the factory.
On your second point, whistleblowing is a key part of our anti‑bribery and corruption policy. We found out initially about the issue in Turkey because an employee in the supplier factory felt strongly enough about it to contact people in our audit team, and they anonymously fed that information back to us. We respond rigorously to that sort of information. Clearly, it is one side of the story, so we are beholden to do a thorough investigation, but any element of whistleblowing has to be taken seriously, and there is a mechanism for doing that.
Q67 Baroness Hamwee: Can I go back to some things we have touched on? I have four questions, but I will wrap them up together for speed. My first question is on terms and conditions, which you rely on a lot. I am not trying to get into what may be commercially confidential, but would it be possible for us to see the relevant terms and conditions that provide for remedies in the event of breach? That would be extremely helpful. As I say, I do not want what is commercially confidential. I assume all that would extend beyond child labour to conditions of work, safety and so on.
Secondly, you talked very helpfully about audit of your suppliers, but I am not clear how far that extends to subcontractors. We would like to hear a bit about that. The third question is about the effectiveness of audits. I think Mike spoke about spot checks. We know that people can be booted, suited and scrubbed up on the day they expect an inspection, but we are concerned about the rest of the year. Fourthly, you are all very big players. What advice would you give those who are not as big as you? Problems can arise there too; they are not only in the chains supplying the big players. I am sorry to throw all those at you, but they are not unconnected.
Mike Barry: Let me pass you our Ts and Cs and sourcing principles as we speak. We can send them by email as well. I am sure the other guys have something similar. On audit and subcontracting, any of our suppliers that wants to use subcontractors must ask our permission and must be independently audited before that work starts.
Baroness Hamwee: On your behalf?
Mike Barry: Independently.
Baroness Hamwee: Who does the independent auditor report to?
Mike Barry: To us. We decide whether it progresses. Although it is not often required, sometimes a spike in production means somebody will come to us and say, “We have so much on at the moment that it makes sense for us to subcontract rather than sweat our workers for long hours”. You use subcontracting for small amounts. It is wisely done and always with open eyes.
The question about audit effectiveness is a very good one. I have said repeatedly that we use unannounced audits. Each year, we say to a supplier, “We will come within a three-month window”. A supplier cannot run a factory badly and hide all the bad practice for three months hoping that the audit turns up on the right day. That gives confidence to the good guys. Remember, we have confidence in 99% of our suppliers. We do not want to treat the good guys who pass our screening audits like naughty children. That three months shows them respect, but it means that the bad guys who might creep in cannot keep hiding.
Small players should join the Ethical Trading Initiative, and listen and engage. We are some of the biggest brands in the world and have been working on this for 10, 15 or 20 years, and we are saying very humbly in front of you that we are not on top of everything we want to be. You learn together; you do together. Fiona and our sourcing team—just like the other businesses—bring our suppliers together to train them on this. It is not beyond the wit of man to imagine that, if there are small retailers out there who want to sit in and learn from our teaching sessions, they can join in as well. We are very happy for them to do that.
Nick Beighton: To build on that, we will send you our Ts and Cs afterwards if we may. Our audits work is exactly as Mike has just described. I have the same comments on the effects of the audit. As regards advice to smaller players, as well as joining the ETI, some retailers like ourselves could do a lot more together by sharing our audits and creating a database, using technology for good to ensure that the smaller players can tap into that. It is something where we could all do better. We could collaborate more so that smaller aspiring brands can benefit from our auditing cycles and processes, and do not have to go to the expense of doing it. In addition, if we collaborate more, we will get many more eyeballs on the problem far more often and create more assurance.
The Chair: Mike, do you already share your audits with other smaller companies that might want to get into the field, as Nick indicated?
Mike Barry: All our audits are placed on the Sedex system.
The Chair: Which system?
Mike Barry: Sedex is a sharing system. Rather than all of us doing different audits in different ways and creating great confusion, Marks & Spencer does one audit of a factory, or it is done for us. That is loaded on to the Sedex system. If a smaller player wants to use that factory later in the year, it can access exactly the same audit. That will save it money. We are very happy that M & S has done it and paid for it and that somebody else gets access to it. We are not competing in that space.
