The modern slavery act 2015: business duties in supply chain transparency

27.07.15

Publish or be damned

The Modern Slavery Act 2015 was introduced with the worthy aim of eradicating modern slavery and making businesses reflect on practices within their supply chains.

Section 54 aims to promote transparency in supply chains and stands to ensure that consumers and businesses are not inadvertently fueling the demand for slave labour. The provision is expected to come into force in October 2015. It will require organisations of a certain size to produce a statement that either:

  1. details the steps taken by the organisation to ensure that slavery and human trafficking is not taking place in any part of its business or supply chain; or
  2. explains that no such action was taken.

Which businesses need to make a statement? Commercial organisations with a turnover above a specified amount will need to publish an annual slavery and human trafficking statement. The UK government consulted on the appropriate level of the threshold from February to May 2015.  At the end of July, Prime Minister David Cameron announced in a speech on his visit to Vietnam that the turnover threshold will be fixed at £36m. The government anticipates producing guidance for businesses in time for the rules coming into force in October 2015. 

The larger businesses caught by the duty are expected to carry out due diligence on smaller businesses in their supply chain.  Therefore, while the turnover limit will impose the legal duty only on larger businesses, in practice all businesses will need to consider the risk of slavery and trafficking because smaller businesses will be asked to respond to the demands of their larger business partners.

What should the statement say? The UK government is committed to providing guidance to help businesses meet the requirement to provide a statement. Whilst the guidance is not yet available, the government’s consultation papers listed the following points as relevant for businesses to include in their statement:

  • a brief description of the organisation's business model and supply chain relationships;
  • the organisation’s policies relating to modern slavery, including the due diligence and auditing processes implemented;
  • details of training available and provided to those in the supply chain management and  the rest of the organisation;
  • the principal risks related to slavery and human trafficking and an explanation of how the organisation evaluates and manages those risks internally and within its supply chain; and
  • relevant key performance indicators, which will assist anyone reading the statement to assess the effectiveness of the activities it describes. As the statements will be produced annually, performance indicators are likely to be useful in demonstrating progress from one year to the next. The choice of which measures to use will depend on the individual circumstances of the business.

Who within the organisation should approve the statement? The statement should be approved by the board of directors of a company or by the members of a limited liability partnership. The statement needs to be signed by a director or member.

What should the organisation do with the statement? The statement needs to be placed on the organisation’s website and there should be a prominent link to the report on the homepage of the website. If the business has no website, then a copy must be provided to anyone who requests one within thirty days of the request.

What happens if organisations fail to comply? The duties imposed on businesses are enforceable by the Secretary of State bringing civil proceedings in the High Court in England for an injunction, or in the Court of Session in Scotland for specific performance of a statutory duty.

Given that a statement will suffice if it simply states that no action was taken, the duties may not be as onerous as they might seem at first. In the short term at least, the real teeth of the publishing duty may lie in the adverse reputational impact on a business appearing to do nothing at a time when trafficking is at the top of the political and public agenda.  What is clear is that larger businesses which fail to publish a statement run the risk of government enforcement and negative public reaction.

Larger businesses who fall within the scope of the new rules, and smaller businesses who work with them, should be taking steps now to comply with the spirit of the legislation and should be evidencing what they are doing to comply, such as training, auditing and due diligence.

If you would like to discuss the impact of the Modern Slavery Act on your business please contact Paul Marshall, our Head of Business Ethics.