For the aviation sector, modern slavery (covering slavery, servitude, forced and compulsory labour and human trafficking) could be a major supply chain issue, particularly in relation to the providers of ancillary services such as catering, cleaning and ground/baggage handling in countries with more challenging labour environments.
Rules implemented in October 2015 require companies with a turnover of GBP 36 million or more to produce a “slavery and human trafficking statement” at the end of each financial year.
The rules apply to businesses with a year end of 31 March 2016 or later and the statement should be published as soon as possible (and in practice within six months) after the year end. The statement must be published on the organisation’s website with a link “in a prominent place” on its homepage.
Which organisations must comply?
Any company which carries on a business in the UK, or part of a business in the UK, supplies goods or services and has an annual turnover of GBP 36 million or more. A company’s turnover is determined by combining the turnover of its subsidiaries with its own. Any UK subsidiary which meets this threshold must also produce its own statement. These parameters will capture almost all airlines operating within the UK as well as many aviation service providers.
What must the statement contain?
In short the organisation must state:
- The steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains or any part of its own business (including its foreign subsidiaries)
- That the organisation has taken no such steps
- There are no further compulsory requirements regarding the content of the statement. The only penalty is for failure to produce one at all, in which case the organisation can be compelled by Court order to do so.
What might the statement contain?
The new rules give non-compulsory examples of what a statement may contain information on, for example:
- The organisation’s structure, business and supply chains – Its policies in relation to slavery and human trafficking
- The parts of its business and supply chains where there is risk of modern slavery taking place and what steps have been taken to assess and manage that risk
- The training on modern slavery available to staff
Additionally, the government has released guidance on the preparation of a statement, suggesting, amongst other things, that an organisation disclose information on:
https://www.gov.uk/government/uploads/system/uploads/ attachment_data/file/471996/Transparency_in_Supply_ Chains_etc_A_practical_guide_final_.pdf
The guidance is not compulsory and there is no legal penalty for non-compliance. However, it is clear that the Government expects consumers, investors and NGOs to engage and/or apply pressure where they believe the business has not taken sufficient steps. The real risk to airlines is therefore in being named and shamed by pressure groups or media organisations for not producing a sufficiently clear statement or, worse, evidence being uncovered inconsistent with the information in the statement. Parallels can be seen in relation to the reputational damage caused to retailers following the exposure of poor working conditions of garment producers in Indonesia.
Similar rules are in place in California where the NGO “KnowTheChain” has already engaged in public shaming exercises. The London and New York-based Business and Human Rights Resource Centre has also been active in approaching non-compliant organisations under the Californian regime and is very likely to turn its attention to businesses who fail to comply with the spirit, or letter of reporting requirements under the new UK rules.
What companies should do next
Organisations subject to the reporting requirement will need to ensure their slavery and human trafficking statement is underpinned by appropriate and proportionate action that is defensible in the face of scrutiny and criticism from inside and outside of the organisation.
Procurement policies should address modern slavery, and organisations should ensure that they have contractual protections in supply contracts; clear labour and whistleblowing policies; and consistent messaging throughout the supply chain. However, for those organisations operating in high risk jurisdictions, enhanced due diligence and the implementation of more stringent preventative measures will undoubtedly be required.