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The £36million Question: What Does Your Organisation Do To Tackle Modern Slavery?

The £36million Question: What Does Your Organisation Do To Tackle Modern Slavery?

New legal provisions under the Modern Slavery Act 2015 are coming into force today, 29 October 2015, which will compel larger businesses across the UK to publish an annual statement detailing what action (if any) they are taking to combat slavery and human trafficking, not only in relation to their own business but also within their supply chains. Significantly, each Slavery and Human Trafficking Statement requires formal management approval, must be published in a prominent place on the organisation’s website and, crucially, must be made even if no steps are being taken to combat slavery and human trafficking. The potential impact on public image of a business openly declaring that they take no action to combat servitude, slavery, human trafficking or forced/compulsory labour is clear.

Initially the duty to publish an annual Slavery and Human Trafficking Statement will apply to commercial organisations (partnerships or incorporated entities) where any part of their business is carried on in the UK (regardless of where the business is incorporated or registered), which supply goods or services and which have a global annual turnover of at least £36million. The turnover threshold of £36 million per annum includes the turnover of parent company and subsidiaries. Within group organisations, consideration should therefore be given to whether individual subsidiary companies fall within the duty to publish a Statement in their own right. While the £36million threshold is intended to catch large organisations with the purchasing power, resources and influence to bring about meaningful change in supply chains, the threshold is expected to be reduced in due course, so all sizes of business need to start looking at their internal processes and the quality of information they hold on their suppliers.

The broad ambit of the duty should be stressed – the Act requires the organisation to detail the steps it has taken not only to ensure the absence of slavery and human trafficking within its own operations, but also within the operations of all suppliers in its supply chain. In the UK oil and gas industry alone this may be a cause for concern, with the various “tiers” of contractors, sub-contractors and sub-sub-contractors and consultants feeding into typical production and extraction operations. Recent research of the Hult International Business School and the Ethical Trading Initiative has shown that around 71% of UK companies believe that there is a likelihood of modern slavery occurring at some point within their supply chains.

Unlike duties under the Bribery Act 2010, there are no criminal sanctions for breach of the duty, but failure of a qualifying commercial organisation to publish an annual Slavery and Human Trafficking Statement could result in the Secretary of State raising court proceedings to enforce performance.

Given that the aim of the new duties is to eradicate modern slavery within goods and services supply chains by requiring organisations to adopt a zero-tolerance approach, it pays to know what you don’t know as early as possible. How much oversight does your organisation have of its international supply chains? How robust are your due diligence procedures, internal policies and procurement contracts? How exposed is your organisation to “high risk” markets? And closer to home, are your staff eligible to work in the UK and paid at least the statutory minimum wage? These are just some of the “£36million questions” that need consideration.

The duty to prepare and publish a Slavery and Human Trafficking Statement for each financial year comes into force from 29 October 2015, and the Act itself has guidance on what the Statement might include. There will be transitional arrangements allowing leeway to those businesses whose financial year end falls within close proximity to this date.

It will be borne in mind that, while public image is king in the 21st century, the fundamental concern is of human rights. The Human Trafficking and Exploitation (Scotland) Bill currently working its way through the Scottish Parliament looks at the criminal offences of human trafficking and modern slavery “on the ground”, as well as providing for sentencing and victim support measures. Demonstrating transparency in supply chains is only the beginning.

Adam McCabe