The Chair: Basically, with your audits you provide an umbrella—a zone of confidence—and that makes it even more important that they are right. Bearing in mind that the countries you operate in have frameworks for independent trade unions, and that we all know how important it is to hear about what is really going on through such unions, why do you not make it—perhaps you do—a term and condition of your contract that there is a recognised trade union in each of the places you contract with? That would sort it. If at any point they did not have one, it would be a fundamental breach of contract. Why do you not give yourself the assurance of knowing that those employees have an independent trade union? Then, in addition to your audits, you will hear from the union.
Nick Beighton: That is a great idea. We have not yet enforced unions in our terms of trade. It is an idea that we have been kicking around. Our approach has been that we are supportive of providing that for people in the supply chain. Where it is not present, we encourage some sort of employee forum and engagement mechanism. The beauty of that, as well as having and enforcing terms and conditions and conducting audits—the audits are not patsy, but they are only a snapshot—is that it gives you many more eyes on the ground, to give more assurance and comfort to the retailer, hopefully. That is certainly something I will take away and think about more closely.
Mike Barry: Can I build on that? It is a vital question, because the involvement of unions and worker representative groups makes such a difference. We require it. When we last did a big audit of our system, back in 2012, 90% of the factories supplying us had a workers committee or an independent trade union. Now it is 97%. We have to get to 100%, but we are nearly there. We are very clear: when unions and worker councils are involved, you get better outcomes. The involvement of unions at the ETI level—on a macro scale, analysing the macro results you are looking at—makes a big difference as well.
The Chair: Is there a distinction between independent trade unions, which have a separate regulatory framework, and works councils and committees? You are running the two together. To me, it sounds as if you are running together two things that can be quite different in nature. If you wanted maximum assurance, it would be an independent trade union. It makes life tougher for them in the short term, but it gives you a level of certainty that you will not get from a works committee.
Mike Barry: Yes. In most cases, there will be a union involved. You have to respect the fact that around the world there will be different situations in different countries, with different workforces and communities. We have to be a bit careful about saying that a union is the 100% outcome that we want, but we should promote the fact that workers need to have an effective voice. Worker councils cannot be patsies. They cannot just be there as a management stooge, to do as they are told. We will look at their effectiveness, to make sure that workers genuinely have a voice.
We have been talking about new technologies. We have been running a trial in India, where 20,000 workers have been using their mobile phones and are being asked independently by auditors, “How are you finding that factory?” People are able to answer questions away from the workforce, with nobody standing behind them making sure they give the right answer; they can give their own voice independently. There is no one magic bullet. There are several different things that add up to a good system.
The Chair: In which country would it not be appropriate for you to put into a supplier’s contract that it must have a recognised trade union, irrespective of whether it has various other consultative mechanisms as well?
Mike Barry: China has always been a bit complicated in that sense. Working with unions in China, within a state-run system—
The Chair: That still leaves a lot of other places.
Mike Barry: Of course. What we are saying is that a lot of clothing comes from China.
Q68 Lord Woolf: At what level, ultimately, in each of your big companies are these matters regularly dealt with? What supervision is exercised by the board? I say that conscious that, not so much in your field, but in the bribery field, our biggest and best companies have been found to be blind to what was happening on the ground.
Chris Grayer: At my level, I have regular meetings with Simon Wolfson, who takes a personal stakeholding in understanding significant issues. I report to the board at least once a year on progress. That is not just about how well we are doing; we also raise issues. I assure you that I am cross-examined about the approach that we are taking and the risks we face, not just from our business point of view, but from that of workers within the supply chain. That includes the non-executives. My colleagues are directors of the Next business around the world. It is not unusual for me to have a conversation with the director from Bangladesh once a week to discuss what is going on. It is not about the hierarchy; it is about understanding what we do within the organisation.
