The Modern Slavery Act received Royal Assent last year and was designed to tackle slavery in the UK whilst also consolidiating previous legislation concerning trafficking and slavery. Kellie Jones takes a look at what the provisions of that Act mean for retailers.

Annual Statement from all Large Businesses

A key provision of the Modern Slavery Act ("the Act") is the requirement that all businesses that trade in the UK with a turnover of over £36m publish an annual statement disclosing the steps they have taken to ensure that slavery or forced labour and human trafficking are not taking place in their business or supply chains. The Act applies to forced labour at any point in the supply chain, including acts that would not constitute an offence in the country they are carried out, but would constitute an offence in the UK.

This requirement will apply to any organisation with a sufficient annual turnover carrying on business in the UK; it does not matter where that organisation is incorporated or has its headquarters. If a foreign organisation carries on a business or part of a business in the UK and meets the £36m turnover threshold, it is likely that the Act will apply. A foreign parent company with a UK subsidiary is not covered by the Act if the UK subsidiary acts completely independently of the parent and other group companies but in those circumstances, the UK subsidiary would be caught. It is important to note that the £36m annual turnover threshold is not limited to turnover in the UK. Turnover for the purposes of the Act is calculated by reference to the organisation's business activities anywhere in the world, this means that foreign businesses with substantial global operations could be caught even though they do relatively little business in the UK.

Given the reputational risks to a retailer of failing to publish an annual statement, if a retailer is in doubt whether it passes the appropriate threshold, it is probably worth preparing an annual statement in any event. The annual statement should appear on a company's website and recent press coverage would suggest that retailers' annual statements are being scrutinised by their customers, pressure groups, trade organisations and/or the media.

What should the annual statement contain?

The Act specifically states that the statement must include details of the steps the organisation has taken during the financial year to ensure that slavery and human trafficking do not take place in any of its supply chains, and in any part of its own business. The provision requires an organisation to be transparent about what is happening within its business. This means that if an organisation has taken no steps to ensure slavery and human trafficking is not taking place then it should still publish a statement stating this to be the case. Although there are no criminal or financial penalties for non-compliance, this is likely to be picked up on by its customers and the media and affect a business' ethical reputation. From the statements already produced, it is clear that many businesses are taking a similar approach, using codes of conduct which are extended to their suppliers and any sub-contractors in the supply chain.

Why should retailers be concerned?

The Act is an issue particularly for retailers because it applies to forced labour at any point in the supply chain. Often retailers do not have full control over their supply chains, with elements being contracted out to suppliers or contractors throughout the world and it can be very difficult to carry out the necessary due diligence. Retailers will need to consider very carefully the measures they can put in place to check the practices employed by their supplies and to demonstrate compliance with the Act.