From previous posts, readers will know that the objective of the Modern Slavery Act 2015 is to prevent modern slavery entering the supply chain and organisations as well as preventing more people becoming victims. The stated aim of the government is to ‘require businesses to be transparent about what they are doing and… increase competition to drive up standards’.
The statutory guidance (https://www.gov.uk/government/publications/transparency-in-supply-chains-a-practical-guide) issued today provides information and case studies about how organisations can comply with the transparency in supply chain provisions Supply chain has its ‘every day’ meaning but an annex to the guidance refers to all supply chains and contractual relationships.
The statutory guidance that has been provided reaffirms the following:
A commercial organisation with a turnover of £36m or more which carries on business (or part of a business) and supplies goods or services is required to produce a slavery and human trafficking statement for each financial year of the organisation. A common sense approach is to be adopted. Even if the organisation carries out charitable, public functions or educational aims, the organisation will be required to comply with the provisions if it carries out commercial activities and meets the turnover threshold. This means that certain public sector organisations will be caught if they carry out commercial activities.
The guidance also confirms that 1) franchisers are required to make a statement if the turnover of the franchiser meets the £36m threshold. When making the statement, the franchiser may choose to include activities of franchisees in order to protect the franchiser’s brand. If the franchisee meets the turnover threshold in its own right, the franchisee is required to make its own statement and 2) If a parent or a subsidiary (irrespective of location) meets the requirements of the provisions, they are required to make a statement in their own right even if another company in the group does so. The definition of a subsidiary has the meaning given by section 1162 of the Companies Act 2006
The guidance states that it is for individual parent organisations to determine whether or not a subsidiary forms part of its supply chain. The provisions are referred to in the guidance as ‘tests in the Act’. When considering whether or not the provisions apply to parents or subsidiaries, organisations should use the provisions as tests. If all the stages of the test apply, the organisation (or part thereof) will be caught and required to comply.
Parent companies should also consider including the activities of foreign subsidiaries in their statement especially where that foreign subsidiary is based in high risk location or sector.
Penalties
The penalties are still civil penalties of an injunction or order for specific performance of a statutory duty however as stated in previous postings it is likely that companies processes will be called into question if they do not show compliance or a reluctance to comply.
Slavery and human trafficking statement (‘the statement’) and policies
The guidance includes top tips for writing a statement including keeping the statement clear and succinct but ensuring the company covers all the relevant points. If an organisation can provide information relating to publications, documents or policies, then it should provide these as well other steps taken to minimise risks. Any policies that a company might have should be provided with the statement.
Details of what organisations are doing to act on the issue of modern slavery as well as their plans for the future (both in terms of due diligence and collaboration with others) should be provided.
The guidance sets out good practice on what organisations should consider when putting policies together.
Who should approve the statement
The statement must be approved by a director or a partner as appropriate. All senior management must be aware of the risks under the Act and ensure that policies and procedures are put into place. Also ensure that appropriate training is given to all employees.
Publishing a statement
A link to the statement must be published in a prominent place on the home page of the company. The guidance recommends the link is clearly marked so it is apparent what it links to e.g. ‘Modern Slavery Act Transparency Statement’.
Due Diligence
The guidance recommends that due diligence procedures should be based on and provides examples:
•proportionality of the risk itself
•the severity of the risk
•the influence the organisation has
•an informed risk assessment which has taken place
Companies should carry out their due diligence throughout their supply chain where they can. Auditing and investigations will be key and companies should consider the following areas when conducting risk assessments:
•business partnership risk
•country risk
•sector risk
•transaction risk
The guidance emphasises that continuous assessment and risk review is essential.
Human Rights
The guidance refers to the UN Guiding Principles (UNGPs) which are based on three pillars of human rights. These are a useful reference point for organisations which choose to implement a human rights policy.
Companies who are required to report under the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 who must also make a statement under the Modern Slavery Act should ensure requirements of both pieces of legislation are complied with. It is anticipated that organisations will make two separate statements rather than a single statement covering all requirements.