Forced labour and charity products - what are charities' responsibilities?

A plea for help in a charity Christmas card sparked an investigation into Chinese factory conditions by the retailer Tesco. Rebecca Cooney asks what charities can do if they find themselves caught up in similar situations

(Photograph: Dominic Lipinski/PA Wire/PA Images)
(Photograph: Dominic Lipinski/PA Wire/PA Images)

Cast your mind back to three days before Christmas, when The Sunday Times newspaper reported that six-year-old Florence Widdicombe discovered one of the charity Christmas cards she had bought from Tesco to send to her friends had already been used.

The card, festooned with a picture of a kitten in a Father Christmas hat, contained a chilling message: "We are foreign prisoners in Shanghai Qingpu prison China. Forced to work against our will. Please help us and notify human rights organisation."

Tesco immediately halted production at the factory, which is run by the Chinese company Zhejiang Yunguang Printing, and launched an on-site investigation.

Fortunately for the voluntary sector, the media coverage largely skated over the fact that a portion of the profit from the cards in question was going to a number of charities.

But the episode will have undoubtedly given many charities pause for thought.

So what are charities’ responsibilities in this kind of scenario, in which a company the charity has a relationship with has been found to have forced labour or slavery in its supply chain? And what action can charities take to prevent themselves being caught up in it?

Hugo Walford, associate on the charities team at the law firm Withers Worldwide, says that, in a situation where charities are not involved in the production or trading of the goods themselves, their main concern should be around trustees’ legal duties to protect the reputation of the charity.

"What this boils down to is reputational damage for organisations through the connection to an organisation with issues in its supply chain, so trustees need to be happy they’re adhering to their duties in that respect," he tells Third Sector.

So when an issue is highlighted in a corporate partner’s supply chain, says Walford, the first thing for charities to do is look as what kind of agreement they have in place with the company.

A charity needs to work out if the agreement allows it to request information or terminate the relationship and whether it allows it to have any input into the process of resolving the issue.

It also needs to consider whether it has faith that the company is capable of dealing with it, he says.

"Look at the value of the relationship at that moment and ask: ‘Is it in the best interests of the charity to keep going with it?’" he says.

Depending on the situation, it might be worth considering whether the charity wants to keep any donations it has already received from the company, Walford adds.

As was demonstrated by the debate after the Presidents Club scandal in 2018, the bar for returning donations is pretty high. This was later reinforced by guidance from the Charity Commission and the Institute of Fundraising

"The default position is that if you are a charity and you get a donation, you should accept it," Walford says.

"But if you decide it wouldn’t be in the interests of a charity to accept it, you can refuse it. As trustees, you have to weigh up the value of that donation against the risk or loss that could arise if you accept it."

But he adds: "Unless you can show the risk of loss, particularly loss of income, is greater than the value of the donation, then you’re going to struggle to show you shouldn’t keep it."

And in this scenario, he says, that is pretty unlikely.

But prevention is generally better than cure, and charities should be considering supply-chain issues when striking up relationships with companies, he says.

"Ensure you have a robust agreement and the ability for you to terminate the agreement pretty quickly if there is a failure on the modern slavery side," he says.

"You wouldn’t want to find yourselves tied into an agreement for six months if you were in a situation where it was having a reputational impact."

Walford says it might also be worth including a clause requiring the company to comply with relevant legislation or even official Home Office guidance on supply chain issues, which is more stringent that the law in some places.

"You’d want to be sure that they are meeting their reporting and monitoring requirements, so that if you as a charity have questions you can get answers," he says.

Above all, Walford adds, do your due diligence before entering into a partnership.

"The assumption that an organisation is doing enough on the modern slavery supply chain just based on its name is not going to cut it any more," he says.

"There’s got to be good practice going on, and evidence illustrating that they are taking the supply chain seriously and doing any due diligence."

Larger charities that are doing their own trading will have their own set of responsibilities under the Modern Slavery Act 2015, on top of any reputational concerns, Walford points out.

For charities supplying goods or services, with annual turnovers of £36m or more, "the obligation is on you to ensure you know your chain well and that you have a clear policy in place for ensuring that there is no modern slavery in that supply chain", he says.

"You need to have a policy, review that supply chain and all your agreements with any subcontractors, and ensure you’ve done due diligence about anyone you’re dealing with."

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