Modern Slavery: Transparency in Supply Chains
The Modern Slavery Act 2015 (the “Act”) seeks to address the role of businesses in preventing modern slavery from occurring in their supply chains and organisations through the ‘Transparency in Supply Chains’ provision contained in Section 54 of the Act. Regulations have recently been introduced that bring into effect the disclosure requirements contained in this provision.
From 29th October 2015, “commercial organisations” in any sector, which supply goods or services and carry on a business or part of a business in the UK with a turnover of £36 million or more, must produce a Slavery and Human Trafficking Statement (“Statement”) for each financial year of the organisation.
Who must comply?
“Commercial organisations” means companies – both listed and private – and partnerships, wherever that organisation was incorporated or formed, that carry on business or part of a business in any part of the UK. This means that the definition will include foreign businesses also. The obligation is not limited to manufacturers and retailers only, but applies to any part of the supply chain. It is not limited to any particular sector either.
The turnover threshold is calculated as the turnover of that organisation as well as the turnover of any of its subsidiary undertakings, including those operating wholly outside the UK. The total turnover taken into account will be the net turnovers, meaning the total revenue derived from all sources after deduction of trade discounts, value added tax and any other taxes based on the amounts so derived. The purpose for which profits are made is immaterial to the calculation.
If any organisation in any part of a group structure meets these requirements, it is legally required to produce a Statement. Organisations operating under a franchise model will also be caught if their turnover is above the £36 million threshold.
The Statement
The Statement must set out what steps the organisation has taken during the financial year to ensure that modern slavery is not occurring in their supply chains or in any part of their own business. Alternatively, the organisation can state that it has taken no such steps, but in any event, an organisation must be transparent about what is happening within its business.
The Statement will be a public-facing document and should be written in simple language that is easily understood.
The Act provides a non-exhaustive list of information that may be included in the Statement, and whilst not compulsory, the list provides useful guidance and examples as to the type of information to include.
- The organisation’s structure, its business and its supply chains
- Its policies in relation to slavery and human trafficking
- Its due diligence processes in relation to slavery and human trafficking in its business and supply chains, both in the UK and overseas (if relevant)
- The parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk
- Its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate
- The training and capacity building about slavery and human trafficking available to its staff
The Home Office has also suggested that relevant key performance indicators could be included in the Statement as they would be useful in demonstrating progress from one year to the next.
The Statement must be approved and signed by an appropriate senior person in the business to ensure senior level accountability, leadership and responsibility. For a company, the Statement must be approved by the board of directors and signed by a director. In the case of limited liability partnerships (“LLP”), the statement must be approved by the LLP members and signed by a designated member. A partner must sign the Statement for other types of partnership.
Publication of the Statement
The Act requires each organisation to publish the Statement on their website with a clearly marked link in a prominent place on its homepage. It is vital that the Statement is easily accessible by anyone who wants to see it. For organisations with no website, a copy of the Statement is to be provided to anyone who requests one in writing, with the copy provided within 30 days of the request.
When does this requirement start?
Although the requirement for organisations to publish a Statement commenced on 29th October 2015, transitional periods have been included to allow organisations time to understand the requirements and produce a Statement.
Businesses with a year-end of 31st March 2016 will be the first businesses required to publish a Statement for their 2015-16 financial year.
An organisation is required to produce a Statement for each financial year that their turnover exceeds the threshold, however the Government strongly recommends that a business which has produced a Statement in one year should continue to do so even if their turnover falls below the threshold in subsequent years. This demonstrates to consumers, the public and investors that the business is being transparent, not because they are required to do so, but because they consider it important.
What should you be doing now?
If you are an organisation that will be subject to these requirements, you should start preparing now by assessing your relevant business activities and supply chains. You should ensure that procurement teams are aware of the new law and regulations, and assess the risks to the business.
Internal business procedures must be examined to avoid making demands of suppliers or subcontractors that might lead them to violate human rights, for example, demanding late orders, high pressure deadlines or making insufficient or late payments. You must ensure that zero tolerance for modern slavery and respect for human rights, including children’s rights, are built into contracts with suppliers, subcontractors, customers and other business partners.
If you do not already have a Slavery and Human Trafficking Policy in place, you should consider introducing one, and think about making training available to staff to increase their awareness of modern slavery.
For further information, please contact Helen Martinelli on helen.martinelli@bpe.co.uk.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.