Executive summary
A new duty on larger businesses to publicly report steps they have taken to ensure
their operations and supply chains are trafficking and slavery free will be implemented
from October 2015. By driving up transparency, the expectation is that modern slavery
will be tackled with greater urgency.
The duty applies to companies incorporated in-and outside the UK, providing they
carry on part of their business in the country. While legal penalties for breach are
limited, businesses should expect campaigning pressure groups to monitor their
compliance, with the associated reputational risks.
To comply, businesses are expected to report annually on policies, training, due
diligence processes and the effectiveness of measures taken to combat modern
slavery and trafficking. The annual report must be signed and approved at the highest
level in the organisation and made accessible on the company’s website.
Disclosure time
How to respond to the
Modern Slavery Act
What is slavery and trafficking?
Modern slavery is a term used to encompass slavery, forced
and compulsory labour and human trafficking. A common
example arises where migrant workers take loans to pay for
their travel to another country to work, or to pay fees to a
recruitment company, with a view to repaying the money
from their earnings. They become trapped in ‘debt bondage’
as other sums are added to the loan while they work, such
as accommodation and transport costs, exceeding their
capacity to make repayments. In addition, their passports
are often withheld. Agriculture, construction, hospitality
and manufacturing are the sectors frequently cited as using
forced labour.
Why is modern slavery an issue for the
business world?
Slavery permeates aspects of the legitimate economy.
Reputable businesses may be satisfied that their own
operations are slavery-free, but are less clear about their
supply chains and other business relationships such as
franchises, out-sourcing partners and joint-ventures. In
the financial sector, criminal proceeds can be unwittingly
facilitated.
What is the new disclosure duty under the
Modern Slavery Act (‘Act’)?
Commercial organisations supplying good or services and
having a minimum total turnover of £36 million will be
required to prepare a slavery and human trafficking statement
for each financial year. A ‘commercial organisation’ includes
partnerships and a body corporate, wherever incorporated,
which carries on a business, or part of a business, in the UK
(not just UK incorporated businesses).
Why should businesses take action?
Slavery has a devastating impact on individual victims. But
it also affects those businesses caught up in increasingly
high profile media and online campaigns alleging slavery
and human rights abuses. Businesses are under increasing
pressure to take action. These pressures include:
––reputational, including the push from governments and
stock exchanges for greater corporate transparency on
human rights, such as the Modern Slavery Act disclosure
duty
––legal, including the risk of litigation, complaints to the
OECD and breaching ethical procurement terms
––financial, reflecting investor and customer sensitivities
and increasing demands for CSR performance data as
part of tendering processes
––operational, arising from labour disputes and
disruption to supply chains.
What should be included in a slavery and
human trafficking statement?
The statement must set out 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 chain and in any part of its own business, or, a
statement that it has taken no such steps. It must be
approved by the board or equivalent management body,
signed by a director or equivalent (eg the general partner
in a limited partnership) and be published prominently on
the organisation’s website. The Act sets out areas which
“may” be included in the annual statement and statutory
guidance will provide more detail on these areas. The
suggested areas are:
––information about the organisation’s structure, its
business and supply chains
––the organisation’s policies relating to modern slavery
––its due diligence processes in relation to slavery and
trafficking in its business and supply chain
––the parts of the business where there is a risk of modern
slavery and the steps it has taken to assess and manage
that risk
––its effectiveness in ensuring that modern slavery
is not taking place, measured against appropriate
performance indicators
––training available.
Understanding the law
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Transparent freedom
Responding to disclosure and the Modern Slavery Act
When do businesses need to publish a
slavery and trafficking statement?
The government’s aim is to commence the disclosure duty
in October 2015. It also intends to implement transitional
provisions to give businesses sufficient time to prepare, where
the financial year end is within close proximity to October.
Further details are awaited. However, all indications are that
businesses need to prepare now, given current timelines.
What are the penalties for failing to publish a
slavery and trafficking statement?
There are limited penalties for non-compliance (the disclosure
duty is subject to enforcement by the Secretary of State by
injunction, which seems unlikely) and the assumption is that
pressure groups will target businesses, particularly consumer
brands, in vulnerable sectors and subject them to reputational
campaigns to force annual disclosure. The government has said
that it may ‘name and shame’ businesses which drag their heels.
