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Commercial Question

Implications of new slavery protections on UK businesses

updated on 15 September 2015

Question

How does modern slavery impact on businesses and their supply chains in the United Kingdom and how is this being addressed by the UK government?

Answer

According to The Walk Free Foundation's 2014 Global Slavery Index, there are an estimated 35.8 million men, women and children trapped in modern slavery across the globe, with Mauritania having the most modern slaves when measured against the population (an estimated 4%) and India having the most modern slaves in total (an estimated 14 million). The United Kingdom is not immune to this phenomenon, with official Home Office figures suggesting there are between 10,000 and 13,000 potential victims of modern slavery in the United Kingdom. Modern slavery is a broad concept covering slavery, servitude, forced and compulsory labour, and human trafficking, and affects businesses in many different sectors of the economy, including construction, agriculture, low-skilled factory work, food-processing and home/domestic work.

The Modern Slavery Act 2015 (MSA) is the United Kingdom's latest response to this local and global problem, and apart from clarifying and consolidating existing criminal offences around slavery and human trafficking and increasing protection for victims, it has brought focus on supply chains for large organisations doing business in the UK.

Supply chain transparency and the reporting obligation

From October 2015 commercial organisations with a global turnover of £36 million or more and carrying on any part of their business in the United Kingdom will be required to publish an annual "slavery and human trafficking statement". This is a statement of the steps (if any) taken by an organisation to ensure modern slavery is not taking place in its own business and in its supply chains, and is required to be published each financial year on the organisation's website.

The MSA sets out a high-level framework of what might be contained in a slavery and human trafficking statement, including  information about:

  • the organisation's structure, its business and its supply chains;
  • its policies in relation to modern slavery;
  • its modern slavery due diligence processes in its business and supply chains;
  • the parts of its business and supply chains where there is a risk of modern slavery taking place and the steps taken to assess and manage that risk;
  • its effectiveness in ensuring modern slavery is not taking place in its business or supply chains, measured against performance indicators; and
  • the training available to its staff.

Statutory guidance is scheduled to be published in October 2015 by the government on how to comply with the reporting requirement and prevent modern slavery in the supply chain.

The government has chosen a reporting threshold of £36 million as this is one of the thresholds under the Companies Act 2006 for determining the size of a large company and on the basis that organisations meeting this level of turnover should have the purchasing power, resources and influence to make positive changes within their supply chains.

Incentivising compliance

Legal sanctions for non-compliant organisations under the MSA are limited - the secretary of state is merely empowered to commence proceedings for an injunction requiring an organisation to prepare a statement. However, public scrutiny will be the primary driver of compliance. Negative attention from the press, customers, activist shareholders, trade unions and civil society will likely prove an effective incentive for many organisations, particularly those already in the spotlight for poor labour practices at home or abroad (eg, the construction sector in the Middle East where migrant labour practices have sometimes been poor).

California has similar legislation already in effect and NGOs, such as KnowTheChain, are engaged in shaming exercises, publishing details on their website of companies that are non-compliant with reporting requirements under the California Transparency in Supply Chains Act 2010. The London-based Business and Human Rights Resource Centre has also been active in approaching non-compliant organisations under the Californian regime and is very likely to turn its attention to businesses who fail to comply with reporting requirements under the MSA.

Organisations subject to the reporting therefore need to ensure that their slavery and human trafficking statement is underpinned by appropriate and proportionate action that it is defensible in the face of scrutiny from both inside and outside of the organisation (eg, from whistleblowers that have intimate knowledge of what an organisation is actually doing to prevent modern slavery on the ground). For all affected organisations, targeted due diligence, procurement policies addressing modern slavery, contractual protections in supply contracts, clear labour and whistleblowing policies and consistent messaging throughout the supply chain will be important ways to help address this issue. However, for those organisations operating in high-risk jurisdictions or sectors, enhanced due diligence and the implementation of more stringent preventative measures will be required.

Resources on modern slavery and supply chains

There is a large pool of resources, tools and guidance publically available on the web to help companies understand and address modern slavery in their businesses and supply chains. Useful points of reference include the:

Brett Hartley is a senior associate at Clyde & Co LLP in London.