The UK Government has recently implemented new legislation to help eradicate slavery and human trafficking (modern slavery). The principal provisions of the Modern Slavery Act 2015 (“Act”), implemented in March 2015, penalise those who are directly involved in modern slavery and aim to protect victims. The Act also contains new enforcement powers, including the creation of an Independent Anti-Slavery Commissioner.
In addition to these “direct” actions to eradicate modern slavery, the Act also aims to encourage companies to scrutinise their end-to-end supply chains to ensure that slavery and human trafficking is not present in their business operations. The main way in which it does this is by means of a new corporate reporting obligation, which says that all companies that: (i) supply goods or services; operate all of part of their business in the UK; and have a turnover in excess of £36 million, must produce an annual slavery and human trafficking statement for each financial year. The turnover threshold relates to those entities in the relevant company or group of companies that conduct business in the UK.
What needs to go into the statement?
Statements must set out all the steps that a company has taken over the last financial year to ensure that slavery and human trafficking are not present in its business and throughout its supply chain. If the company has not taken any steps to eradicate modern slavery in its business and supply chain, it must say this in the statement.
The Government is not prescriptive about what should be included in the statement, although the legislation and associated guidance suggests that the following areas should ideally be included:
- A brief description of an organisation’s business model and supply chain relationships.
- Policies relating to modern slavery, including due diligence and auditing processes.
- Training available and provided to supply chain management and the rest of the organisation.
- The principal risks related to slavery and human trafficking, including how the organisation evaluates and manages those risks in its organisation and its supply chain.
- Relevant key performance indicators (KPIs). According to Government guidance, this might include:
5.1 information about the steps an organisation has taken to ensure that business-related KPIs do not impact negatively on issues relating to modern slavery. For example, focus on KPIs to increase production, shipment or turnaround speed could unintentionally increase pressure on those who are producing the goods, creating environments that are vulnerable to modern slavery (for example bonded labour); and/or
5.2 KPIs that have been specifically introduced to measure the performance of any anti-slavery actions undertaken by the business.
There is no obligation to introduce any of these measures, however companies should ensure that they do address all relevant steps taken by them.
How should the statement be presented?
The Government has published guidance on producing the statement, including the following top tips:
- Keep the statement succinct but cover all relevant points, with links to relevant publications, documents or policies if possible.
- Use simple, accessible language.
- write the statement in English. However, it can also be provided in other languages, relevant to the organisation’s business and supply chains.
- Specify actions by specific country, to help readers to understand the context of any actions or steps taken to minimise risks.
The statement needs to be approved by the company’s board of directors and signed by a director.
Where should the statement be published?
Companies must publish the statement on their website, with a prominent link to it on their homepage.
For companies that have more than one website, the statement should be published on the site that is most relevant to the organisation’s business in the UK. If there is more than one relevant website, a copy of the statement or a link to the statement should be made available on each relevant website.
When should the statement be published?
The requirement for certain organisations to publish a statement came into force on 29 October 2015. However, the Government has allowed additional time for organisations to understand the requirements and produce a statement. As such:
- Businesses with a financial year-end date between 29 October and 30 March 2016 will not be required to publish a statement for that financial year of the organisation.
- Businesses with a year-end of 31 March 2016 or later will be required to publish a statement for their 2015-16 financial year, covering the full financial year of the organisation. It is accepted however that some organisations may only recently (e.g. since the implementation of the law) have undertaken steps to eradicate modern slavery in their supply chain and this can be indicated in the statement.
In future years, companies must ensure that their statement is published “as soon as reasonably practicable” after a company’s financial year-end. Statements may be published alongside other annual reports. Government guidance has indicated that in all cases, the Government recommends that statements are published within six months of a company’s financial year-end.
What will happen if my Company fails to produce a statement?
If a company fails to produce the statement, the Secretary of State can seek a court injunction which would require it to comply. If the company still fails to produce a statement, it could be found to be in contempt of court, which can result in an unlimited fine.
The Act does not oblige companies to take active steps to eradicate slavery and human trafficking from their supply chain or their business. It simply obliges companies to be transparent about what if any steps have been taken to ensure the same.
The minimum standard to ensure compliance is a short basic statement and the statement may even say that no steps have been taken or that investigations have just begun. However, while it is legal to publish a statement saying that no steps have been taken, there may be industry and/or consumer pressure on companies to assess the risks in their supply chain and take active steps to address modern slavery.