Mike Barry: I will add three very quick bullet points. The Modern Slavery Act became enforceable last year. Our chief exec, Steve Rowe, wrote to every Marks & Spencer food supplier, clothing and home supplier, franchise partner and business partner around the world to say, “We expect you to comply with this. This is what you need to do”. That was from the chief executive. We have been to the operating committee that runs Marks & Spencer on an executive level twice in the last six months, for an hour each, to discuss human rights and how we manage them. This week, we went to the audit committee—the non-execs, including the chairman, Robert Swannell—to explain how we are running the system and how we are keeping ahead of both ever more scrutiny of human rights and new legislation. From the very top of the business—both the chairman and the chief exec—we are totally involved.
The Chair: That cues in Fiona’s questions nicely.
Q69 Fiona Bruce: Good afternoon, gentlemen. Under the Modern Slavery Act regulations, companies over a certain size now have to provide an annual report on slavery and human trafficking. Have you produced one? What has been the impact of those reporting requirements on your day-to-day operations and those of your supply chains? You touched on it already, Mr Barry. Do you want to start?
Mike Barry: I will say a few words. We have come out with a modern-day slavery statement, placed very publicly on our website, saying, “This is what we expect of our business. This is how we will comply with the legislation”. I hope that over the last 40 or 50 minutes I have been able to demonstrate that M&S takes the issue very seriously, but that piece of legislation has driven us to look even further into our business, and we have identified things that we need to do even better. I am saying clearly, as a businessman, that piece of regulation has been helpful. It has driven consistency in the marketplace.
We feel quite strongly that there needs to be one more push from government to finish off the journey. It relates to TISC—the transparency in supply chains part of the Modern Slavery Act. There is no central repository that says which companies in Britain you would expect to receive a report and statement from. Of course, you would expect the four businesses here, which are very public and prominent, to say something, and you would hold us to account if we did not; but is the figure 1,000, 2,000 or 6,000? There needs to be a list held centrally that says, “These are the companies that should be reporting. This is what they have actually reported against”. If Oxfam, the Guardian or you guys want to hold us to account for not doing enough—or not doing anything—people can. Transparency is key.
Fiona Bruce: It is based on annual turnover, is it not? You are saying that that is insufficient.
Mike Barry: No. The £36 million cut-off is sensible. We cannot expect every SME to follow the same system as Marks & Spencer.
Fiona Bruce: Absolutely.
Mike Barry: We have to be realistic about that. However, having done all the hard work of creating a world-leading piece of legislation that we, as business leaders, are buying into, you need to finish off the journey by driving transparency and saying, “Who is doing what about this good piece of legislation?” I do not want to ask you guys to spend tens of millions of pounds of taxpayers’ money creating a police force to audit the system. You should just finish off the transparency bit of it.
Nick Beighton: I totally support that. Transparency is normally the key. This is a great piece of legislation. It put the spotlight on an issue and has some clear mechanisms for reporting. We will publish our first report next week.
Chris Grayer: I echo that. We too applaud the Modern Slavery Act. It has given clarity and leverage. It is very clear, because nobody would argue against the compelling situations that it expresses. We can illustrate what modern slavery looks like; it is apparent. It is a rising issue across the world. As the implementation of a minimum wage comes in across the world, the outsourcing of labour to third-party labour providers is a significant risk that we are now having to manage. As a business, we have formed a working committee and we are in the process of understanding what modern slavery means. We are looking at it in the context of human rights. We have been working with Shift in the USA to understand how that looks, but modern slavery is the most tactile and compelling part of it.
We do not think that the Act goes far enough. We have worked with Baroness Young on her Private Member’s Bill, which tries to extend some of the requirements of the Modern Slavery Act. We support that. Looking at the regulation against third-party labour providers would give us a further piece of authority to practise our diligence in a much more significant way.
Rob Billington: I reinforce what the guys said. We were happy when that piece of legislation came in, as the Government were showing a keen interest in that element. We did not change the way we did anything because of it, but it was good to know that it was supported by government. It reinforced the systems that we had, which were pretty rigorous and good.
The key question, which has been mentioned before—it comes back to your point—is for the smaller businesses. The answer is to get transparency across the whole supply chain, with every supplier and brand. How is that reinforced? There is a cost implication; it costs small businesses. Any penal efforts that come in, to tell them off if they are not doing it, are probably not the right approach. You need to support them and give them the mechanism to implement it.
