The Crown Prosecution Service has embarked on a new enforcement push in respect of the Modern Slavery Act 2015 (‘the Act’) reporting a 27% rise in the number of charges brought against businesses suspected of modern slavery offences last year. With the Act currently under a Government-commissioned review, this trend looks set to continue into 2019. Tech companies with international supply chains and particularly where raw materials are involved should vet their supply chains to ensure compliance with the Act, and those in the gig economy who say, link customers to third-party suppliers need to evaluate their indirect supply chains.
How to be compliant with the Act
Under Section 54 of the Act, all UK commercial organisations with an annual turnover of £36 million or more are required to produce a Transparency Statement disclosing the details of how they comply with the Act by ensuring that modern slavery is not taking place in their supply chains. The Act also applies to companies incorporated overseas if they supply goods or services in the UK.
In July 2018, the Home Secretary, at the request of the Prime Minister, announced an independent review of the Act. The members of the review (Frank Field MP (chairman), Maria Miller MP and the Baroness Butler-Sloss) produced their first Interim Report in December 2018.
The report revealed that statements varied significantly in detail and quality. Under the Act, businesses have flexibility on how to report. We recommend the following approach:
- in preparing the annual Transparency Statement it should be recognised that it is an evolving document that demonstrates year-on-year improvements to supply chain risk management. Statistics should be used to capture such progress, for example, the number of investigations conducted and the number of suppliers vetted
- the process should be underpinned by a supply chain risk assessment (both sector and company specific) detailing the policies the company has in place to prevent forced or trafficked labour
- responsibilities should be clearly defined and assigned to members of staff. Who is responsible for the risk management strategy? Who is responsible for the reporting method? To whom should whistleblowing claims be reported?
- reporting incidents - any non-compliant supply chain issues should be disclosed together with details of how those issues were rectified
The Act requires the Transparency Statement to be approved at a board meeting of the organisation and signed by a Director. The Transparency Statement must then be published on the organisation’s website accessible to all.
As part of their compliance programme, Tech companies should include in their contracts prohibitions on the use of forced or trafficked labour as well as requirements on suppliers to comply with applicable laws and policies. Such clauses could be included as supporting evidence in the Transparency Statement.
Reputation and ethics
We are now entering the fourth year of transparency reporting and the Home Office has shifted its focus from compliance to enforcement, with the expectation that businesses should be making progress in this area of law which can no longer be said to be “new”. As consumer demand for ethical supply chains and focus on corporate & social responsibility within organisations increases, the tech sector must be alive to the risks of reputational damage if they fail to comply with the requirements of the Act.