The Modern Slavery Act came into force in October last year directly affecting 12,000 UK businesses as well as creating knock-on effects for many others worldwide.
Its purpose is clear and its motivation is laudable. More challenging, however, is identifying the extent to which businesses are affected and how they can best tackle this far reaching and important issue.
What the act means
The term modern slavery encapsulates offences covered in sections 1 and 2 of the act:
- Slavery, servitude and forced or compulsory labour, as set out in the act
- Human trafficking
It is based squarely on the principle that companies should be taking steps to prevent slavery from occurring. Where it does occur, organisations should assume accountability and work with suppliers to improve practices and minimise future risk. It follows on from the UN Guideline Principles on Human Rights, which takes the view that businesses should mitigate risks posed by business relationships.
A key element of the act is the transparency in the supply chain clause, requiring companies affected to publish a slavery and human trafficking statement within six months of each financial year end.
This statement must specify actions taken by the company to ensure that slavery and human trafficking are not present in any part of the business or supply chain.
It is a legally binding requirement that applies to companies that fall under all of the following – whether in the private, public or non-profit sectors:
- Operating in the UK, whether incorporated here or elsewhere
- Have a turnover of £36m or more per year
- Providing goods for sale or service
The statement needs to include one of the two following declarations. Either:
- ‘Steps are taken to ensure slavery and human trafficking are not taking place within the supply chain or any part of the business’
- ‘The organisation has not taken any such steps’.
The statement could also include:
- Information about the organisation’s structure
- Business and supply chain policies
- Due diligence processes and staff training in relation to slavery and human trafficking
- Risks identified and steps taken to manage such risks
- Effectiveness in ensuring slavery and human trafficking is not taking place
It must be must be published in the organisation’s annual accounts and placed on its website with a prominent link on the homepage. Any businesses without a website must provide a copy of the statement in writing within 30 days to anyone who requests it.
The first to report under the act will be businesses with a financial year end of 31st March 2016, with statements required by the end of September this year at the latest. Non-compliance can result in court injunction, forfeiture of assets, reparation orders, an unlimited fine and even sentencing.
Organisations affected by the act and focussed on maintaining their reputations should be trying to show that they have taken steps to address these issues.
It is generally difficult for businesses to ensure their supply chain is slavery-free. By its very nature slavery is secretive and the complexity of many supply chains makes it harder to identify.
But organisations with robust stakeholder management should already be well on their way to addressing these issues. Others may need to direct more time and resources towards this area.
The following steps are a useful guide:
- Map your supply chain
- Identify areas of greatest risk – and greatest potential for improvements
- Set targets and allocate resources to tackle the issue
- Prioritise remedial issues
- Develop a long term strategy and code of conduct
- Evaluate, report and communicate regularly
Forward looking organisations will also be quick to recognise the brand and reputational risk associated with this act. More than being solely a compliance issue, the need to include a statement within financial reporting and accounts – and show meaningful progress – will have the effect of shining a spotlight on a controversial issue.
As a result of the act, slavery reporting is now even more of a transparency issue, one where wide-reaching and decisive action will head off unwanted investor, stakeholder and media attention as well as contributing to a more equal society. It’s also a timely opportunity to look at wider human rights issues, such as child labour and diversity, and their impact on supply chains.
For more information on whether your organisation falls within the scope, visit the Modern Slavery Act 2015 website.
Murray Sayce is Principal at Ramboll Environ.