Fiona Bruce: It is all very well producing a fine statement, but has that resulted in your discovering or exposing bad practice, human trafficking or slavery? Has it led to anything further than producing a statement and saying that best practice is important?
Rob Billington: From our perspective, it is too early to tell. It reinforced the fact that our processes were in place and were rigorous enough. We have not found any issues historically in that respect. The introduction of the Modern Slavery Act has not exposed anything further. It is probably too early to tell.
Mike Barry: I have two very quick points. First, the Act has driven us to look beyond our product supply chains. We have huge supply chains that supply us with what we call goods not for resale: the lorries, computers and staff uniforms that make the business tick. We have driven it into that supply chain as well. We have talked to our franchise partners around the world and to our business partners. There is something about broadening beyond just product that we sell to the consumer.
I will speak for 30 seconds as a food retailer. We are talking today predominantly about clothing, but half our business is food. The Gangmasters and Labour Abuse Authority has made such a difference in the food industry by driving a level playing field across the whole industry on a very complex issue that is fundamentally about criminality driven by abuse outside the workplace. The gangmasters start work on the other side of the world, to bring migrants here to abuse them. Our audit system could never track and follow that. What the GLAA has done on food could be brought across proportionately into the world of clothing. There is learning to be had. That is another great success for UK plc and the UK policy system. I know that there is constant tension and challenge about budgets, but the GLAA needs to be supported. It is doing a really important job on behalf of us all.
Chris Grayer: That is a fundamental requirement. We will be looking for further support for it. The GLAA is a great opportunity. A further opportunity to allow true enforcement would be a great step forward and would enable us to do the job. The criminality attached to modern slavery is sophisticated and incredibly difficult to manage. A level of expertise is required to undo and untie some of the issues. Slavery is the second biggest criminal activity in the world. It is incredibly difficult to unravel it and get to the bottom of who the perpetrators are. We face a massive challenge. If we had stronger tools and somewhere to take the problems, it would give us an opportunity to start to deal with some of them in a much more systemic way.
Fiona Bruce: Finally, is there enough guidance from government on the new reporting regulations? What further government actions would help to produce meaningful results from the legislation? I think you have answered that, but is there anything further that you would like to see government do in connection with the regulations in particular?
Mike Barry: I have one very quick thought. The Government are an amazing source of intelligence. I have spoken about picking up the signals of problems and putting them together to track down solutions. Between the Foreign Office and DfID, the UK is represented in every country in the world. There is information that can flow to us. I am delighted that our friends from other countries—MPs from around the world—are here today, because there is a conversation to be had between UK politicians and politicians overseas about dovetailing our work. To me, that is a critical role for government.
Baroness Hamwee: I am delighted to hear you talk so enthusiastically about transparency. I am not surprised, because you all want a level playing field with others. Perhaps I could put it this way. If you have not said to government, “It would be very helpful to have a central repository of statements”, can I encourage you to do so?
The Chair: We have talked about the Gangmasters Licensing Authority, the Ethical Trading Initiative and all sorts of other things. One dog that has yet to bark in this discussion will be explored with you by Doreen.
Baroness Lawrence of Clarendon: I am not sure that I want to be known as the dog—
The Chair: The organisation we have been talking about is the dog that is yet to bark. I am sorry for any misunderstanding.
Q70 Baroness Lawrence of Clarendon: This is a question to all of you. It is around the national contact point. How much do you know about national contact points? Did you know about them before you arrived here today? A few of us found out about them only last year, when we did our visit. Can you tell us a bit about that?
Nick Beighton: Yes, we knew about them before we came here today. We have no need to use them right now, so we have not formed a view on their effectiveness. I cannot add much to that.
Rob Billington: It is the same for Mulberry. We are aware of the national contact point, but we have had no cause to use it so far.
Mike Barry: My answer is exactly the same. We do not sense that the national contact point is a significant part of the conversation. We bump into a lot of organisations and stakeholders in the outside world that challenge us to do more. For whatever reason—it may be very legitimate—the NCP has not been part of that significant discussion yet, but it probably has the potential to be.
