The question that many supporters of anti-trafficking movements are asking – does the new Modern Slavery Act (2015) go far enough and ensure that corporates do enough to maintain a transparent supply chain?
The new Modern Slavery Act (2015) will apply to all commercial organisations who carry on business or part of a business in the UK.
Regulations under the Act expected to be implemented in October 2015 will require those with turnover above a yet to be determined threshold to produce an annual statement for each financial year under the so-called ‘Transparency in supply chain provisions’.
Organisations are likely to have only until the end of the current financial year to produce their first statement. Current reports suggest that a threshold of around £36 – 40 million is likely.
The Government has indicated it will publish compliance guidance in the next few months.
The Act introduces two main offences
- servitude or forced labour
- arranging or facilitating the travel of another person with a view that a person is being exploited
- Section 54 of the Act will require every large business to publish an annual statement setting out the steps the business has taken during the year to ensure that slavery and human trafficking are not taking place in the business itself or in its supply chain. The statement must be published on the business’s website.
- The obligation to publish a statement applies to businesses which carry on any part of their business in the UK and which “supply goods or services” (essentially all trading companies and partnerships).
- The statement must be approved by the board of directors and signed by a director (in the case of companies), approved by the LLP members and signed by a designated member (in the case of LLPs), and signed by a general partner (in the
case of limited partnerships).
- Overseas conduct will be included and will be deemed as if the offence had
taken place in the UK.
Preparing the Statement
If a company is caught within threshold, the basic requirement is to produce a statement confirming:
- the steps taken to ensure that slavery and human trafficking are not taking place in your business or in any supply chain or
- that you have taken no steps to confirm the existence of slavery or trafficking. This approach may place a company’s ethical position into question and would probably not be perceived to be the popular stance.
The Act does not specify the exact steps that a business must take in relation to supply chain transparency, and there is no prescribed form of transparency statement. However, the Act suggests that the statement “may” include the following:
- brief description of your organisations business model and supply chain relationships
- your organisation’s policies relating to modern slavery including due diligence processes and the training available/provided for those in supply change management and the rest of the organisation
- the parts of the business and supply chain most at risk in the organisation and how the organisation evaluates and manages those risks
- relevant key performance indicators which would allow a reader to assess the effectiveness of the activity described in the statement.
The homepage of your website must contain:
- a prominent link to the statement
- the statement must be approved by the board and signed by a director
- homepages of both the parent company and any subsidiaries websites
- if the company does not have a website it must provide a copy of the statement within 30 days to anyone who requests it
Application / Jurisdiction
- a company/partnership over a certain size
- supplies goods or services
- carries on a business or part of a business in the UK
The Act itself imposes no legally binding requirements to conduct due diligence on its supply chains. At present there is some flexibility surrounding the content of the statement as companies may find it difficult to compile all information and the Government has framed Section 54 in such a way as to leave it open to businesses to determine how best to comply
with its requirements, and how far they should go in identifying where any risks may lie (and how to tackle them). The Government has also made it clear that it expects each business to take a appropriate and proportionate approach based on the nature of its business and the industry sector.
What should companies be doing now?
Companies should assess whether you are caught by these requirements, for some this will be straight forward, however for others they will need to decide on an entity by entity basis once the turnover threshold is published. Companies may want to consider the following:
- start assessing current levels of information on your supply chains. The company will need to start engaging with your direct and indirect suppliers and set up due diligence systems to obtain reliable information
- draft and implement a policy on slavery and trafficking
- assess the need for training within the organisation and your supply chains on human rights compliance
- incorporate anti-slavery and trafficking obligations (and related policies) into procurement agreements, and require similar obligations to be incorporated into any sub-contracting arrangements
- consider the company’s supplier due diligence processes to incorporate procedures designed to identify modern slavery and trafficking risks.
Does this impose enough obligations on companies? At this time, it seems that any process that seeks to address trafficking and forced labour issues are to be welcomed.
However there are no criminal or financial penalties for non-compliance and that is an area that should be reconsidered. In order to safeguard and ensure that companies comply with the Act and comply properly and ethically, there should be some element of financial penalty. Notwithstanding the lack of penalty, any company that is deemed not to be adhering to the Act may suffer detriment from a reputation perspective and this in itself may be enough of an incentive for both companies that fall within the threshold and those that don’t to comply with Section 54 properly.