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Big business and modern slavery: new requirements for organisations

Introduction

The Modern Slavery Act 2015 (the “Act”) is a sweeping project to crack down on modern slavery practices, both within the EU and beyond. As well as consolidating the current offences of slavery and human trafficking, introducing new civil preventative measures, establishing the office of Anti-Slavery Commissioner and introducing measures to support victims, the Act also imposes annual reporting obligations on organisations above a certain size. This will have far reaching consequences for the commercial arrangements of many businesses with activities in the UK. This part of the Act is not expected to come into force until October 2015; however, all organisations would be advised to begin considering how they can achieve compliance with the Act.

THE REPORTING OBLIGATION

The Act imposes the requirement on organisations with a certain level of turnover to prepare a report in relation to slavery and human trafficking within its supply chain. The intention behind this is to encourage organisations to take more action as a result of increased pressure from stakeholders and competition between businesses. The statement must be approved by the board and signed by a director and included on the organisation’s webpage, with a prominent link to it. Organisations will be able to consolidate statements between a parent company and its subsidiaries. The statement must either set out the steps the organisation has taken to ensure that there is no slavery or human trafficking in its business and supply chains, or state that no such steps have been taken. The Act suggests that the statement may include, amongst other things, information as to the organisation’s structure, business and supply chains, its policies in relation to slavery and human trafficking and the steps taken to assess and manage the risk of slavery and human trafficking.

THE SCOPE OF THE ACT

In a climate of increasing expectations on businesses to protect human rights, the Act is aimed at larger businesses with the resources to undertake due diligence on its suppliers and which have the power to exert influence on their supply chains and in turn to impact the smaller businesses within their supply chains. Whilst the Secretary of State has not yet determined the level of turnover for organisations to be caught by the Act, by way of comparison, the California Transparency in Supply Chains Act 2010, which imposes a similar reporting obligation, applies to businesses with worldwide annual gross receipts over $100m. It is clear, however, that the turnover will include that of a company’s subsidiaries. The Act will impact organisations carrying out a part of their business in the United Kingdom. In its consultation paper, “Modern Slavery and Supply Chains”, the UK Home Office acknowledges that the reporting requirement should “ensure that large businesses cannot turn a blind eye to modern slavery simply because of their corporate status or domicile.” This section of the Act has been drafted broadly. The extent to which a company carries out a part of its businesses within the UK may be uncertain; however, it appears the Act is intended to catch as many organisations as possible.

BIS CONSULTATION

The Department for Business Innovation and Skills held a consultation period in relation to the Act, which closed on 7 May 2015. The responses are currently being reviewed and the level of turnover relevant for the application of the reporting obligation is expected to be confirmed as well as further guidance on the information to be included in a slavery and human trafficking statement. COMMENT Organisations should already be considering performing further due diligence on the businesses in their supply chains, whether agreements with suppliers and sub-contractors contain provisions to ensure that they do not engage in activities which would fall within the definitions of slavery and human trafficking and making training available to staff in relation to slavery and human trafficking. Thought should also be given to potential confidentiality issues that may arise as a result of disclosure requirements relating to an organisation’s supply chain.

This article was written by Paul Henty and Simon Holdsworth