Chris Grayer: It is exactly the same for us. We know about it and understand it. Has there been a reason to use it? No. Are we fully aware of what it can do? No.
Baroness Lawrence of Clarendon: Considering that the national contact point is a body that is looking into the things we are talking about today, do you not think it is something for you yourselves to investigate, to see what it is about and how it can support your business?
Mike Barry: That is a fair challenge. We understand that we need to understand it more. It has a very important role, potentially. A lot of this is complex. We heard the Mulberry example about what is happening in Turkey. There are different views. Sometimes you need a safety mechanism where people can come together safely to resolve big issues that they have not been able to resolve at local level. We take that very clearly as a challenge to us to become better involved.
Baroness Lawrence of Clarendon: Is that the case for all of you?
Rob Billington: Yes.
Q71 The Chair: You are aware of and engaged with the international trade union movement, the ILO and a whole range of things that you have talked about. Another dog that has not barked is the UK national action plan. Is that something at the top of your mind when you go around and about?
Mike Barry: What we see are the specific manifestations of the GLAA and the Modern Slavery Act. We are very practical shopkeepers, so we tend to see those, rather than a national strategy. There is clearly an opportunity for the UK to move forward from a good position to an even better position by joining a few more of the dots. We have talked about transparency. That is the single most important thing to be done in the next two or three years on the national strategic level. You might want to give some consideration to government procurement. You buy things in the way we buy things. You buy food and clothing. We buy food and clothing. Is there a way of making government procurement more closely aligned with corporate procurement? We are stronger together. There are a few questions, but, by and large, we are very supportive of the practical manifestations of the strategy; they are very good.
The Chair: It sounds to me as though you do not really find it stretching. From our point of view, we would like it to stretch just short of objectionable. That is the point at which you are really making progress. It sounds as if you are saying that you do not get a sense that, through what they are doing, they are stretching themselves in their procurement.
Mike Barry: It is not for me to draw any conclusions for the Committee. As business leaders—relative leaders; I keep using the word “relative”, very advisedly—we are saying that we have to engage all the UK procurement system. There are many retailers not in this room. Many of them are good, but not all of them are. We need to make sure that the totality of the system works. I am a great believer that we should focus on doing something called silver sustainability. Sometimes we talk about gold—the very best standards in a complex world—and forget everybody else. We need standards that the entire retail marketplace can participate in. As much as there has to be a stretching of us, with ever higher standards—we applaud that—there has to be a mechanism that reaches down and helps the average retailer to move forward as well. We talked about the small guys. Let us make sure that the strategy is about scale as well as pushing us to be even better.
Q72 The Chair: Can we move on to the final point? You have explained a lot about what you do, what you expect your subcontractors to do and the rules about further subcontracting. One of the issues we are interested in is what the remedy is—whether there is an effective remedy for somebody whose rights have been breached, such as a child who has been involved in working. We are not talking about popping into a safe workplace during the school holidays; we are talking about children actually working. Leaving aside the fact that external events happen that change the labour market profoundly—from our visit to Turkey, we are well aware of the immense impact that 3 million Syrians and their children have had on the labour market in Turkey, where you source much of your material—what is the effective remedy for a child who, in one way or another, has ended up being employed in something that is part of your supply chain? Should they not have a legal remedy? If that is a way of holding you to account, is it not a good way forward, as opposed to the more evolutionary process we have been hearing about?
Chris Grayer: Access to remedy can take many forms. The most important thing is to ensure that, when any person has been exploited, the situation is remediated for them as an individual, and the opportunity for it to recur is resolved in permanence. If you are talking about children, in the instances where we find it, we demand that the supplier takes responsibility for the child and takes them back to school. We engage NGOs in the marketplace, and support them financially and physically, to enable the child to be monitored all the way through, from whatever age they are to school-leaving age. We have had success in every instance of that taking place. In the few individual instances that we have had over the last two or three years, those children are still being supported by the NGOs; they are still in school and have not returned to the workforce.
