The Modern Slavery Act 2015: supply chain transparency requirements
The UK government has recently issued statutory guidance relating to the supply chain transparency and reporting obligations of the Modern Slavery Act 2015. With confirmation on who is required to comply and when they need to comply by, as well as including essential details on the all-important annual statement, Transparency in Supply Chains: A Practical guide is a welcome document for all. Here is everything you need to know and what you need to do.
Consolidating UK law on slavery and human trafficking, the Modern Slavery Bill was first introduced to parliament on 10th June 2014 and subsequently passed into law on 26th March 2015. With the aim of preventing employment exploitation and increasing disclosure of labour practices, the Act introduces new grounds of compliance for commercial entities. Not only do organisations need to ensure that modern slavery is not an issue in-house, they also need to take, and report on, actions to prevent the issue from occurring within their supply chains.
Which companies are captured under the Act?
The threshold to determine which companies have to adhere to the Act has been something of a discussion point for the vast majority of the year. Following a government consultation period earlier in the year, it was confirmed that the Act applies to any organisation that supplies goods or services and that has a turnover exceeding £36 million, aligning the legislation with the definition of a ‘large business’ in the Companies Act 2006.
Furthermore, this threshold is valid for any organisation that has operations in the UK regardless of where it was formed. This means that many non-UK organisations providing goods or services within the UK’s geographical boundaries will have to engage with their suppliers, essentially resulting in diverse, complex and global supply chains being assessed.
The annual statement
A key part of the Act is the stipulation that captured organisations need to prepare and publish an annual statement detailing the ongoing process they are taking to ensure that there is no modern slavery within their business and supply chains. To be published at the end of the organisation’s financial year, and required to be approved at board level, the statement must be publicly available via a prominent link on the company’s corporate website homepage.
What does the statement need to look like?
There are 2 routes that organisations can go down when it comes to preparing the slavery and human trafficking statement. Captured organisations must prepare and publish either:
- A statement detailing steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place in any part of its own business or supply chains; or
- A statement that the organisation has taken no such steps.
Although option 2 is the simpler journey, having a publicly available statement that effectively says that the organisation does not care about the issue of modern slavery risks a backlash from stakeholders. As such, the safest route to compliance is certainly the first.
In terms of what the annual statement needs to looks like, the Act does not stipulate the exact parameters, but does provide some key areas that should be covered:
- the organisation’s structure, its business and its 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;
- its effectiveness in ensuring that 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 its staff.
What do captured organisations need to do?
The statutory guidance confirmed that the supply chain transparency and reporting provisions of the Act commenced on 29th October 2015. However, a transitional period applies to businesses with a financial year-end date between 29th October 2015 and 30th March 2016, meaning those who have a year-end of 31st March 2016 will be the first to publish the statement.
So what should companies be doing to prepare for these new supply-chain requirements? Regardless of when the year-end date is, it is imperative that organisations start engaging with their suppliers now and assess the level of risk. Without an extensive and ongoing information gathering exercise, taking steps to prevent the risk and subsequently reporting on them is simply not possible.
Where to start
As it is now a requirement for companies to collect and interrogate data from across their web of suppliers, it is essential that they make the process as efficient as possible. At Greenstone, we understand that this can be a complex and time-consuming process. The traditional offline data collection methods are not suited to the demands of today’s globalised supply chains and, as such, it is an increasing trend for companies to move the process online.
For advice on what you need to consider when moving your supplier risk and compliance process online, please read our previous blog article on the subject.