The Modern Slavery Act 2015 (MSA) is the UK’s latest response to modern slavery in its various forms and has put supply chain transparency squarely in the spotlight. The issue of what large companies are doing to prevent slavery in their businesses and supply chains is set to become a very public compliance challenge.
Who is affected?
“Commercial organisations” (body corporates or partnerships), supplying goods or services, with a minimum global turnover of GBP 36 million, and carrying on “business” in the UK are directly affected. Such organisations are required to publish an annual “slavery and human trafficking statement” on their website.
When and what do I need to report?
Organisations with a financial year ending 31 March 2016 will be the first required to publish a statement.
This is not a statement guaranteeing supply chains are slavery free but to communicate the steps the
organisation has actually taken to ensure modern slavery (such as bonded or forced labour) is not taking place. The Government expects statements to be published within six months of an organisation’s financial year end and to be improved year on year.
The MSA sets out a high-level framework of what may be incorporated in a statement, including:
- A description of an organisation’s business model and supply chain relationships
- Policies relating to modern slavery, including due diligence and auditing processes implemented
- Training available on modern slavery
- Principle risks related to slavery and human trafficking (including how risks are evaluated and managed)
- Key performance indicators (allowing third parties to assess the effectiveness of the activities described in the statement)
The statutory guidance provides further details, tips and case studies on these themes. It also provides guidance on how to respond to modern slavery if it is identified in a supply chain.
What happens if I fail to report?
Legal sanctions for non-compliance are limited to an injunction compelling the organisation to report. Subsequent failure to comply would risk the entity being held in contempt of court, punishable by an unlimited fine
However, an organisation’s reputation and the value of its shares are most at risk, particularly if it operates in a sector that is already under scrutiny in relation to labour issues. The primary drivers for compliance are intended to be customers, activist shareholders, trade unions, civil society and the press. NGOs, such as the Business and Human Resources Centre and KnowTheChain have been active in publically shaming non-compliant companies under similar Californian legislation. They will undoubtedly turn their attention to non-compliance under the MSA.
What steps should I be taking?
A statement should be underpinned with steps to ensure modern slavery is not taking place in your supply chain. These steps should take into account sectoral and jurisdictional risks, as well as the complexity of the organisation’s supply chains. A clear policy on modern slavery will also be an essential part of all organisations risk management. Supply chain mapping to understand risks, clear rules for procurement, contractual protections and consistent messaging will certainly have a role to play.
The above steps are undoubtedly familiar to most and in many ways similar to the UK Bribery Act. However, modern slavery presents a more nuanced problem given the potential for an organisation to cause further victimisation of vulnerable workers.
Organisations must therefore reflect on how they will respond to identified cases of modern slavery, what level of support (if any) they are willing to give to remediate issues, and how they will adapt their incentive packages to mitigate against reliance on forced labour.
It is worth reflecting on the reality that a termination of a supply contract may not always be in the best interests of victims.