Nick Beighton: I can tell you what we did in Turkey when we found the eight adolescents, who were all Syrian. We reached straight out to them. We tried to trace them as soon as possible, because they were vulnerable people who needed our help, and we put them all back in school, funded by ASOS. Then we found a complication. Regrettably, one of the young ladies, called Fatima, did not want to go back to school. She had the burden of a fully formed adult, because she realised that she was the breadwinner for her mother and her younger brother. We then realised that we had to go a step further. We pledged to commit to paying a national living wage to all the children we put back to school. At that point, Fatima was happy to go back to school, because she was free from that burden.
That was quite a distressing experience for us, and it has made us think more about remediation. I do not profess to claim that UK retailers could put all Syrian adolescents or all people around the world through school at their own cost. That is unfeasible. The best part of remediation is to try to get prevention. That is moving us all through a higher form of Ts and Cs, of auditing and of encouraging employee ownership, through trade unions, to get many more eyes on the problems.
It goes back to what shapes behaviours in business. I am the chief exec of ASOS and proud to be, so I take personal responsibility and accountability for what happens in our organisation. On the back of that, we just need to raise our game. What tends to shape business behaviour is customers, shareholders and, of course, legislation. The UK enjoys a very high standard of corporate governance. A solution to raise everyone’s game would be to use those strong corporate governance principles, through transparency—the key—to raise everyone’s game. Those are the solutions we are thinking about. With incentives and rewards, and through disclosure of the risk ratings of factories and the remediation plans, we need to embed transparency in buying discussions, so that buyers, chief execs and boards are aligned on a different set of measures. Those are the things I am thinking about to move things forward and to try to get to a higher bar of operating, so that human rights abuses are run out of our supply chain.
Q73 The Chair: If there is something serious like a child being employed anywhere in your supply chain without your knowing about it—if you had known about it, you would have stopped it—what is your response to the idea that there could be a right of action in the UK courts for that child? That would have a deterrent effect as well, would it not? Presumably, if you were confident that your processes ensured that that was not happening, you would have no objection. You would not feel that you were exposed to court cases, because it was not happening. If it was not happening, presumably you would have no objection. If it was happening, surely it would be right that there should be some redress in the courts here, because you are UK businesses and you are selling to us, as UK customers.
Mike Barry: The key thing is to create elsewhere the strong regulatory systems that we have in the UK. In the Midlands this week, two people were sent to jail for six years for human trafficking in the retail sector, because we have a strong enforcement system here. That has dealt with it. There is remedy. Those people have had a sense of justice. The people who perpetrated the crime have been locked away for a significant amount of time. The victims have been looked after. Those regulatory systems do not occur in exactly the same way around the world. We are saying that the UK is a leader. Our focus should be on ensuring that there are strong regulatory systems that understand the local context and are democratically appropriate for the countries involved.
A strict liability system, based on something that may have happened 3,000 or 4,000 miles away, where there may be significant dispute about facts and figures, becomes quite difficult. Things are best resolved near the point. If you push me into a corner on the theory of this, ultimately if somebody feels that they must have that sort of recourse to the courts in the UK, you cannot argue with it, but I do not think that is the best way of doing it in the real world. We have to resolve things at the coalface, by strengthening the institutions in places where it happens, with a local context.
The Chair: Any case in a court requires evidence. There are some cases where the courts have to consider evidence from abroad. The Bribery Act is one. In some cases of homicide, there is an extraterritorial jurisdiction. It does not seem to me that the evidence issue is a showstopper. The question of local context is not an issue, if there is a clear view about the employment of children. There is no local context that any of you is saying makes it all right to employ a child. I do not underestimate the importance of all the things you have talked about that you are doing and are still working on, but the response you have given me about why it would not be a good thing does not persuade me that it is not worth further examination.
