What to Know About Transparency in UK Supply Chain

In today’s modern world many business leaders assume that slavery no longer takes place. The unfortunate reality is that it does exist and the UK is no exception. This modern form of slavery can often be hidden in plain sight, and the assumption that it does not exist means that businesses can unknowingly endorse forms of modern slavery.

The International Labour Organization (ILO) estimates that around the world there are approximately 21 million victims of forced labour. This is defined as the work or services of an individual that are extracted under potential penalty risk, without having volunteered this service. Of these 21 million in forced labour conditions, an estimated 10.7 million are victims in private enterprises covering agriculture manufacturing, construction, mining and utilities. Of which, a portion of these individuals are likely to be in or be connected to a UK supply chain.

Theresa May, the Home Secretary, has been a strong advocate of extending the UK’s efforts to counter modern slavery through the Modern Slavery Act 2015, within which section 54 extends the required compliance to that of the supply chain.  On this, Theresa May has said:

“The transparency in supply chains provision in the Act is a truly ground-breaking measure. It recognises the important role business can play in tackling this scourge and encourages them to do more. By requiring businesses to disclose what they are doing to eliminate slavery in their supply chains, we will provide a strong incentive for businesses to take this issue seriously.

Modern slavery is a complex and multi-faceted crime. Tackling it will require all of us to play a part – government, law enforcement agencies, businesses and non-governmental organisations. By working to stop criminals infiltrating supply chains we can try to prevent more people from becoming victims. ”

The UK Modern Slavery Act applied to at least 12,000 companies from 1 October 2015, with a staged implementation for other companies.

Section 54 of the UK Modern Slavery Act 2015 provides that all commercially driven organisations shall be required to make available a ‘slavery and human trafficking statement for each financial year’, with the only alternative being a direct statement from the corporation that the organisation has not taken any steps in this regard. This shall be applicable to all companies with an annual turnover that exceeds £36m.

The annual statement a company is required to produce must address a full list of organisational details that are available in Section 54(5). These are:

“(a) the organisation’s structure, its business and its supply chains;

(b) its policies in relation to slavery and human trafficking;

(c) its due diligence processes in relation to slavery and human trafficking in its business     and supply chains;

(d) the parts of its business and supply chains where there is a rick of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;

(e) 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;

(f) the training about slavery and human trafficking available to its staff.”

Organisations with a financial year ending between 29 October 2015 and 30 March 2016 will not be required to produce a statement for the financial year 2015/16. Organisations with the end of financial year occurring 31 March 2016 or after will be legally required to produce a statement for the financial year of 2015/16.

A statement must be published within 6 months of the end of the organisation’s financial year.

In order to help organisations become fully compliant with the new provisions, the Home Secretary has put forth a practical guide that will take businesses through the process ensuring that not only are requirements met but that the organisation fully understands why such efforts are important, and what to do if a company encounters an instance of modern slavery. Another resource for those corporations functioning worldwide are the principles of due diligence to tackle slavery and trafficking in supply chains set forth by the UN.

The hope within the implementation of section 54 and subsequent statements being made by corporations, is that an appropriate level of balance will be obtained in the UK between improving transparency in the supply chains while also using a form of corporate peer pressure to ensure that commercial organisations participate in actions that will reduce the level of modern slavery.

Many companies already opt to include ethical considerations, of varying degrees, within their procurement processes, and this will add to the momentum behind social responsibility being a necessary business consideration, with there being a clear business case for compliance.

The Home Secretary has power under the Act to bring civil proceedings against violators in the High Court. However, it is vital to note that business leaders, if found to have violated sections 1 or 2 of the Act, will be entangled in criminal proceedings.

With the implementation timeline of the UK Modern Slavery Act 2015 fully kicking into gear in April 2016, it is vital that businesses are in full understanding of the Act, including the most likely changes that need to be made within corporate processes. Such likely changes include developing relevant corporate policies, developing processes to investigate or verify information about supply chains, setting out a process for addressing risks or issues within the supply chain, and appointing individuals responsible for compliance.

Now more than ever, corporate responsibility is being enforced formally under the law, as well as informally through business pressures from supply chains and consumers, pushing businesses to consider all business impacts.