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Know Your Chains: Supply Chain Transparency and the Modern Slavery Act

Brett-Hartley-IMG_7629

According to the 2014 Global Slavery Index, 35.8 million men, women and children are trapped globally in various forms of modern slavery, a concept covering slavery, servitude, forced and compulsory labour and human trafficking. The UK is not immune, with Home Office figures suggesting there are up to 13,000 victims of modern slavery across the UK. For the building and construction sector, modern slavery can be a significant problem, particularly for those operating in environments known for labour exploitation. For the estimated 12,000 organisations caught by the new reporting obligations under the Modern Slavery Act 2015 (MSA), the issue of what they are doing to tackle modern slavery in their supply chains will now be a serious compliance challenge.

What is the reporting Obligation?

The MSA requires organisations (body corporates and partnerships), supplying goods or services, with a minimum global turnover of £36 million (including turnover of subsidiaries) and carrying on business in the UK, to publish an annual “slavery and human trafficking statement” on their website. This is a statement of the steps taken to ensure modern slavery is not taking place in their own business or their supply chains. Organisations without a website must provide a copy of their statement within 30 days to anyone making a written request for one. Importantly, the statement must be approved by the board and signed by a director (or the equivalent for partnerships) to ensure there is top level responsibility for its content.

Those with a financial year ending 31 March 2016 are the first required to report, with the Government expecting statements to be published within six months of financial year end. While there is no prescribed content of a statement, the MSA provides examples of what a statement may contain, including information on:

  • the organisation’s structure, its business and its supply chains;
  • its policies in relation to modern slavery;
  • its due diligence processes in relation to modern slavery;
  • the parts of its business and supply chains where there is a risk of modern slavery taking place and steps taken to assess and manage that risk;
  • its effectiveness in ensuring that modern slavery is not taking place in its business or supply chains, measured against key performance indicators; and
  • the training about modern slavery available to staff.

The Government’s statutory guidance – Transparency in Supply Chains: A Practical Guide – provides further details on these themes.

What steps can I take?

A statement should be underpinned by a proportionate and risk-based approach and capable of withstanding scrutiny from key stakeholders, including shareholders and customers. Practical steps an organisation could take include adopting a modern slavery policy and supplier code of conduct; undertaking a risk assessment of existing suppliers and developing risk-based due diligence procedures for new suppliers; reviewing procurement procedures to ensure they are able to respond to labour exploitation; and updating contract terms to ensure suppliers are required to comply with policies on modern slavery and the MSA.

What are the consequences for not reporting?

Penalties under the MSA for failing to report are limited to a court injunction compelling the organisation to report. The Government intends that consumers, shareholders, civil society and the press will be the primary drivers of compliance. An organisation’s reputation is therefore most at risk from non-compliance, particularly if it operates in a sector, such as construction, already in focus for labour-related issues.

By Brett Hartley (Pictured) of Clyde & Co

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BDC 299 December 2022