It seems that a certain number companies think that they should not prepare a modern slavery statement and to them I ask why? Section 54 of the Modern Slavery Act 2015 has not been amended and the 2017 guidance sets out further clarity so why do certain companies still believe that they do not have to comply?
The 2017 Guidance
Section 54 of the Act requires businesses that have a global turnover above £36 million and that operate in the UK, to produce an annual statement detailing the steps they have taken to ensure that there is no modern slavery in their own business and supply chains. The original 2015 guidance set out the Home Office’s expectations for such statements. It is unclear whether an organisation caught by section 54 must also account for the operations of non-UK subsidiaries but best practice would suggest that it should. Paragraph 3.13 of the 2017 Guidance states:
“If a parent company is seen to be ignoring the behaviour of its non-UK subsidiaries, this may still reflect badly on the parent company. As such, seeking to cover non-UK subsidiaries in a parent company statement, or asking those non-UK subsidiaries to produce a statement themselves (if they are not legally required to do so already), would represent good practice and would demonstrate that the Company is committed to preventing modern day slavery. This is highly recommended, especially in cases where the non-UK subsidiary is in a high-risk industry or location.”
The 2017 Guidance makes it clear that the statement is not just a box ticking exercise but must reflect a conscious effort to tackle the risks posed by modern slavery and trafficking.
As I have written before the two main points of the Guidance are:
• Organisations falling below the £36 million turnover threshold may find it helpful to make a voluntary statement if they are bidding for contracts against businesses that do have one. Such organisations may already be responding to supply chain due diligence queries asking if they have a statement or policy setting out their approach to tackling modern slavery.
• An indication that it is best practice to include in the statement matters such as parts of the business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk. For anyone dealing with local content requirements, particularly in high risk countries and in market conditions where profit margins are stretched, this obligation may seem like an onerous burden and one that may be ignored. But section 54(5)(d) does emphasise the need for closer scrutiny of where local labour is sourced from and, in particular, proper due diligence into the players involved in the extensive supply chains that exist in a typical, large project.
Looking ahead – The Modern Slavery (Transparency in Supply Chains) Bill 2017 (the “Bill”)
Assuming the Bill becomes law, important changes to the Act that are of relevance include:
• Section 54(5) of the Act would no longer be best practice examples of what to include in the statement: they would be mandatory, thus reinforcing the element of self-policing of compliance and making it easier for apparently minor breaches to occur which might tip off authorities to the need to investigate in more detail.
• A requirement that reasons are given when a statement is published confirming no steps have been taken to ensure modern slavery and human trafficking is not occurring in any part of their business or supply chains.
• An obligation on the Secretary of State to publish a list of all commercial organisations that are required to publish a statement, in a place and format that is easily accessible.
Sadly there is still no proposal in the Bill to amend the sanctions for non-compliance with section 54 of the Act. The threat of adverse publicity and likely impact on credibility of reputation and so prospects for tenders to succeed, plus the fact that a lack of compliance may provide a basis of a full investigation into a company’s operations around the world, remain the serious consequences likely to arise.
Conclusions
Organisations will need to pay heed to the “best practice” section 54(5) requirements, which are likely to become mandatory in the near future, thus it may be prudent to take the time to review your own position and ensure the section 54 requirements have been complied with to the fullest extent possible.