From October 2015, organisations carrying out business in the UK will be required to prepare a slavery and human trafficking statement each financial year.

WHO WILL IT APPLY TO?

The new requirement will apply to any corporate body, LLP or partnership (whether incorporated or formed in the UK or overseas) which:

  1. carries on its business or part of its business in the UK;
  2. supplies goods or services; and
  3. has a turnover of at least £36 million per annum.

WHEN WILL IT APPLY?

The government has announced that it intends to introduce regulations in October 2015 to bring the requirement into force. Statements will not be required for financial years which end "within close proximity to the date that the requirement comes into force".

WHAT IS REQUIRED?

The statement must describe steps taken to ensure that slavery and human trafficking are not taking place in their businesses and supply chains, or state that no steps have been taken. The government expects that “businesses who disclose that they take little or no action may be subject to particular scrutiny and public pressure which may jeopardise both their reputation and their profit”.

The Act provides that a statement may include information about:

  1. the organisation's policies in relation to slavery and human trafficking;
  2. its due diligence processes in its business and supply chains;
  3. the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps taken to assess and manage that risk;
  4. its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against appropriate performance indicators; and
  5. training about slavery and human trafficking it makes available to its staff.  

HOW MUST IT BE DISCLOSED?

In the case of a company, the statement must be approved by the appropriate board of directors and signed by a director. Comparable requirements apply for LLPs and partnerships.

The statement must be published on the organisation’s website with a link to the statement in a prominent place on the homepage. If a company does not have a website, it must provide a copy of the statement within 30 days on request of any person.

HOW DOES IT APPLY TO GROUPS?

Strictly, a company only needs to report on its business and supply chains, and not those of other group companies. Where more than one group company is caught by the new requirement (in their own right), each is required to prepare a statement. We anticipate that the guidance will confirm that a single statement may be used to cover companies in the same corporate group.

WHAT SHOULD BE DONE TO PREPARE?

The UK government will publish guidance on the information which may be included in a slavery and human trafficking statement and on good practice in relation to due diligence. The guidance is not expected to be published before October 2015 which may leave little further time for organisations to prepare their first statements. The financial threshold (£36 million) was only confirmed at the end of July. As such, there is huge pressure on companies to react in a short time frame. It is currently unclear, but the guidance may recognise this fact, as least in the first year.

Given timing and uncertainty over transitional arrangements, organisations will need to assess now, on an entity by entity basis, whether they are covered by the new requirement. The Secretary of State can obtain an injunction requiring an organisation to comply but it is not anticipated that this will be applied in the short term. Public scrutiny will provide the primary driver for compliance, and due diligence and action will need to be taken at a level which satisfies the expectations of stakeholders and customers. Organisations may be able to make use of systems and measures already in place for other supply chain issues.

Modern supply chains are complex and obtaining reliable and comprehensive information from direct and indirect suppliers may often prove challenging. For these reasons, statements might reflect the current status with a focus on an organisation's intended approach and actions, and in time focus more on the outcomes of due diligence and actions that have been taken. Organisations will also need to factor in their strategy and requirements in the event of any business change e.g. new acquisitions and activities in new markets.