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Modern Slavery Act

Posted on 16 March 2017

Modern Slavery Act

What does the Modern Slavery Act mean for businesses?

As well as consolidating and introducing new criminal offences for those involved in modern slavery, the Act has introduced changes in UK law focused on increasing transparency in supply chains. Specifically, large businesses will be required to disclose the steps they have taken to ensure their business and supply chains are free from modern slavery.

How do I know if I need to produce a statement?

The Act requires commercial organisations supplying goods or services with a minimum annual turnover of £36 million to publish a slavery and human trafficking statement each financial year on their website (if they have one). A "commercial organisation" is defined as a body corporate (wherever incorporated) or partnership (wherever formed) which carries on a business or part of a business in any part of the UK. Under the Act, there is no minimum level of "business" required in the UK to trigger the reporting requirement and no requirement for an organisation to be physically located in the UK.

So I just need to look at my company's turnover?

No, the turnover threshold includes the turnover of "subsidiary undertakings" and is calculated on the basis of total net turnover (that is, total amount of revenue derived from the provision of goods and services falling within the ordinary activities of the organisation or subsidiary after deduction of trade discounts, value added tax and any other taxes based on the amounts so derived). A company will be a subsidiary of its holding company if the holding company:

  1. holds a majority of the voting rights in it, or
  2. is a member of it and has the right to appoint or remove a majority of its board of directors, or
  3. is a member of it and controls alone, pursuant to an agreement with other members, a majority of the voting rights in it or if it is a subsidiary of a company that is itself a subsidiary of that other company.

What does a business need to disclose?

Businesses which fall into the scope of the Act will need to produce a statement each financial year setting out the steps (if any) it has taken to ensure that slavery and human trafficking is not taking place in the business or in any of its supply chains. The government's expectation is that organisations will build on their statements year on year and that they will improve over time. 

How can I guarantee that my entire supply chain is slavery free?

There is no requirement for a business to guarantee that its entire supply chain is slavery free, which in practice may be difficult or impossible to determine.

How do I go about putting together a statement?

In order to complete the statement, you should review your supply chain policies and procedures to ensure they are sufficiently robust to mitigate the risk of modern slavery occurring in your business and supply chains and implement appropriate and proportionate responses across the Group where you identify risks and any current or potential exposure.    

Can anyone put the statement together?

The Act requires that your slavery and human trafficking statement is approved by the board and signed by a director. The director who signs the statement should ensure they verify the accuracy of the statement before signing.   

What does the statement have to contain?

The Act does not mandate what a slavery and human trafficking statement must contain, or require that it takes any particular form. As guidance only, the Act sets out the following information that may be included in a slavery and human trafficking statement. That is, information about:

  • Your organisation's structure, its business and its supply chains.
  • Your policies in relation to modern slavery.
  • Your due diligence processes in relation to slavery and human trafficking in your business and supply chains.
  • The parts of your 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.
  • Your effectiveness in ensuring slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate.
  • The training about slavery and human trafficking available to your staff.

When do I need to make the disclosure?

You are required to publish the statement as soon as practicable after the first financial year end after 31 March 2016, and each year after this – the government has indicated that it expects statements to be published within six months of year end. 

What do I do with the disclosure statement once I've finished it?

You are required to publish your slavery and human trafficking statement on your website and include a link to the statement in a prominent place on the homepage of your website.

Each organisation within the Group that conducts business, in whole or in part, in the UK and exceeds the turnover threshold in its own right is also required to publish a slavery and human trafficking statement on its website. However, there is the option to take a Group approach to this requirement. Where, for example, a parent company and a subsidiary are both required to produce a statement, one statement may be produced and published on each website, as long as it covers the business and supply chains of both entities.     

What if I don't comply?

There are no fines or penalties for failing to prepare or publish a slavery and human trafficking statement under the Act. However, the Secretary of State has the power to bring civil proceedings in the High Court for an injunction requiring an organisation to comply with the disclosure requirement. A subsequent failure to comply with any court order to publish a statement would risk being in contempt of court, punishable by an unlimited fine.    

Public scrutiny is expected to be the primary incentive for compliance with the Act and act as a check against inaccurate disclosure. A failure to comply could be reputationally damaging, particularly if it transpires that there are problems in your supply chain. 

Do you have any tips for preparing the statement?

You should consider carrying out the following actions in order to prepare the statement:

  • Conduct a comprehensive Group-wide risk assessment, clearly mapping the Group's supply chains across multiple tiers and identifying potential touch-points for modern slavery. Some territories, for instance, will be known to present a higher risk of child labour and modern slavery than others.
  • Adopt a risk-based approach, conduct due diligence and audits on suppliers within the Group's supply chains.
  • Conduct an immediate review of procurement policies and other existing policies and procedures relevant to modern slavery, or if not already in place, develop appropriate policies and procedures, in both cases taking into account the results of the risk assessment.
  • Adopt a code of conduct for the Group which addresses how employees and other associated persons (agents, suppliers and other service providers) are required to act to minimise the risk of slavery and human trafficking occurring in the business and in its supply chains. 
  • Undertake a review of existing supplier arrangements, particularly in high risk sectors or jurisdictions, and, where necessary, seek to amend agreements to ensure that suppliers are obliged to comply with the requirements of the Act and the Group's code of conduct. 
  • Update standard agreements to ensure suppliers and, in turn, their suppliers, will comply with the Act and the Group's code of conduct (include appropriate warranties, undertakings and audit rights).
  • Appoint a compliance officer at board level or reporting directly to the board with responsibility for overseeing implementation of policies and procedures and annual preparation of the slavery and human trafficking statement.
  • Adopt a robust anti-slavery stance at the highest level, including making a board level statement of the Group's zero tolerance to modern slavery in its business and supply chains and publicising this internally and externally.
  • Ensure consistent messaging of the Group's modern slavery policy is distributed throughout the Group's supply chain.
  • Provide adequate budget and resources to effectively implement the Group's modern slavery policy and procedures.
  • Review the Group's whistleblowing policies to ensure they adequately accommodate the reporting of modern slavery issues in the business and supply chain. 
  • Implement a training and sensitisation program within the organisation, with targeted training for those involved in procurement and/or with responsibility for supply chain management, including how to respond to modern slavery identified within your supply chains.
  • Prepare to respond to enquiries and challenges from inside and outside of the organisation once the slavery and human trafficking statement is published.
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