Mike Barry: The issue is proportionality. Of course, you can create a strict liability system for any British business, operating anywhere in the world, on any potential issue. We are saying very humbly that in supply chains of millions of people, across hundreds of factories, in dozens of different countries, there are issues. Many of them are minor and are resolvable straightaway. Some of them are quite significant and need to be resolved there and then. I struggle to think of an instance in the last couple of decades at Marks & Spencer when there has been an issue so serious that it has not been able to be resolved by the local courts and law systems, our suppliers or us, or local NGOs and trade unions, such that it would have ended up in the law courts here. You challenged me to say, “Would it be theoretically possible?” Yes, it would be theoretically possible, but in relation to where this nation needs to focus limited resources, both as business and as government, it is probably not where I would put the effort. That is just a personal view.
Nick Beighton: I support what Mike says. I understand the line of questioning totally. I am fearful of the unintended consequences of something like that. I am also fearful of where you start and end the liability, because some supply chains go all the way back to picking cotton somewhere. There is the issue of drawing the lines and deciding where they all go. I am fearful of the unintended consequences of doing something like that.
Q74 Lord Woolf: This afternoon you have explained how you recognise a responsibility and how you seek to meet it. You show very clearly that you see this is a duty, especially of large companies such as yourselves, in the contemporary world. You would probably accept that you have to do it, because your reputation requires you to do it. If you damage your reputation, it has very serious effects on your business.
Can I put the point differently from the way in which the Chair put it? Not all British companies in the retail trade are of the same scale or sophistication as your companies. Do you not think that it would be helpful—I am not talking about a strict liability—if the law here made it clear that British retailers are under a duty to do the sorts of things you were talking about? What I am saying is that the law should put a duty on you. Each of you would say, “We have performed that duty”, but you should be under a duty. The law should be clear, and it should not depend on your voluntarily undertaking what you are doing.
Mike Barry: That is a very important point. In effect, you have done that with the Modern Slavery Act. It is on a very specific element of human rights—modern-day slavery. You have placed that duty on us, and we feel hugely duty-bound to explain what we do. Now you are saying, “Do you want to broaden that to a wider range of human rights issues, with the same umbrella and approach, potentially?” Personally, I would walk before I ran. I would learn a little more over the next couple of years about how to do the Modern Slavery Act and enforce it well. If that is effective, you have a mechanism, proven in the UK, that is scalable.
Lord Woolf: I did not quite understand the last point.
Mike Barry: We have a duty on one element of human rights: modern-day slavery. Let us see how that legislation works out over the next two or three years. If it is a great success, and we all learn to use it effectively and efficiently and can see that it is making a difference to human rights in a sensible commercial way, you have the opportunity to look at whether you want to bring other specific human rights under that umbrella.
Chris Grayer: I certainly welcome the fact that it could give us a level playing field. Perpetration has to be fed. If it is being fed by income, the level of oxygen it is being given skews our abilities to work to achieve your ambition, which is an industry that is completely compliant with the standards that we all agree with. We understand that that is not the case at this time. Greater application would be beneficial in creating a level playing field and tidying it all up.
Nick Beighton: I understand where you are going with all this, but do not underestimate the power of consumer pressure. There are some great examples in the food industry, where the fair trade movement has driven substantial, sustainable change from customers having choice and visibility. That is my point about transparency enabling and empowering one of the most powerful change agents for business: consumer behaviour. We live in a world where our audience is more connected and socially aware and has access to information far more quickly than before. That is also a powerful agent for change in business.
Mike Barry: Chair, this comes back to where you started the conversation—the national strategy. The national strategy needs to use market forces, our reputations, which we want to protect, and proportionate legislation to do things that we cannot do alone. You cannot legislate everything, nor can you leave everything to the market. The whole point of having a strategic approach is to work out what the right balance is.
Lord Woolf: You used the word “proportionate”. I suggest that the difficulty you have with those who do not comply with the standards you have talked about is that it becomes very difficult to prove. If there is an extension of the modern slavery position across the board, everybody is under the same duty, so there is a level playing field. If you could show the results of damage, you would have to show that it was not because we had not done our bit to try to avoid that. It makes a huge difference. It makes feasible what would otherwise not be feasible. One talks about time, but meanwhile a lot of people can suffer.
