In March this year, the Government introduced the Modern Slavery Act 2015 to tackle slavery, servitude, forced or compulsory labour and human trafficking in England and Wales. The Government has now ceded ground to campaigners advocating that businesses should be held more accountable for modern slavery in their supply chains. Consultation in relation to the proposed reporting requirements for a ‘supply chain clause’ took place earlier this year. From October, section 54 of the Modern Slavery Act 2015, which governs transparency in supply chains, will come into force.
Section 54 requires commercial organisations, who supply goods or services with a turnover of over £36 million, to publish a yearly statement of the steps they are taking to ensure that slavery and human trafficking are not taking place in their supply chains or any part of their business. The statement must confirm the steps taken to ensure that slavery and human trafficking are not taking place or, alternatively, declare that no steps have been taken to confirm the existence of slavery or trafficking.
The definition of ‘commercial organisation’ in section 54(12) will inevitably capture many housing associations and charities. Commercial organisations mean partnerships or corporate bodies that carry on a business or part of a business in the UK, regardless of where they are incorporated. The turnover threshold is the total amount produced by the provision of goods and services after tax.
Section 54(5) outlines six areas of information that a slavery and human trafficking statement may include; (1) information on the organisation’s structure, business and its supply chains; (2) its policies in relation to slavery and human trafficking; (3) its due diligence processes in relation to slavery and human trafficking; (4) the parts of its business and supply chains where there is a risk of slavery or human trafficking and the steps it has taken to assess and manage that risk; (5) an overview of the organisation’s own performance indicators; and (6) information about related training available to its staff.
If the organisation has a website, it must publish the statement in a prominent position on its homepage. Alternatively, the organisation must make the statement available to anyone who requests it in within 30 days of any request.
Section 54 has been welcomed by campaigners, but treated with caution as there are no legally binding requirements to conduct due diligence on supply chains and no criminal or financial penalties for non-compliance. The Secretary of State may only enforce the duty to prepare the statement by way of a civil injunction. Campaigners fear that those organisations most likely to be implicated by such practices are least likely to publish the statement. Furthermore, the requirements obligate only large commercial organisations, leaving many smaller businesses less accountable (although the accumulative turnover of organisations and their subsidiaries is taken into account).
Statutory guidance on how to implement section 54 should be available from October and there will be transitional provisions so that statements are not required where a business’s financial year ends close to the date on which the duty comes into force. Organisations should now start to undertake a comprehensive risk assessment and review current processes; in particular procurement practices and auditing procedures are in place to prevent the practices outlawed by the Act taking place in their business or supply chain. The principal risks are likely to come from the substandard practices of suppliers, contractors or any other third party that the organisation does business with.
For more information or how section 54 may affect you, please contact a member of the Employment Team.