Modern Slavery remains a high priority in the UK and across the world and it is receiving continued attention in the popular media. In this context, and given the moral imperatives, it is important that businesses are complying with their obligations and are aware of the developing UK Modern Slavery legislation and guidance. This means not only meeting their legal obligations but also considering what more they could or should be doing to meet customer expectations and protect (and potentially enhance) their reputation in this area.
Quick recap: the Modern Slavery Act 2015
In the UK, the Modern Slavery Act 2015 introduced a number of new offences, including for Slavery, Servitude and Forced or Compulsory Labour and Human Trafficking. Critically for many businesses, it also introduced a requirement for businesses with an annual global turnover of £36 million or more, that supply goods or services and that carry on part of their business in the UK, to publish an annual “Transparency in Supply Chain” statement (a so-called TISC statement).
This TISC statement needs to set out the steps that the organisation has taken over the previous financial year to ensure slavery and human trafficking is not taking place in its business and supply chains.
The geo-political climate
At the UN General Assembly, in September 2017, 37 member states (including the UK) ratified the ‘Call to Action to end Forced Labour, Modern Slavery and Human Trafficking,’ which requires members to implement international conventions on modern slavery, develop protocols and frameworks to prevent modern slavery, and develop and strengthen law enforcement and criminal justice in response to modern slavery. Theresa May took the opportunity to emphasise the UK’s international leadership in combatting modern slavery.
Consistent with the Prime Minister’s statement to the UN, the UK government’s modern slavery agenda has become a unifying point of principle in a divisive political climate and the government has committed to driving its policies further. At the UN General Assembly, Theresa May announced that the UK will host an international summit of chief prosecutors in the spring of 2018 to discuss an internationally coordinated response to modern slavery. She said that the UK would double its aid spending on modern slavery to £150m and that the UK was committed to training specialist investigators and police officers to develop the expertise to prosecute modern slavery offences (though questions are still being raised about the consistent effectiveness of the police in spotting modern slavery and reacting appropriately to it).
UK prosecution of modern slavery offences
The UK has seen a large jump in the number of prosecutions under the Modern Slavery Act, from 12 in 2015 to 51 in 2016. A number of the successful prosecutions have demonstrated the potential risks for businesses, for example:
- In January 2016, three men were jailed for modern slavery offences relating to the operation of a factory in the North of England. The factory supplied beds to a number of high street retailers.
- In June 2016, DJ Houghton Chicken Catching Services was ordered to pay compensation to six trafficked Lithuanian nationals.
- In January 2017, two men were jailed for trafficking 18 Polish nationals to work for a large high street retailer.
Obviously, companies with potential exposure to offences under the Modern Slavery Act need to ensure they are acting within the law. However, while some companies will have direct exposure, the focus of the vast majority will be on the requirement to make a TISC statement. It is vital that otherwise law abiding businesses comply with their obligation to make a TISC statement to avoid being tarred with the same brush as those prosecuted for Modern Slavery Act offences.
Despite the high profile of modern slavery and the increasing prosecutions, there is evidence that some companies are still not doing all that they could to meet their legal requirements, protect their reputation and meet the ethical standards of good corporate citizenship. A recent Walk Free Foundation Modern Slavery Survey found that only 25% of businesses surveyed had reassessed their supply chain since the introduction of the Modern Slavery Act, 55% did not have modern slavery questions on their new supplier assessment questionnaires and only 60% were confident that their supply chain was fully compliant. Interestingly, 82% of employees questioned wanted senior management teams to do more to enforce compliance with the Modern Slavery Act and only 65% thought their company’s policy had been communicated clearly internally.
As public awareness and expectations increase, companies are under increasing pressure to protect their reputations by scrutinising their business and supply chains effectively and ensuring top-down commitment to the issue from senior management.
Proposed changes to the Modern Slavery Act and accompanying guidance
The legal position is not static either. The scope of the Modern Slavery Act and the guidance around it is continuing to develop. The UK government is now consulting on legislative changes to the Modern Slavery Act and updated guidance for organisations making TISC statements has recently been introduced.
The potential legislative changes include:
- extending the obligations imposed by the Modern Slavery Act to public bodies;
- requiring the Secretary of State to publish a list of all commercial organisations that are required to publish a transparency statement; and
- the ability for contracting authorities to exclude ‘economic operators’ from participation in public procurement where the economic operator has not prepared a transparency statement.
These changes will be of particular importance to companies that take part in public procurement procedures, where failure to comply with the requirement to publish a TISC statement could result in exclusion from a lucrative procurement. Notably, the changes also mean it will become easier to see whether a company is required to publish a transparency statement, and whether it has done so. This may help some multinational companies who carry on part of their business in the UK and have had to interpret the imprecise wording to determine whether, and at what level, they have an obligation to make a statement.
The Home Office has also recently published further guidance entitled, ‘Transparency in Supply Chains etc. A Practical Guide.’ The changes in the guidance include:
- encouraging smaller organisations (those with a turnover of less than £36 million) to make a TISC statement voluntarily;
- setting out best practice on the structure of TISC statements (organisations should now “aim to include” the items set out in section 54(4) of the Modern Slavery Act);
- confirming that it is best practice for the director who signs the TISC statement to sit on the board that approves the statement and for the statement to include the date on which it was approved; and
- encouraging organisations to make historic TISC statements accessible so that the public can compare statements and monitor progress.
Osborne Clarke had worked with the International Chamber of Commerce to push the government to clarify areas that have been of consistent concern to our clients, including greater clarity on the meaning of “carrying on business in the UK” and specifically whether, as currently worded, parent companies are judged to be doing so if the UK subsidiary is not acting “completely independently of its parent or other group companies”, and how far up the chain the obligation then goes. Unfortunately, this has not been addressed in the current update.
Modern Slavery remains a hot topic both internationally and domestically in the UK. Even for those not at risk of committing the primary offences, the reputational damage that can be suffered as a result of failure to make an appropriate TISC statement can be severe.
In its updated guidance, the Government makes plain that it wants the public, investors, the media and other external parties to be able to scrutinise progress made by organisations, and to ‘call out’ perceived failures. The intention is to push companies to use their power within their sphere of influence to improve the situation worldwide, and to do so not by threatening legal action but by putting at risk their reputations if they fail to do so. As many companies will now recognise, this means it is no longer just or even mainly a question of legal right or wrong but more substantively a commercial and ethical question for the business.