As construction companies and supply chains become more globalised, with staff working in countries which have very different cultural practices from their own, new and often unexpected risks are emerging.
In 2016, consultancy Sweett Group’s prosecution under the Bribery Act and GBP 2.25 million fine sent out a warning to all construction companies operating in countries where cultures may be unfamiliar.
Following an investigation by the Serious Fraud Office into its activities in the United Arab Emirates, Sweett Group pleaded guilty to a charge of failing to prevent an act of bribery intended to secure a Dubai hotel contract, contrary to UK bribery legislation.
Given that similar legislation is prevalent around the world, the case was a lesson for many businesses.
While some business practices, such as ‘facilitation payments’ in advance of a contract award, are considered commonplace and acceptable in certain countries, a company can still be prosecuted for these actions in their home jurisdiction, even when an agent or subsidiary is acting on their behalf.
Bribery and corruption in construction
Bribery and corruption is just one example of the risks facing multinational construction companies when they move into new territories.
More sinister are instances of worker exploitation and slavery in supply chains.
Practices that can occur include long working hours, squalid accommodation, erratic or reduced payment of wages, passport confiscation, debt bondage, and pay levels below those agreed when workers were recruited.
Typically, they involve migrant workers.
The UK based Chartered Institute of Building (CIOB) addressed many of these practices in its 2016 report, Building a Fairer System: Tackling Modern Slavery in Construction Supply Chains.
“The construction industry is susceptible to cases of forced labour as the use of migrant workers has become a key element for many companies, particularly when bidding for or working in large infrastructure projects abroad,” explains the report’s author Emma Crates.
“Without attracting skilled and unskilled talent from other regions, many organisations would struggle to complete these building schemes.”
Tier one contractors are particularly at risk from worker exploitation in their supply chains, which are typically large and challenging to manage.
Where the country is unfamiliar, the supply chain is likely to include companies the contractor has not worked with before.
Several major international contractors have been subject to media investigations into their treatment of workers on projects in the Gulf region, with the attention centring on labour agencies used by the companies to supply their sites.
The right tools to tackle global supply chain risk
The CIOB has launched a ‘toolkit’ to help construction companies tackle the issue of forced labour and modern slavery in its global supply chains, providing guidelines, training and best practice.
The guidance is backed by pan-industry organisation Stronger Together, set up after the UK implemented the Modern Slavery Act in 2015, and can be regarded as an important risk management tool for any globalised construction company.
“Firms that take up and implement this toolkit demonstrate their commitment to ending modern slavery,” says CIOB Chief Executive Chris Blythe.
“The toolkit is there to help raise awareness of modern slavery, identify exploitation and then provide the support for businesses to deal with it responsibly through guidance and good practice.”
Major companies who have signed up for the toolkit include contractor Willmott Dixon, product manufacturer Saint-Gobain and developer Westfield.
Rick Willmott, Chief Executive at Willmott Dixon, says: “Sustainability is at the heart of our business and that includes showing leadership in sustainable procurement.
“We take our responsibility for tackling modern slavery very seriously.”
Other firms have already taken positive action. Paving supplier Marshalls sources its stone products from quarries and manufacturing plants in countries such as India, China and Vietnam.
Group Marketing Director Chris Harrop was shocked at the levels of exploitation he witnessed after visiting suppliers in Rajasthan, western India. “What struck me was that it was so blatant,” he says.
Ethical trading to combat exploitation in construction
Marshalls has joined the Ethical Trading Initiative (ETI), an international alliance of companies, trade unions and NGOs, and adopted the ETI Base Code of Labour Practice, which covers areas such as child and bonded labour, living wages, health and safety, discrimination and inhumane treatment.
Consultancy CH2M, which has acted as a technical consultant for the 2022 World Cup, worked with ethical labour expert Verité to develop a global policy on worker welfare.
It covers issues including fair worker recruitment and payment practices, accommodation and living standards.
Last year, nearly 20,000 employees took CH2M’s online ethics programme, which included a segment on the new worker welfare policy.
“Introducing worker welfare into our standard training packages, rather than treating it as a stand-alone topic, is a good way of keeping this issue live within the company, and building it into everything we do,” says Senior Vice President Theresa Loar.
The risks from operating in foreign territories and unfamiliar cultures are clear. Sweett Group is perhaps the most extreme example of the risk involved.
Since the Dubai bribery scandal, its name has disappeared from the industry – the company was taken over in 2016 by rival Currie & Brown, which has dispensed with its brand completely.
So, construction companies that do not rigorously monitor business activities across their whole supply chain can leave themselves open to serious reputational damage.
For further information please contact Richard Gurney, CEO of JLT Construction on +44 20 7558 3880 or email email@example.com