UK Government Guidance on the Modern Slavery Act - Transparency in Supply Chains

Transparency in supply chains statutory guidance 

The UK Government recently published updated guidance on the Modern Slavery Act 2015. The Transparency in Supply Chains Statutory Guidance ("the guidance”) provides clarity and guidance in respect of the reporting requirements set out in Section 54 (transparency in supply chains etc).

The Modern Slavery Act 2015 ("the Act”)

Modern slavery is the exploitation and extreme poor conditions of employees or workers in what would be considered a ‘normal’ workplace. The International Labour Organisation ("the ILO”) has estimated that there are approximately 27.6 million people living in forced labour globally. The aim of the Act is to reduce and ultimately abolish forced labour in the UK and globally. 

Section 54 of the Act – reporting requirements 

Section 54 of the Act requires ‘commercial organisations’ to publish an annual slavery and human trafficking statement. To summarise the requirement:

Who

‘Commercial organisations’ are body corporates or partnerships (irrelevant of where incorporated or formed) who (i) carry on a business (or part of a business) in the UK, (ii) supply good or services, and (iii) have an annual turnover of £36 million or more. 

What

The statement should set out the steps the organisation has taken to ensure modern slavery isn't occurring in its business and supply chain.

Under section 54(5) of the Act, the annual statement must include the following six categories:

• 'the organisation’s structure, its business and its supply chains; 
• its policies in relation to slavery and human trafficking; 
• its due diligence processes in relation to slavery and human trafficking;
• the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it 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.'

If a commercial organisation is part of a group of companies, the parent company can produce a modern slavery statement for use by its subsidiaries. However, where entities within a group operate in different sectors, each entity should produce its own modern slavery statement due to differing risks of modern slavery across different sectors and different actions will, therefore, be required to respond appropriately to the risk. 

How

The statement must be published on the organisation’s website or sent to any person who requests the statement within 30 days of the request if the organisation doesn't have a website.

When

The statement must be published annually, ideally within six months after the end of the organisation’s financial year.  

Key takeaways from the guidance

Section 4 of the guidance sets out helpful actions and practical steps organisations can take to report effectively on the section 54(5) requirements in their annual statement. Key takeaways for each category are: 

Organisation’s structure, business and supply chains

Organisations must ensure they understand and have oversight of their group structure, supply chain and relationships with stakeholders, and who is responsible for managing and complying with modern slavery requirements, so that they can effectively identify and mitigate modern slavery risks within their business and supply chain. The guidance recommends undertaking supply chain mapping to support this.

Policies 

Organisations should undertake a thorough review of their current modern slavery policies in place to ensure that these are clear and up-to-date and have been appropriately implemented, communicated and enforced, and are available to relevant stakeholders. Relevant policies listed on page 21 of the guidance should be implemented, and organisations should engage with stakeholders to develop and implement policies as appropriate.

Due diligence 

Organisations should have appropriate processes and actions in place to prevent and reduce the risk of modern slavery, as well as for reporting concerns or instances of modern slavery. Due diligence should focus on the areas of the organisation with the highest risk of exploitation. Business models and activities should promote positive purchasing practices and responsible recruitment. 

Assessing and managing risks

Organisations should assess the risk that 'goods or services [it]…provides, makes or purchases has been made fully or in part by slave labour', focussing on the risk to workers rather than the organisation.

An organisation should first identify the specific risks in relation to that organisation, which will depend on the nature, size, location and structure of the business. The risk level of each risk will need to be assessed (an example risk matrix is provided on page 32 of the guidance) and then prioritised, mitigated and prevented by following processes and actions put in place as part of the organisation’s due diligence process. Risks should be regularly reviewed. 

Monitoring and evaluation 

Organisations should record the actions taken to manage and mitigate the risks of modern slavery and evaluate their effectiveness to ensure continual improvement of policies and practices. Organisations should set relevant modern slavery goals and KPIs and capture data to support monitoring and evaluation. Pages 55 – 56 of the guidance provide a detailed process of how to develop such goals and KPIs. 

Training 

Organisations are required to deliver modern slavery training to everyone within the organisation as well as tailored training to HR staff, management, suppliers and those workers most at risk. Training should include (but is not limited to) what modern slavery is, how modern slavery may occur and the organisation’s reporting processes.

Failure to comply

If an organisation fails to comply with section 54 of the Act, then an injunction may be brought against the organisation requiring it to comply. If the organisation fails to comply again, then it can be subject to an unlimited fine. 

Global 

If your company operates across multiple countries, you might be questioning how many statements are required and which entities need to issue one. The following information is provided in the guidance: 

'If a foreign subsidiary is part of the parent company’s supply chain or own business, the parent company’s statement should cover any actions taken in relation to that subsidiary to prevent modern slavery. Where a foreign parent is carrying on a business or part of a business in the UK, it will be required to produce a statement.

If a parent company is seen to be ignoring the behaviour of its non-UK subsidiaries, this may still reflect badly on the parent company. As such, seeking to cover non-UK subsidiaries in a parent company statement, or asking those non-UK subsidiaries to produce a statement themselves (if they are not legally required to do so already), would represent good practice and would demonstrate that the company is committed to preventing modern slavery.'

Therefore, even if it isn't a legal requirement to cover certain non-UK entities, we'd recommend you do so in any slavery and human trafficking statement produced.

Further, the OECD due diligence guidance is helpfully linked throughout the guidance for each specific requirement. We'd also recommend organisations with global entities review the UN guiding principles which provide the global framework for businesses to prevent negative impacts on human rights, including labour exploitation.   

How can we help you?

Anyone who is required to produce an annual statement should review the guidance carefully and follow its advice, but we can support your organisation with this: for example, we can advise whether your organisation needs to produce a modern slavery statement, review your current statements or create a statement template for your organisation. 

We can also assist with statements for global entities and for more complex organisations or structures, and work together with you and one of our well-connected network of global law firms in the relevant jurisdictions for your organisation.