The UK's New Reporting Obligations on Modern Slavery and Human Trafficking
A "Race to The Top" to Tackle an Atrocious Global Problem
Introduction
Companies or partnerships carrying on business in the UK with an annual turnover of £36 million (around US$55.5 million) or more will now, for the first time, be required to publish an annual statement setting out the steps they have taken to ensure that there is no modern slavery or human trafficking in their own business and their supply chains.
This is not sector specific such that only banks or energy companies (for example) are impacted. This is relevant for all companies who fall within these new reporting obligations.
The passage of the UK's Modern Slavery Act 2015[i] (the "Act") earlier this year consolidated existing criminal offences for modern slavery and human trafficking, increased the maximum sentence available from 14 years to life imprisonment and established a new independent anti-slavery commissioner.
Section 54 of the Act came into force on 29 October 2015 and introduced a new reporting obligation requiring certain businesses to publish a slavery and human trafficking statement for each financial year. As identifying modern slavery can be a challenge, this new reporting obligation is intended to increase supply chain accountability and "seeks to create a race to the top by encouraging businesses to be transparent about what they are doing, thus increasing competition to drive up standards"[ii].
The UK Government's view is that modern slavery is "extremely prevalent" across the globe. The ILO estimates that there are 21 million people in forced labour in the world today.
The aim of the legislation is to ensure that organisations with significant resources and purchasing power, which are in a strong position to influence global supply chains, implement policies and practices to combat modern slavery in their business and supply chains.
Who is required to issue the statement?
Commercial organisations, including corporate bodies and partnerships, whether incorporated in the UK or other jurisdictions, must issue a slavery and human trafficking statement each financial year if they:
- have turnover above £36 million;
- carry on any part of their business in the UK; and
- supply goods or services.
- the organisation's structure, business and supply chains;
- the organisation's policies in relation to slavery and human trafficking;
- the due diligence processes undertaken to identify slavery and human trafficking in its business and supply chains;
- the parts of the business and supply chain identified as at risk of slavery and human trafficking and the steps taken to measure and manage that risk;
- the organisation's effectiveness in ensuring that slavery and human trafficking is not taking place, measured against such performance indicators as it considers appropriate; and
- the training made available to staff about slavery and human trafficking.
- Organisational structure and supply chains: information on the organisation's structure, sectors in which it operates, complexity of its supply chains and countries in which it sources goods and services;
- Organisational policies: information on the organisation's code of conduct, recruitment policy and procurement policy;
- Due diligence: information on the organisation's risk management processes, impact assessments, action plans to combat modern slavery;
- Assessing and managing risk: identifying and prioritising business risks such as country risk, sector risk, counterparty risk and transaction risk;
- Performance indicators: identifying key performance indicators which over time will demonstrate that progress is being made to prevent modern slavery; and
- Training: information on the training provided to employees to identify modern slavery.