Corporate briefing: larger companies will soon have to report on steps they are taking to prevent slavery and human trafficking – a duty that is likely to affect any business within their supply chain

On 29 October 2015, s 54 of the Modern Slavery Act 2015 was brought into force. It imposes an obligation on larger businesses to publish an annual “slavery and human trafficking statement”.

A similar obligation has been introduced in other jurisdictions, but the UK’s version is quite broad in comparison. It covers both goods and services (other systems restrict their regulations to the suppliers of goods only), and is not sector specific. It also extends to any organisation which carries on a part of its business in the UK, and there is no requirement that the turnover threshold is all within the UK part of the business.

This new obligation currently applies only to those with an annual turnover (including subsidiaries) of £36 million or greater for financial years ending on or after 31 March 2016. The statement comprises: “(a) a statement of the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place– (i) in any of its supply chains, and (ii) in any part of its own business, or (b) a statement that the organisation has taken no such steps”.

What’s the point?

It may initially seem unclear what the point of all this is, as a company can simply state that it has taken no steps, and it has complied with s 54. There are no tough penalties in place yet for failure to comply – the Act simply provides that the Secretary of State may bring proceedings for specific performance, and it is not clear whether that is something that will be regularly used.

However, the real penalty is publicity. Section 54 sets out an explicit requirement that the statement is published on the organisation’s website with a link to it on the home page. For any business with a reputation worth protecting, especially those which are high profile or deal with consumers, a statement saying no steps have been taken (or the absence of a statement altogether) will just not cut it.

The content

Therefore, it seems that businesses are to be shamed into doing something about it. At an internal level in low risk sectors, that might be as simple as introducing a policy or delivering some training. However, the statement also applies to supply chains and foreign arms of the business, which might be less straightforward. The Act suggests that a business should include “its due diligence processes in relation to slavery and human trafficking in its business and supply chains”, and goes on to mention measuring the effectiveness of steps taken. These items are much more onerous.

Steps already being taken by organisations include: introducing policies and training, specific clauses in contracts with suppliers, due diligence questionnaires prior to engagement, obligations on suppliers to use the same process/policies for their suppliers, and stricter controls on subcontracting. It is prudent that such measures be taken now, as the relevant financial year for the first statutory statements has already begun for many.

Smaller businesses should also take note, especially if they have larger customers. If they form part of a qualifying company’s supply chain, it is inevitable that these provisions will filter down to them in practice.

Scotland aims high

These reporting obligations are merely the tip of the iceberg with this new wave of legislation. It is a practical approach which will hopefully produce results, but there is also long-awaited modernisation of the criminal offences. The Scottish version is set out in the Human Trafficking and Exploitation (Scotland) Act 2015, which is not yet fully in force.

In addition to introducing the more useful and broad definitions of crimes such as human trafficking (which the UK Act similarly does for England & Wales), the Scottish Act further includes a number of provisions for the protection and support of victims of such crimes. It also sets out a requirement for the Scottish ministers to prepare a strategy in this area to improve awareness, enforcement and prevention of trafficking and exploitation.

The placing of responsibility on businesses to be seen to be combating such serious issues is a growing trend, with further similar provisions in relation to broader human rights expected soon. Although further reporting burdens are often bemoaned by industry, the goals of this particular burden must surely outweigh any inconvenience caused.

The Author
Alison Marshall, partner, CCW Business Lawyers Ltd
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