Supply chain transparency reporting under the Modern Slavery Act is set to enter a new phase this Spring when the Home Office carries out its first ever compliance audit.

The Home Office first announced the audit in October 2018, publicising the fact that it planned to write directly to the chief executives of 17,000 businesses "telling them to open up about modern slavery in their supply chains, or risk being named as in breach of the law". The letters themselves explained that the Home Office's records indicate that the recipient business is in scope of the legal requirement to publish a supply chain transparency statement, and that it would be carrying out an audit of statements from 31 March 2019. Following the audit, a business risks being included in a published list of non-compliant businesses if it has not published a statement by that date or if its statement is no longer up to date.

The Modern Slavery Act takes a "name and shame" approach to compliance. There is no statutory penalty for failure to publish a statement, though the Government could seek an injunction (failure to comply with which could attract a significant fine), though it has not taken legal action against any business so far. However, as expected, NGOs, charities and the press are keen to expose instances of modern slavery and trafficking, particularly where there is a supply chain link to the products sold to UK consumers by the country's biggest businesses.

What will the Home Office audit look like? Last month, the Home Office again wrote to businesses, to remind them of the upcoming audit. The word "audit" can strike fear into many, but it is most likely that the Home Office audit will be a desk-based exercise in which it checks that each in-scope business has complied with the mandatory legal requirements, being:

  • a statement must be published for each financial year
  • the statement must be approved by the board and signed by a director
  • the statement must be published on its website (if it has one) with a prominent link on the homepage.

Of course, businesses are judged by NGOs, charities, the press and others on the detailed content of their statements, and the actual steps they are taking to tackle any risks of slavery and trafficking in their supply chains, but the Home Office audit is more likely to focus on the legal minimum requirements set out above.

The Home Office has indicated that it intends to communicate directly with businesses who do not meet the legal minimums, essentially giving them the opportunity to fix any deficiencies. Only after that will the Home Office consider publicising that a business is non-compliant, or taking enforcement action in the courts.

How best to prepare for the audit some tips

  • Check your statement is up to date: The Home Office advises that statements should be published within six months of the financial year end. For example, for businesses with a 31 December year end, provided the audit take places before 30 June 2019, the Home Office will be looking for a statement for the 2017 financial year (though of course some businesses may already have published their statement for 2018).
  • Check that each group company that is in-scope is covered by a statement: groups have the flexibility to publish a statement which covers more than one group company (provided that the statement does set out what each company is doing to tackle slavery and trafficking). The Home Office has recently confirmed that it is sufficient for a statement to list all of the companies covered, and to be approved by the board of the parent or group company that prepared the statement only.
  • Check for board approval and signature: to demonstrate compliance, statements should clearly state the date of board approval, and should also indicate which director signed it and when (though there is no need to show an actual signature on the version published online).
  • Check your website: to ensure that there is a prominent link on the homepage of each company covered by the statement.