Employers will soon be required to publish a modern slavery statement setting out how they protect against slavery in their supply chains. Jonathan Exten-Wright looks at how employers should respond to the new reporting requirement.
The Modern Slavery Act 2015 consolidates current offences relating to trafficking and slavery. It also criminalises aiding, abetting or procuring forced labour or human trafficking, or being an accessory to such offences.
Modern slavery resources
Visit our Modern slavery topic page for more details on reporting requirements and what should be included in the statements.
For UK nationals, the trafficking provisions have extraterritorial application – this means an offence is committed regardless of where in the world the arranging or facilitating of trafficking takes place.
And from October 2015, all businesses operating in the UK with a turnover of £36 million or more will need to make a slavery and human trafficking statement every financial year.
This must include “a statement of 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 chains” or that they “have taken no such steps”.
The turnover threshold is lower than previously expected, bringing more organisations within the scope of the reporting requirement.
This requirement is part of a continuing trend compelling businesses to address adverse human rights impacts of not only their own activities, but those of their entire value chain.
In this context, suppliers represent a particular challenge for companies. Adverse human rights impacts can occur at any level of a supply chain – from direct suppliers, all the way through multiple layers of sub-suppliers and sub-contractors, to those at the end of the chain that provide raw material inputs.
The requirements of the Modern Slavery Act mean that this is no longer about corporate social responsibility or brand protection; transparency through all those layers will now be a legal requirement.
Surprisingly, the Government only plans to issue non-prescriptive guidance on what a slavery and human trafficking statement should contain and this will only be issued at the same time as the legislation takes effect.
This makes it more difficult for businesses affected by the new legislation to be fully prepared. The indications given so far suggest that any statement may include information about:
- the organisation’s structure, business model and supply chain relationships;
- its policies and processes relating to modern slavery, including due diligence and auditing;
- training provided to those in supply chain management and the rest of the organisation;
- its principal risks related to slavery and human trafficking including how these risks are evaluated and managed both within the organisation and across its supply chain; and
- key performance indicators as measures to assess the effectiveness of what is described in the statement, with a view to showing progress year on year.
The statement must be approved by the board, signed by a director and published on the company’s website.
Making the statement
In terms of enforcement, the Act states that the duties can be enforced by civil injunction, but there is likely to be further information on this in the guidance.
The new legislation falls short of a “comply or explain” approach, but the majority of companies are likely to provide a statement of steps, rather than state that they have not taken any. The possible adverse PR impacts are likely to mean companies say more rather than less.
However, in addition to this, it is possible that ethical investment funds, for example, will decide not to invest in organisations that do not publish a full statement.
Arguably, the legislation allows a company to take a risk-based approach and provide a fuller report on some of their supply chains, and indicate that they have not looked at others, explaining why they have taken this approach.
While there will be some transitional provision (for example if a company’s financial year ends close to the date when the duty comes into force), businesses need to prepare urgently to ensure compliance, dealing not just with direct suppliers but throughout their supply chain.
Each business should tailor their response to their particular needs and those of their sector.
Although the guidance is not yet in place, steps organisations can take to prepare for implementation include:
- Reviewing the “UN Guiding Principles on Business and Human Rights“, which accompanied the UN’s 2011 launch of its “Protect, Respect, and Remedy” Framework and is the most comprehensive guide relating to how human rights issues are reported. The framework reflects “best practice” and was referred to by the UK Government when developing the Act.
- Reviewing their commitment to anti-slavery and trafficking, as well as any applicable human rights policies and procedures.
- Reviewing their risk profile to identify any potential pitfalls not just inherent in the company’s activities, but also its business relationships and supply chains. Also, organisations should look at the way the company does business in the light of any identified risks.
- Identifying specific “high-risk” geographies. This may be a sensitive exercise from a political perspective, and it may assist to use third-party sources (such as the Global Slavery Index) to support any particular selection and to avoid any implied criticism of a particular government or culture.
- Actively considering risk mitigation and management – including introducing new review mechanisms, audits, processes and procedures or reviewing those in place in relation to other risks (such as bribery and corruption); training employees in identifying issues related to slavery and trafficking; and reviewing standard terms with suppliers as a means of ensuring disclosure and compliance.
- Appointing someone at a senior level with overall responsibility for compliance.