The Modern Slavery Act 2015 will require organisations with turnover of at least £36 million and operations in the UK to publish an annual ‘slavery and human trafficking statement’. As these organisations scrutinise their business and supply chains, smaller organisations may also feel an impact. Organisations should start to prepare now for this new disclosure obligation, particularly those with a year end of 31 March 2016 who are likely to be the first to have to comply.

Application and requirements

What are the requirements?

A slavery and human trafficking statement must be published each financial year setting out what steps the organisation has taken to ensure that its business and supply chains are free of modern slavery.  The statement must be published on the organisation’s website together with a link to it in a ‘prominent place’ on the home page.  Those that do not have a website must provide a copy of the statement within 30 days of receipt of written request for one.

The Act provides high-level statutory guidance on the contents of the statement but does not otherwise require affected organisations to take any particular action or to meet any particular standard.  However, the statement must be approved at the highest level within the organisation which, in the case of corporates, means that it must be approved by the board and signed by a director.

Technically, an organisation would comply with this new disclosure requirement by publishing a statement that no steps have been taken.  But such an approach risks attracting negative stakeholder and media attention which may jeopardise both the organisation’s reputation and profit.

What is modern slavery?

The Act sets out offences of slavery/servitude, forced/compulsory labour and human trafficking.  The offence of slavery or forced labour is committed where a person holds another person in slavery – or requires them to perform forced labour and, in each case, the circumstances are such that the person knows or ought to know that the other person is held in slavery or is required to perform forced labour.  The offence of human trafficking is committed where a person arranges or facilitates the travel of another person (whether that person consents to such travel and irrespective whether they are an adult or a child) with a view to that person being exploited.

Who will be affected?

Commercial organisations (bodies corporate and partnerships and wherever incorporated or formed) that carry on a business or part of a business in the UK supplying goods or services and have an annual turnover (including that of its subsidiary undertakings) of at least £36 million will have to publish an annual slavery and human trafficking statement.  There is no requirement for organisations to have a certain level of activity in the UK before the Act applies.

Smaller organisations that do not satisfy the turnover threshold are not required to publish a statement, but may also be affected.  This will be the case where they form a part of the supply chain of a larger organisation that is required to publish a statement and who are therefore likely to scrutinise afresh their business and supply chain by, for example, conducting additional and on-going due diligence and/or seeking specific assurances from its supply chain.

When will the provisions apply?

At present this is unclear.  Additional Governmental guidance is awaited that should provide the necessary clarity but, in the meantime, it is anticipated that organisations with a year end of 31 March 2016 will be the first to have to comply.

Checklist for businesses

Below is a checklist of some of the steps that organisations should consider to prepare themselves for the introduction of this new disclosure obligation.

Initial preparatory steps

  • Identify which organisations within the group structure satisfy the turnover threshold and how many statements should be prepared.
  • Conduct a risk assessment to determine which parts of the business and which of its supply chains (particularly if there are a large number) are most at risk of modern slavery. This should include a review of any existing compliance policies, contractual provisions and supply chain relationships.
  • Commence an information-gathering exercise to understand what steps, measures and/or policies have been taken or are in place to ensure against modern slavery and what is already publicly disclosed in this respect.
  • Determine what further actions and resources are required to prevent, monitor and mitigate against any risks that are identified in the business and/or its supply chain.
  • Appoint a team with responsibility for gathering the information required for the statement, drafting the statement and managing its approval and publication.
  • Be prepared to engage with interested stakeholders following the publication of the statement including delivering extra training for public relations and communications teams and/or the preparation of FAQs.

On-going steps

  • Put in place internal policies and deliver consistent messaging throughout the business’ supply chain.  For example, roll out training to staff, local suppliers and agents, ensure that the organisation has appropriate whistleblowing procedures and nominate individuals within the organisation responsible for compliance going-forward.
  • Depending on the sector and countries in which the business operates, consider enhanced due diligence and supplier pre-screening when dealing with new suppliers and, where applicable, ensure that clear procurement policies are in place.
  • Ensure that, going-forward, whether during contract tendering or renewals, supply contracts contain adequate contractual protection including warranties, reporting requirements and audit rights.  Ensure that these areas are the subject of enhanced diligence and warranted on future acquisitions.
  • Consider introducing site inspections to the extent not already undertaken.