Modern slavery - the need for transparency in supply chains and new reporting obligations
This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.
The Modern Slavery Act 2015 (Slavery Act) comes into force in October 2015.
If your organisation supplies goods or services and has an annual global turnover of £36m, take note. Your organisation will need to prepare and publish a slavery and human trafficking statement each financial year.
This alert considers the "transparency requirements" under the Slavery Act, and the steps that your organisation must take in order to comply with its obligations.
What is modern slavery?
Slavery and human trafficking is conduct that constitutes any of the following:
- Slavery.
- Servitude and forced or compulsory labour.
- Human trafficking.
- Trafficking for prostitution.
- Trafficking for exploitation.
What is the purpose of the Slavery Act?
The aim of the Slavery Act is to achieve greater transparency in businesses and heighten corporate social responsibility.
The Government's intention is that the transparency requirements will encourage organisations to take the issue of modern slavery in supply chains seriously through pressure from investors, consumers and the general public and their ability to decide who they should and should not do business with based on ethics.
When do you need to take action?
The Slavery Act is effective from October 2015. There will be transitional provisions to apply to businesses whose financial year end is close to the implementation date.
Which businesses are affected?
The Slavery Act will apply to your organisation if:
- it is incorporated (either a public or private company) or a partnership;
- the business or part of the business is in the UK;
- it supplies goods and services; or
- it has a global turnover of £36m or more.
What do you need to do?
If the Slavery Act applies, your organisation must publish a "slavery and human trafficking statement" each financial year (the Statement).
The Statement should be published on the organisations website with a link to a prominent place on the home page.
What should the Statement include?
The content of the Statement is not mandatory.
The Statement may simply confirm that no steps have been taken – this approach is unlikely to be advisable.
The Statement is likely to confirm the steps that have been taken during the relevant financial year to ensure that the organisation's supply chains and all parts of its business are free from slavery and human trafficking.
The Slavery Act provides that the Statement may include the following information:
- Its structure, business and supply chains.
- Its policies in relation to slavery and human trafficking.
- Its due diligence processes in relation to slavery and human trafficking in its business and supply chains.
- The parts of its 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.
- Its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate.
- The training about slavery and human trafficking available to its staff.
Further guidance about what to include in the Statement is expected to be published by the Government in October 2015.
Where is the Statement published?
The Statement will need to be approved by the business e.g. the board of directors or the partners.
The Statement must be published on the organisation's website (if it has one) and include a link to the statement in a prominent place on the home page. If the organisation does not have a website it must provide a copy of the statement to anyone who makes a written request for one within 30 days of receipt of the request.
What are the sanctions?
The Secretary of State may commence civil proceedings (via an injunction) to force a business to prepare a Statement. We anticipate that the Secretary of State will first give an organisation the opportunity to remedy its failure to comply.
The main driver for businesses to comply with their obligations under the Slavery Act will be the wish to avoid negative publicity and reputational damage, which could cost them customers, investors and contracts.
What do affected companies need to do?
If your organisation is caught by the Slavery Act it should consider the following steps:
- Identify any entities in your corporate group that need to prepare a Statement.
- Identify who within your business will be responsible for overseeing compliance with the reporting obligation.
- Conduct an audit of your business and supply chains to assess any areas of risk and the likely level of exposure.
- Review your policies and practices and consider how to integrate the requirements of the Slavery Act. Consider introducing a corporate social responsibility policy and/or code of conduct to combat modern slavery and human trafficking in the business and supply chains.
- Ensure that you communicate any relevant policies (and code of conduct if applicable) to your suppliers and that they are contractually obliged to comply with them. Consider making this a requirement of your procurement process.
- Review your contracts with suppliers. Ensure each supplier is contractually obliged to comply with the Slavery Act and to ensure its suppliers and subcontractors do too.
- Train your employees, suppliers and agents, in particular those responsible for supply chain management and procurement.
- Consider the crossover with grievance and whistleblowing policies.
- Consider what information to put in the Statement.
- Plan for obtaining the appropriate approval.
