New legislation has been introduced to ensure that companies don’t use workers who are victims of human trafficking in their supply chains. If you’re an organisation which might be affected by the new Act, read our article to find out the steps you need to take to stay compliant.
What is the Modern Slavery Act?
In October 2015, Section 54 of the Modern Slavery Act came into force. What does this mean for businesses and what steps should they take to ensure compliance with the law?
What is Section 54?
This section of the Act means that businesses in the UK have to be transparent about the things they are doing to address the issue of modern slavery in both their operations and their supply chains. These requirements are known as the ‘Transparency in supply chain provisions’.
This means that many businesses who had not previously addressed compliance issues will need to look anew at their relationships with suppliers to make sure that they comply with the new reporting requirement.
Who is covered?
Section 54 of the Act requires all companies with a turnover of £36 million or more to publish an annual statement which sets out the steps taken to ensure that slavery and human trafficking form no part of the business or its supply chain. It’s estimated that nearly 17,000 UK businesses fall within these parameters.
‘Total turnover’ is defined as the organisation’s total net turnover, i.e. total revenue from all sources less discounts, VAT and any other taxes. The turnover will be assessed as including the turnover of all an organisation’s subsidiaries.
Preparing the Statement
The Slavery and Human Trafficking statement will either give details of the steps that the organisation is taking to ensure that neither slavery nor human trafficking take place in its business or in any supply chain (Option A) or a declaration that no such steps have been taken (Option B).
Option B may well result in negative publicity and pressure from shareholders and the media, together with serious damage to the organisation’s reputation.
Publication of the statement
A prominent link to the statement needs to be included on the homepage of the organisation’s website. The statement should be approved by the board and signed off by a director to show that it has been seen and authorised at the very highest level.
In the unlikely event that the organisation does not have a website, it will have to provide a printed copy of the statement to anyone who writes and requests it. The statement must be sent within thirty days of receipt of the request.
The Act says that the statement should include the following information:
The structure of the organisation, with details of its business and supply chains.
The policies that have been developed by the organisation relating to slavery and human trafficking.
The due diligence processes that the organisation operates to check for slavery and human trafficking in its business and supply chains.
The areas that the due diligence process has identified as being at particular risk of slavery and human trafficking
The steps that the organisation has taken to tackle those areas identified.
The training given to staff in order to raise awareness about slavery and human trafficking and the steps that are being taken to deal with it.
Key performance indicators that will enable readers of the report to gauge how effective the activity described in the statement actually is.
What are the consequences of non-compliance?
An organisation has the choice of Option A or Option B (outlined above) with regard to publishing a statement. What it does not have is the choice of doing nothing. The Secretary of State can apply to the High Court to obtain an injunction which will force the organisation to publish a statement that complies with Option A or B.
However, the real risk for an organisation may be to its reputation. As has been discussed above, stating that it has taken no steps to identify and tackle slavery and human trafficking in its operation and supply chains may well lead shareholders, the public and the press to focus on this to the detriment of its business successes. That could go on to cause problems if contracts that would otherwise have been placed were cancelled due to negative publicity.
What should businesses do to prepare?
Even for those businesses whose turnover is too low to qualify them for the provisions of the Act, it is a good idea to follow some or all of the following guidance, since it is good advice regardless of the size of the organisation and for those organisations which may grow to become eligible for Section 54, setting up a system of compliance will stand them in good stead later.
Information should be gathered regarding the steps that are currently taken to ensure that human trafficking and slavery do not take place.
If the business has a number of suppliers, it should conduct a risk assessment with each one to identify which are most likely to be affected by slavery and human trafficking
If the risk assessment identifies areas where action can be taken, measures can be drawn up and put into place to strengthen its existing strategy and deal with shortcomings.
The new Modern Slavery Act risk assessments need to be integrated into existing risk management systems and due diligence procedures.
The business’ human rights/Corporate and Social Responsibility policies need to be updated to include the issue of slavery and human trafficking.
If the business whistleblowing policy does not already mention concerns about slavery or human trafficking, it should be amended to do so.
To avoid accusations of facilitating exploitation, the business’ practices should be checked to ensure that they guarantee all employees, whether in the UK or not, the minimum wage and the right to work.
All commercial agreement templates should be updated to include a requirement on complying with the Act (this should extend to suppliers and sub-contractors).
A senior member of staff should be appointed to oversee all investigations into the business and its supply chain as well as producing and publishing the statement. A communication strategy should be developed to ensure that the results of the statement reach as wide an audience as possible.
The business should, as soon as possible, draft and publish its policy on slavery and trafficking.
Since training for staff is one of the essential elements of the statement, an assessment should be carried out regarding the need for human rights compliance training throughout the organisation, including all stages of the supply chain.
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