Recent news stories such as that factory fire in Rana Plaza, Bangladesh which killed over 1000 workers and the controversy over Costco’s prawns reportedly being supplied by slave labour fisheries in Thailand, have put the spotlight on ethical policies and how businesses maintain these through their supply chains. Issues such as slavery, servitude, forced labour and human trafficking (modern slavery) must be seen to be real concerns for business when social media can react so quickly and reputations are so easily damaged. This is the background to the Act which requires large commercial organisations in the UK to set out the steps they have taken to ensure their supply chains are free from forced labour.
Which businesses are affected?
Section 54(1) requires all commercial organisations which supply goods and services and have a minimum total turnover of £36 million per year to prepare a slavery and human trafficking statement for each financial year. In practice this means companies and partnerships carrying on any part of their business in the UK and includes a company incorporated or a partnership formed outside the UK. Quoted companies already have an obligation to disclose information about social, community and human rights issues in their strategic reports and this reporting requirement will build on this; for other companies this will be new. The turnover threshold of £36 million is global turnover not just that within the UK and this is the same threshold figure as in the Companies Act 2006 for determining whether a company qualifies as small or medium (i.e. a company with a turnover of below £36 million). Consequently small and medium sized companies are not required to prepare such a statement under the Act.
What should be included in a slavery and human trafficking statement?
A company required to make a report under the Act must include a statement about the steps it has taken over the year to make sure that slavery and human trafficking is not taking place in any of its supply chains or in any part of its own business. Alternatively, a company can make the statement that it has taken no such steps. (For most organisations, this latter option seems likely to be very unattractive from a public relations view point.) Although the Act does not prescribe the content of the statement, it does suggest the kind of information a company may wish to consider in this context, for example:-
- An organisation’s structure, business and supply chains;
- Any slavery and human trafficking policies;
- Any due diligence processes in relation to slavery and human trafficking in its business and supply chains;
- The parts of an organisation’s business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps an organisation 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; and
- The training about slavery and human trafficking available to its staff.
In practice, the form and detail of the statement will be different depending on the nature of the company and its operations. Clearly this exercise is likely to require more work for an organisation with significant overseas operations and complicated supply chains.The government intends to publish further guidance on this. In all cases the statement must be approved and signed by an authorised person, for example, in the case of a company approved by the board and signed by a director (or partner in the case of partnerships) and published on the organisation’s website with a link to such statement from the homepage. If there is no website, the organisation must provide a copy of the statement to anyone who asks for this within thirty days of receiving the request.
When does the reporting requirement come into force?
The requirement to prepare a slavery and human trafficking statement comes into force on 29 October 2015. There is a transitional period so that any organisation with a financial year end between 29 October 2015 and 30 March 2016 will not be required to make such a statement for the financial year 2015/2016.
The first step will be to determine whether or not your organisation is required to prepare a statement. If yes, consider the following preliminary due diligence to:
- Map the structure of the business and describe its supply chains;
- Identify existing anti slavery and human trafficking policies (if any);
- Examine existing contracts with suppliers. Do these contain relevant provisions?
- Consider staff training on this topic. How are suspicions reported?
Gathering information in this systematic way will not only provide a basis for the statement itself but will help an organisation to understand its relative strengths and weaknesses in this area.