The UK has enacted ground-breaking legislation, the Modern Slavery Act 2015, requiring large companies in the mining sector to be transparent regarding the impacts of their supply chains.
What are the obligations?
Commercial organisations with an annual turnover of £36 million, which supply goods or services in the UK, will be required to publish an annual slavery and human trafficking statement to report on what actions they have taken to ensure that slavery and human trafficking is not taking place in their supply chains or any part of their own business, which must include “a statement of the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains” or that they “have taken no such steps”.
The statement may include information about:
- the organisation’s 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.
The statement must be approved by the board and signed by a director and published on the company’s website.
When will this take effect?
The legislation came into force at the end of October 2015. The statement must be published after the end of the organisation’s financial year (Government Guidance suggests within 6 months). For companies whose next year end fell between 29 October 2015 and 30 March 2016; these organisations will not be required to publish a statement until the end of the following financial year.
The mining sector in particular has been flagged as being ‘high risk’, with a number of public studies alleging working practices in some mines amounting to slavery. Most recently, a 2013 Verité report investigated illegal gold mines in Peru, finding widespread human trafficking and forced labour. Similarly, a 2011 ‘Free the Slaves’ report focused on slavery in conflict minerals in the Democratic Republic of the Congo.
In November 2014, the UK parliament criticised international mining companies from the UK, Canada and Australia – without naming them – for using the Eritrean national service programme to supply forced labour. This followed a Human Rights Watch report on ‘Forced Labour and Corporate Responsibility in Eritrea’s Mining Sector’. Such reports and the issues highlighted in them are likely to be more prevalent and receive greater attendance as a result of the Act.
A failure to report in sufficient detail may result in reputational damage and public scrutiny. Companies in the mining sector will be familiar with the US obligation to report on conflict minerals under the Dodd-Frank Act, which resulted in Amnesty International and Global Witness reporting that a significant number of US firms were failing to check their supply chains for conflict minerals and even publicly named certain companies.
Affected employers have three options:
- Publish an annual statement setting out the steps that it has taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains or any part of its business; or
- Publish a statement that it has taken no such steps; or
- Decline to publish a statement.
Only options (a) and (b) will be legally compliant. Employers need to consider now:
What time, resource and money will be required to comply?
How feasible is it to identify all supply chains and take steps in relation to each?
What steps are actually required in practice? What is the relationship with suppliers and where does the bargaining power lie?
What are competitors doing? What is the general approach of the sector/market?
What are the potential risks to reputation and negative attention from the UK’s independent anti-slavery commissioner, shareholders, investors, customers, trade unions and civil society, such as non-governmental organisations and human rights groups?
What is the potential for exclusion from tendering for private sector contracts in relation to businesses who have themselves have published a statement of steps and/or require their suppliers to?
What steps can we take to prepare?
Organisations who engage with the legislation will need to take steps to address each part of the annual statement. These are likely to include:
- Mapping of suppliers and identification of high-risk activities/geographies;
- Creation of new policies and procedures on slavery and human trafficking;
- Review of existing policies and procedures to ‘dovetail’ with slavery and human trafficking processes;
- Implementation of a confidential reporting line;
- Proactive risk management, including supplier audits;
- Training of employees, suppliers, contractors; and
- Identification of key performance indicators allowing progress to be benchmarked and monitored.
In the first year of compliance, an organisation may choose to simply set out its strategy for combating modern slavery risks, rather than taking material and substantive steps. It will, however be critical for the organisation to continue to build on, and begin implementation, of its strategy year-on-year.
With so much at stake, companies and their directors need specialist advisors to help them navigate this new terrain. With leading labour law, human rights and regulatory and government advisory expertise, DLA Piper is well-placed to be your human rights trusted advisor. We have global reach and local knowledge of the salient risks pertinent to each jurisdiction, making us ideally placed to support companies during the complete life-cycle of human rights issues almost any business can face.