The Modern Slavery Act 2015 will impose a new obligation on businesses to report what they are doing to combat slavery and human trafficking. The new duty will apply to all businesses which carry on any part of their business in the UK and which "supply goods or services" (essentially all trading companies and partnerships). Foreign companies may be caught by this as well as UK-incorporated entities.

Under Section 54 of the Modern Slavery Act, commercial organisations (companies or partnerships) must publish a statement annually that either: (1) details the steps taken by the commercial 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.

Section 54 is expected to come into force this month. It will only apply to commercial organisations within a certain turnover limit – the Government has said it intends to set that limit at £36 million (the size of a large company for the purposes of the Companies Act).

The Act does not specify exactly what a business should do in relation to supply chain transparency, and there is no prescribed form of transparency statement. However, the Act suggests that the statement 'may' include:

  • a description of the organisation's business model and supply chain relationships;
  • policies relating to modern slavery, including due diligence and audit;
  • training available and provided to those in 1) supply chain management and 2) the rest of the organisation;
  • the principal risks related to slavery and human trafficking including, how the organisation evaluates and manages those risks in their organisation and their supply chain; and
  • relevant key performance indicators.

The statement must be approved by the most senior officials in an organisation (e.g. the board of directors in a corporate body, or a partner in a partnership).

If the organisation uses a website, it must publish the report on that website and include a link to it in a prominent place on the website’s homepage.

If companies do not comply, they can be served with an injunction by the Secretary of State. In practice, we expect that campaigning organisations will "name and shame" those companies who do not comply.

Human rights issues, as well as supply chain transparency, are increasingly on the agenda for in-house counsel and risk managers. In the UK, listed companies must now report publicly on social, community and human rights issues to the extent necessary for an understanding of the development, performance or position of the company. And many companies have now signed up for voluntary commitments such as the Global Compact.