Rob Billington: If we all agree that the best way to remove or certainly minimise the risk is to have a more transparent, rigorous due diligence system that we all adopt—be it Marks & Spencer or the smaller retailer—compliance with and rigour in that system has to be the best answer, rather than going down the strict liability route. Conversely, strict liability could lead some suppliers not to be transparent, because of the threat of prosecution. They could go dark and not comply, because if they stick their head above the parapet, there is the threat of prosecution, through a strict liability approach. The answer has to be more involvement, more sharing of best practice and tackling the problem together in a very transparent and rigorous way, rather than a strict liability approach.
The Chair: I know that strict liability is a criminal concept, but it is used in the regulatory context. I was thinking more of the opportunity for civil actions, rather than the police going after you. Anyway, it is an ongoing thought, certainly in my mind. We will take a final question from Fiona. Then we will let you go.
Q75 Fiona Bruce: I want to come back to the issue of SMEs. All of us around the table today are very concerned about human rights, but every large business started off as a small one. What are your reflections on imposing that level of extensive liability on SMEs? How far should that go before we stifle enterprise?
Mike Barry: As a big business, all I can say is that it is a tough issue. We have a fantastic team, led by Fiona, working flat out across our global supply chains. More and more of the clothing retail marketplace now is new players. It is much more fragmented. It is not just a few big players like Marks & Spencer and Next. Businesses like ASOS have emerged. Many small players have emerged. We do not want to stifle that creativity and stop bringing them to the market. Equally, there is a point—let us use £36 million for now—at which you become a grown-up and have to take responsibility for being a significant player and doing things well. Again, there is a proportionality point, but I take away the point from all of you today that we, as big businesses, could probably help SMEs to develop a little more by sharing what we know and have learned.
Nick Beighton: I have some relevant experience. Eight years ago, ASOS had a turnover of £100 million. I do not know whether you call that an SME—
Fiona Bruce: No.
Nick Beighton: It was certainly a lot smaller than it is now.
The Chair: It was certainly bigger than Fiona’s firm.
Nick Beighton: Sharing data and using data and technology to assist people to grow is definitely important. Drawing up legislation that has a threshold is appropriate, because otherwise you overburden entrepreneurial spirit and businesses never get off the ground. The burden of understanding becomes so immense that you squeeze out entrepreneurial life. The point Mike made is valid. There is a point at which you say, “Right, this is where you change and have a different approach”. Some sort of threshold on all those things would be sensible.
Fiona Bruce: Do you think that the present threshold of £36 million is reasonable, as regards the modern-day slavery regulations?
Mike Barry: It has been defined by the Modern Slavery Act. Why would you go somewhere else at this stage? Let us keep things consistent and stick with it.
The Chair: We will take a final final question from Doreen.
Q76 Baroness Lawrence of Clarendon: It arises from how Nick answered a previous question, which brings us back to the human rights side of things. You asked, “How far do we go?” and mentioned cotton picking. That, too, should come to the forefront when you think about human rights. As a company, you have a responsibility to those cotton-picking individuals, too, no matter how far down the chain they go.
Nick Beighton: Without a doubt. That is not the point I was making. We have a responsibility there. Regrettably, the further back you go to the source, the more difficult the visibility becomes and the more difficult it is to enforce the principles. I agree. I was not trying to exempt that. I was just saying that if you took a liability approach, which is where I thought the Chair was going, it is difficult to decide where you start and end. That is the point I was making.
Chris Grayer: There is a huge amount of work on trying to work further down the supply chain. I can speak for the other brands we work with in the ETI. We are all engaged in trying to find processes that enable us to gain greater understanding and provide transparency through the supply chain. I echo a point that was made earlier. The Modern Slavery Act has got us to look not just at resale product in our procurement, but more broadly—at procurement of services, as well as not-for-resale products. It is about that movement forward and back, on a lateral basis, in all the purchasing that takes place, as well as going further down the supply chain. Our business, for one, is exploring how we can get greater traceability. We have some great work going on there. There are organisations in the world that are geared up to try to help brands to establish traceability on cotton, for instance.
The Chair: Thank you very much for giving us your time. It has been a very useful and productive session. We greatly appreciate it. The Committee will stay for a few moments, but we can let you go now. The public will leave at this point.