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Transparency in business supply chains: new obligations on commercial organisations

The Modern Slavery Act (the Act) received royal assent in March this year and consolidates pre-existing offences relating to human trafficking and slavery.

One aspect of the Act which is likely to be particularly significant for commercial organisations is the new requirement to prepare a slavery and human trafficking statement. Slavery is widely defined to include "servitude" and forced labour working.

This requirement is contained within section 54 of the Act and comes into force today, 29 October 2015. It applies to all businesses with a global turnover of £36 million or more.  

The statement will need to be prepared and published on an annual basis; but businesses whose financial years end before 31 March 2016 will not be required to comply with section 54 of the Act for this financial year. For any other business, whose financial year is aligned with the tax year, section 54 will apply, meaning that they will be required to produce a statement.

What is the purpose of the slavery and human trafficking statement?

The slavery and human trafficking statement is intended to improve transparency in business supply chains and to encourage businesses to take steps to avoid any association with modern slavery.

Under section 54 of the Act, any commercial organisation that meets the relevant criteria (outlined below) will have to prepare and publish a statement confirming either:

  • what steps the organisation has taken to ensure that its business and supply chains are free from slavery and human trafficking; or
  • that no action has been taken to ensure that its business and supply chains are free from slavery and human trafficking.

Who will be required to prepare a statement?

The requirement applies to all commercial organisations which:

  • supply goods or services in the UK; and 
  • have a turnover of £36 million or higher. 

The definition of a commercial organisation is wide and includes all companies and partnerships meeting the above criteria, regardless of whether or not they are incorporated in the UK. 

For corporate groups, the turnover threshold of £36 million is expected to take into account the combined global turnover of all subsidiaries within that group.

The statement will also need to be approved and signed by a senior member of the organisation (approval is required by the board of directors within a company; the members of an LLP; a general partner within a limited partnership; or a partner within any other partnership).

Where does the statement need to be published?

Once the statement has been internally approved, it will need to be published on the company's website, with a link to the statement featuring in a "prominent place" on the homepage.

Organisations without a website will need to provide a copy of the statement to anyone who makes a written request and this must be done within 30 days of that request being made.

What are the potential consequences for failing to prepare and publish a slavery and human trafficking statement when required?

The Act enables the Secretary of State to enforce the requirement to provide a statement through civil proceedings in the High Court for an injunction. 

While there is no specific criminal penalty as such, it is anticipated that companies will be encouraged to provide the statement in line with the legislative requirement in order to avoid facing negative publicity. 

What action can organisations take to prepare?

Although the Act does not prescribe what specific information must be included in the statement, it does provide some suggestions. These include details about the organisation's structure, business and supply chains, the policies it has in force in relation to slavery and human trafficking and any due diligence processes it has in place to detect where modern slavery may be present in its supply chains. 

The task of preparing the statement is likely to prove particularly arduous for organisations which have large supply chains or supply chains which span across multiple countries. There are a number of actions which organisations may wish to consider in order to prepare, including:

  • appointing someone within the business to take responsibility for ensuring compliance with the requirement to prepare and publish the statement;
  • assessing the organisation's financial status (taking into account any subsidiaries where the organisation forms part of a corporate group) in order to determine whether it is likely to meet the £36 million threshold; and
  • how the company can establish and evidence a clear zero tolerance stance towards modern slavery both internally (for instance through incorporating an anti-slavery policy or the provision of training etc) and throughout its supply chains (for instance through effective due diligence, and the inclusion of an anti-slavery clause within its contracts etc).

For further information or guidance please contact Duncan Reed on +44 (0)333 006 0742 or duncan.reed@TLTsolicitors.com

Contributor: Clare Dadge

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2015. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.

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