Shanta Martin and Emily Soothill discuss the new requirement for large businesses operating in the UK to produce an annual slavery and human trafficking statement

Last year we reported on the introduction of the Modern Slavery Act 2015 (the Act) and why it does not go far enough to protect victims of human trafficking. On 29 October 2015, the provisions of the Act entered into force.

As mentioned in our previous blog post, the Act includes a new requirement for large businesses operating in the UK to produce an annual slavery and human trafficking statement, setting out how they are preventing slavery and human trafficking taking place in their supply chains. Although similar to the California Transparency in Supply Chains Act of 2010 which entered into force in 2012, this is the first time that a country has introduced such a human trafficking reporting requirement.

The increased focus on supply chain transparency has followed a number of allegations in recent years of multinational corporations purchasing products produced by forced labour. In April 2015 migrant workers were reportedly being treated like ‘slaves’ in Spain when growing vegetables for sale in UK supermarkets and in December 2015 the Guardian published new allegations of global supermarkets selling shrimp peeled by slave labourers in Thailand. A recent study by the Ethical Trading Initiative also found that 71% of companies believe there is a likelihood of modern slavery occurring at some point within their supply chains.

So what types of businesses will be required to make a slavery and human trafficking statement? Basically all major companies and partnerships – whether supermarkets, retailers, technology brands, banks, accountancy firms or even law firms – that supply goods or services in the UK (wherever incorporated) and have an annual turnover of more than £36 million (including the turnover of any subsidiaries).

Businesses with a year-end of 31 March 2016 will be the first required to publish such a statement. Businesses will be expected to publish their statements as soon as reasonably practicable after the end of each financial year in which they are producing the statement. The Government guidance suggests that it should be within six months of the organisation’s financial year end. We can therefore expect the first statements to come out by September 2016.

The Act requires the slavery and human trafficking statement to be approved and signed by a senior person in the business. Who that person must be depends on the type of organisation:

  • for companies, the statement must be approved by the board of directors and signed by a director (or equivalent);
  • for limited liability partnerships, it must be approved by the members and signed by a designated member; and
  • for partnerships, a partner must sign it.

The annual slavery and human trafficking statement is required to set out the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place both in its own business, and also in any of its supply chains.

The Act does not prescribe exactly what the statement must include. However, it might include:

  • the organisation’s structure, its business and its 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 and capacity building about slavery and human trafficking available to its staff.

Businesses are also able to comply with the requirement by simply stating they have not taken any steps to ensure that slavery is not taking place in their supply chains. However, in light of the increased focus on modern slavery in the media and elsewhere, there are likely to be negative reputational consequences for any businesses that choose to adopt such an approach. This is particularly the case as slavery and human trafficking statements are required to be made publically available, including on the business’ website.

As is recognised in the Government guidance, “[i]t is important for large organisations to be transparent and accountable, not just to investors but to other groups including employees, consumers and the public whose lives are affected by their business activity”.

It is hoped that the publication of human trafficking statements will be an important accountability tool, allowing purchasers and civil society to monitor the steps that companies take to eradicate slavery in their supply chains.