Commercial organisations with a global turnover of £36 million must, as soon as reasonably practicable after their financial year end, prepare and publish a slavery and human trafficking statement for that financial year. This obligation has been known about since the Modern Slavery Act 2015 (the “Act”) came into force last year, but it is only now that the obligation will “bite”, as it applies to financial years ending on or after 31 March 2016. We should expect the first statements relatively soon (probably with organisations’ final accounts for the year).
Many small and medium sized organisations have seen the headline application to those with turnover of more than £36 million and assumed that the Act is not relevant to them. It is easy to see why, especially for companies that do not produce or receive goods or services from areas of the world where there are higher risks of modern slavery occurring. However, when you look more closely at the requirements of the Act and consider what information these large organisations will report on, you see that their supply chains will also be heavily involved.
Section 54(4) of the Act defines the required slavery and human trafficking statement as: “a statement of 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 part of its own business”, or a statement that the organisation has taken no such steps.
This is the minimum requirement, but the Act goes further and says what these statements may also include. This includes information about the organisation’s 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; its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains; and the training about slavery and human trafficking available to its staff (emphasis added).
Given the international importance of this issue, and the severe adverse publicity that could come from failing to tackle it, we can assume that many of these organisations will take these reporting details seriously. We expect them to place considerable pressure on businesses in their supply chains to report on these matters themselves, which will “feed in” to the ultimate statutory report.
It is therefore very important for small and medium sized businesses to understand the requirements of the Act and the definitions of modern slavery contained within it. They will need to be ready when their larger customers ask for information about what policies they have, how much training their staff receive, how they identify the risks of human trafficking existing in their own supply chain and what is their due diligence process for suppliers in this regard. Questions will also be asked about the steps the business is taking to tackle the risks in their own supply chain. It is clear that most businesses will need to carefully consider how they go about recording and producing this information.
The vast majority of businesses in a large organisation’s supply chain will not have a statutory obligation to produce a slavery and human trafficking report, but some large organisations are already asking these questions of their smaller suppliers. It is easy to see how large companies may make it a condition of doing business that suppliers investigate and report on slavery and human trafficking.
Direct suppliers to large organisations will, in order to fulfil their obligations, need to ask the same questions of each of their own suppliers, and so on throughout the supply chain. So, there will inevitably be a massive “trickle down” effect throughout huge sections of the economy.
And if you still think your business is far removed from modern slavery and human trafficking, consider the recent case of two Lithuanian brothers who were trafficked to the UK and worked in a food factory in Sussex, having been recruited through a legitimate recruitment agency. Modern slavery goes on closer to home than you may think. More details of the case can be found in a BBC news article here.
To find out more about the issues raised in this post, or to discuss any queries regarding modern slavery get in touch with Kim Freeman Smith or call +44 (0) 161 829 2599.
The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by berg or any of its partners or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.