How does the Act compare with other
human rights disclosure duties?
A similar disclosure provision was introduced in California
in 2012 with a higher threshold ($100m). The UK Act goes
further, covering:
––organisations carrying out any part of their business in the
UK (no minimum ‘footprint’)
––all sectors, not just retail and manufacturing
––both goods and services (not just supply chains for goods).
Next year, the UK Companies Act will be amended to
strengthen current corporate duties to report on human
rights, not just slavery and trafficking, in strategic reports.
Globally, the UN Guiding Principles (‘UNGP’) expect
companies to ‘know and show’, through human rights
reporting, how they prevent and address salient adverse
human rights impacts.
Seeing the Modern Slavery Act holistically in this way should
avoid the need for piecemeal responses that need revisiting
at a later date. Some businesses may decide to adopt the
UNGP Reporting Framework to ensure a broader, consistent
approach to human rights reporting in an effort to meet
a number of new stock market and national human rights
transparency measures, including the Act.
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Responding to disclosure and the Modern Slavery Act
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Moving forward:
a practical roadmap for taking action
Viewing modern slavery disclosure as a
compliance issue, not a voluntary ‘addon’,
and engaging top-level leadership
are instrumental to achieving progress.
Taking the first step is also important for
those struggling to know where to start
given the breadth of issues involved.
This page has a summary roadmap to
help signpost the way forward for those
without prior experience of human
rights or CSR reporting:
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Identify key support: top-level
commitment is essential.
Decide whether to focus on slavery
and trafficking or broader human
rights (see above).
Assign responsibilities: the team
may need to be cross-functional.
Address funding, including
training costs as a minimum. Risk assess to determine where the risk of modern
slavery and trafficking lies in the organisation and
supply chains and to define the area of focus.
Consider, for example:
–– what the company is already doing
–– official data on high risk geographies, activities,
sectors, products and services
–– stakeholder information including employee
engagement
–– the likelihood and severity of the risk.
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Responding to disclosure and the Modern Slavery Act
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Develop and implement a modern
slavery (or broader human rights)
policy, if none exists.
Disseminate the policy and provide
targeted training.
Act on the risk assessment: take steps
to stop or prevent actual or potential
modern slavery and trafficking in the
company’s own operations. Where
modern slavery is directly linked to
the company through its supply
chains, it should seek to prevent it
happening or mitigate its effects. Some typical steps which may be
appropriate when taking action, depending
on the organisation:
–– train employees on how to spot, and
respond to, the signs of modern slavery
and trafficking and the disciplinary
penalties for non-compliance
–– develop a supplier code of conduct
including slavery and trafficking
standards, require suppliers to self-certify
compliance with the code in commercial
agreements, map supply chains and
identify high risk suppliers for site visits,
audits, improvement plans and training
(or potentially ending the relationship),
consider financial or legal incentives to
improve supplier behaviours as well as
collaborative problem solving (eg where
companies act together or with NGOs to
tackle systemic supplier issues)
–– conduct proper checks on agencies who
supply labour
–– provide whistleblowing and grievance
mechanisms, including to outsourced
labour.
Track the effectiveness of steps taken
to combat slavery and trafficking.
Consider remediation where the
company has caused or contributed
to modern slavery or trafficking – this
might include apologies, compensation
or more practical measures.
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Responding to disclosure and the Modern Slavery Act
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Eversheds International is an international legal practice,
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EHRG.1093 08/15
eversheds.com
Thomas Player
Partner
+44 29 2047 7574
Tamsin Wallace
Senior Associate
+44 29 2047 7734
How Eversheds can help
Our legal and consultancy experts provide practical and
strategic services:
––design and deliver bespoke training, including briefing
senior management
––draft policies and codes of conduct
––advise on changing supplier and procurement terms and
conditions
––conduct a risk assessment providing a heat map of modern
slavery, or broader human rights, exposures
––carry out risk-based interviews with key stakeholders
––produce a report with key recommendations and
implementation options
––create and implement internal monitoring methodology,
including key performance indicators
––review your internal and external reporting and assurance
models.
Transparent freedom
Responding to disclosure and the Modern Slavery Act