The Modern Slavery Act 2015 received royal assent on 26 March 2015. The Act consolidates the current offences of slavery and human trafficking. It also serves to lengthen the maximum prison sentence for such crimes, introduces new civil orders to increase law enforcement and includes provision for the creation of a new Anti-Slavery Commissioner.
Additionally, and perhaps of most relevance to law-abiding businesses, the Act also introduces a requirement for commercial organisations over a certain size to disclose, on an annual basis, the steps taken to ensure that slavery and human trafficking is not taking place in their organisation or associated supply chains. This new obligation can be found at Part 6, section 54 (Transparency in Supply Chains etc) of the Act.
What is required by Part 6 of the Act?
Commercial organisations covered by the Act are required to disclose and publish a slavery and human trafficking statement in every financial year.
Any commercial organisation (whether a body corporate or partnership carrying out business in any part of the UK) which:
(a) supplies goods or services; and
(b) has a total turnover of not less than an amount prescribed by regulations made by the Secretary of State
is covered by the requirements of the Act.
The Act could therefore cover organisations based in the UK but operating abroad and those based abroad but carrying out some part of their business in the UK.
Government consultation in relation to the level of “total turnover” (in terms of requirement (b) above) a commercial organisation requires to have in order to be covered by the requirements of the Act is currently ongoing.
It is clear from the Consultation that the intention is to catch large organisations, which have sufficient resources and capabilities to undertake investigation and diligence into their supply chains in order to ascertain what practices are being undertaken and to exert real influence to eliminate human trafficking and slavery at any stage in their business’ supply chains. With this in mind, various potential annual turnover thresholds are set out in the consultation document, ranging from a possible threshold of £36 million up to £1 billion. The Home Office has estimated that if the annual threshold were to be set at £36 million, over 12,000 companies in the UK would be covered whereas if set at £1 billion, 724 companies would be covered by the requirements.
Consultation on the proposed turnover threshold will close on 7 May 2015. It is expected that the Government will regulate on the prescribed turnover threshold shortly thereafter as the requirements imposed by the supply chain transparency clause are due to commence in October 2015.
What should your organisation’s slavery and human trafficking statement look like?
If your organisation is covered by the Act, your statement will either be:
- the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place:
- in any of its supply chains; and
- in any of its own businesses; or
- a statement that the organisation has taken no such steps.
Given the wide ranging nature of (a), this could be a relatively onerous obligation for businesses, particularly those with international operations and global reach, in particular in terms of diligence into the business’ supply chains etc. However, while option (b) in theory allows business to take no steps to try to ensure it has no involvement in relation to slavery and human trafficking, the Government has made it clear that it considers commercial competition will make doing nothing an unattractive and potentially more expensive option. It is easy to imagine the likely impact on an organisation’s reputation and ultimately its commercial success if the organisation is not seen to be proactively playing its part to stamp out slavery and human trafficking.
The Act gives some indication of the types of information that an organisation’s slavery and human trafficking statement may include. For example: information about the organisation’s structure, business and 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; 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 and the training about slavery and human trafficking available to its staff. This is a non-prescriptive list but it does provide guidance as to the extent, and type, of information the Government is expecting to be disclosed.
The Act requires the statement to be approved by the Board of Directors of a limited company or all members of an LLP.
There are also various other requirements in terms of posting the statement on the organisation’s website if it has one or providing written copies on request if it doesn’t.
As well as determining the appropriate turnover threshold, the Consultation is also aimed at establishing what guidance is required on the nature and extent of the duties imposed by this disclosure requirement, in particular what the statement should be required to include.
What should businesses be doing now?
Organisations may wish to consider responding to the Consultation before it closes on 7 May 2015 in order to have a say in what the prescribed turnover threshold should be and what you would like to see in terms of the Secretary of State’s proposed guidance on the duties imposed on commercial organisations by this disclosure requirement. The consultation document can be accessed here.
It may also be appropriate for larger organisations, likely to meet or exceed the yet unknown turnover threshold, to review current processes and procedures now, in particular procurement practices and what checks/auditing procedures are in place to prevent the practices outlawed by this legislation taking place in their business or supply chain.
A risk assessment to assess the risk to the organisation from suppliers, contractors and/or any other third party that the organisation does business with may also be appropriate.
Whilst the requirement for supply chain transparency will not commence until October 2015, some organisations may wish to start to consider the level of reporting and disclosure they would intend to make and ensure that mechanisms are in place to allow such reporting to take place.