You may be wondering whether the Modern Slavery Act applies to you as a start-up or a small business owner. How could this apply when your supply chain is relatively small compared with that of a multi-national conglomerate? You may be thinking I know my supply chain inside out. And you may be right. In fact, you may not be under any legal obligation to publish a Modern Slavery Statement at all. But there are other reasons why you should consider complying at an early stage to support your business’ growth. Read our guide below on complying with the Modern Slavery Act and see how it could benefit your business.
- What is the Modern Slavery Act?
- Does the Modern Slavery Act apply to my business?
- What are the Modern Slavery Act requirements?
- What policies and actions need to be taken for my business to comply?
- How can seeking Modern Slavery Act guidance benefit my business?
What is the Modern Slavery Act?
The Modern Slavery Act 2015 (the Act) was introduced to try to combat the almost 21 million people worldwide believed to be victims of modern slavery. Modern slavery might include human trafficking, prostitution, forced marriage, forced labour (violence or intimidation used to get someone to work) or bonded labour (where someone is coerced to work against their will to pay off a debt).
The Act aims to make modern slavery more difficult by requiring larger businesses to disclose the actions taken during each financial year, to ensure modern slavery is not a part of their business or part of their supply chain in an annual statement.
Does the Modern Slavery Act apply to my business?
In October 2018 the Home Office wrote to the Chief Executives of 17,000 companies advising them that they needed to register with the Modern Slavery Contact Database.
Even if your business did not receive this communication, your business will be required to comply with the Act if:
- It is commercial in nature
- It has a global turnover of over £36 million
- It carries on a business, or part of a business, in any part of the United Kingdom
- It supplies goods or services
It does not matter which sector you operate in or whether you are based outside of the United Kingdom. If your business operates within the United Kingdom and fits the other criteria above, your business will need to comply with the Act.
If you are an overseas business and your UK-based subsidiary’s activities would fit with the criteria under the Act, it might be that the overseas organisation is subject to the Act as well, but individual analysis on a case by case basis will be required. If you are unsure as to whether the Act applies to your business, contact our employment solicitors.
What are the Modern Slavery Act requirements?
If your business fits the criteria above, you must publish a ‘slavery and human trafficking statement’ (Statement) for each financial year. As stated above, this Statement must disclose steps the business has taken to ensure that slavery and human trafficking is not taking place in their own business and in the businesses of those in their supply chains. Where no steps have been taken to prevent modern slavery, a Statement must also disclose this point.
The Statement must be approved by the Board of the company, signed by a Director (or someone at least as senior) and the Statement should be prominently linked on the company’s homepage on their website.
At the moment there is no requirement to also upload the Statement to a centralised government website, but the Business and Human Rights Resource Centre is pulling together a central register of Statements to be able to easier compare businesses and their actions against modern slavery.
The Practical Guide, released by the Home Office, highlights six areas that companies could consider covering in their Statements.
- Business organisation, structure, and supply chains
- Due diligence
- Risk assessment
- Performance indicators
Whilst the six areas are guidance and not requirements, it is advisable for Statements to cover all these areas, such as the details of policies and procedures, a description of the training provided to staff, and commercial agreements your organisation has in place regarding obligations on suppliers to comply with minimum standards and ethical practices. This will help you avoid the reputational risk associated with the perception that a Statement is ‘incomplete’.
Price Waterhouse Cooper research of the 100 largest overseas companies demonstrates that 42% of the companies’ reports were non-compliant in not meeting one or more of the legal requirements.
Businesses must publish their annual Statements ‘as soon as reasonably practicable’ following the end of their financial year. There is no specific legal deadline, but Statements must be published within six months of the end of the financial year. Businesses should try to work on their Statements throughout the financial year by keeping careful records of all the action taken throughout the year to address modern slavery.
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What policies and actions need to be taken for my business to comply?
Whilst there are specific policies which may assist, it is a general culture of strong disclosure and communication across different departments, particularly in larger or more decentralised businesses, which will help your business to comply with the Act.
In terms of practical actions which can be taken, it would be advisable to consider working groups whose specific purpose is to look at how the Act should be complied with. It is important to remember though, that any actions or policies should be proportional to the risk and resources of the business and so it is reasonable to consider this when putting measures in place to comply with the Act.
When it comes to policymaking, developing new, modern slavery-specific policies or redrafting existing policies such as supplier codes of conducts - this might be a good place to start. Businesses would be well advised to integrate relevant legal conditions into supplier agreements, where possible, either at the beginning of the relationship or at an appropriate time in a contract, for example at re-tendering.
You should also look at risk assessment and whether this is thorough enough. If you consider that any suppliers are ‘high risk’, further investigation into their practices, including a probing but relevant questionnaire can be sent to that supplier for completion.
We can assist you with not only reviewing your Statement and policies, but also with risk assessing your supply chain by drafting the questionnaire and sensitively investigating a supplier’s processes and practices and carrying out a thorough due diligence process either at the beginning of or during your relationship with a supplier.
Our specialist advisers can help you review the Statements released by your suppliers and look at what other information you need to ensure you are complying with the Act. We can also review relevant clauses in third party agreements and advise on how these might be amended in your business’ circumstances to better comply with the Act.
How can seeking Modern Slavery Act guidance benefit my business?
There are no criminal sanctions for failure to produce a slavery and human trafficking Statement, but the Government can apply to the High Court for an injunction to force an organisation to publish a Statement. Subsequent non-compliance with registration requirements or other aspects of the Act could lead to ‘naming and shaming’ and so aside from the legal reasons for compliance, it is important to ensure compliance for reputational reasons. With 24-hour news coverage and social media, significant reputational damage can happen very quickly if your business does not take adequate steps to tackle modern slavery.
As well as the negative attention that non-compliance could draw, demonstrating that you are compliant with the Act and so an ethical business can enhance your brand and show corporate social responsibility to be central to your business.
Supply chain efficiencies
Complying with the Act can also have other positive implications for your business. For example, being more aware of what your suppliers are doing and asking more questions of them can bring new supply chain efficiencies and avoid weak supply chain management, which could lead to the impounding of goods imported for sale if slavery is found in your supply chain. If compliance could prevent this and allow goods to be efficiently and lawfully sold you will have a more profitable business.
Winning new business
There is now a ‘trickle-down effect’ with compliance, as larger businesses are requiring assurances from their smaller business partners (who are not required by law to comply with the Act) to make sure that their own businesses are free from modern slavery. Therefore, when bidding for work it is often a required field in many tenders to confirm no modern slavery is present in your supply chain so compliance with the Act could help you to win business and be commercially advantageous.
The Corporate Human Rights Benchmark and the EU non-financial reporting directive amongst other recent changes highlight that human rights are very much on the global agenda and so preparing your business for this is unlikely to be a disadvantage.