In a step towards tackling the global problems of slavery and human trafficking, Her Majesty’s Government recently passed the Modern Slavery Act 2015 which includes, at Section 54, a provision (which came into force on 29 October 2015) requiring organisations that fall within the remit of Section 54 to produce a slavery and human trafficking statement, setting out the steps that the organisation has taken to identify and eliminate modern slavery and human trafficking from its supply chain. This obligation will apply even if the organisation already has ethical business policies in place or is subject to other domestic or international laws on this subject matter. In addition, this legislation does not just impact UK registered organisations but all global organisations that carry on a business in the UK market, as more fully described below. 

Which organisations are subject to this new provision?
A commercial organisation in any part of a group structure will be required to produce a statement if it:

• is a body corporate or a partnership, 
• carries on a business, or part of a business, in the UK, regardless of where that organisation was incorporated or formed,
• supplies goods or services, and 
• has an annual turnover of £36 million or more.

There is no statutory definition for an organisation that ‘carries on a business’- Government-issued Guidance on the Act suggests that this should be applied logically and that a common sense approach should be taken to understanding this term. The courts will be the final arbiter as to any issue raised from this definition.

In ascertaining whether the reporting obligation is applicable, it is necessary to look at each parent and subsidiary organisation in a group structure to see if they fulfil the requirements listed above. In circumstances where a parent company and one or more subsidiaries are required to produce a statement, the parent company may produce a single statement on behalf of itself and its subsidiaries, provided that this statement covers and adequately describes the steps taken by each of the entities covered.

Whether a non-UK parent organisation itself is properly regarded as carrying on a business or part of a business “in any part of” the UK is to be determined by applying a common sense approach. A non-UK parent organisation with a UK subsidiary does not, in itself, mean that the parent is carrying on a business in the UK and is required to make a statement, because a subsidiary may act completely independently of its parent or other organisations in the group. However, the Guidance encourages non-UK parent companies to issue a statement in these circumstances, in the spirit of the Act’s general approach towards increasing transparency in supply chains. Similarly, the Guidance also encourages UK parent companies that are required to produce a statement to also include information about their non-UK subsidiaries, even if this is not required by Section 54 of the Act: a failure to do so may imply that a company is ignoring the activities of its non-UK subsidiaries, and this in turn may “reflect badly on the parent company”. 

What are commercial organisations required to do?
The organisation must produce a slavery and human trafficking statement at the end of each financial year. Each organisation may decide how to present their statement; however all the steps taken must be described. Providing links to appropriate documents or policies is both permitted and advisable.

The Guidance produced on the new requirement states that the statement may include information about: 

• the organisation’s structure, its business and its supply chains, 
• relevant policies which are in place, 
• due diligence processes which are undertaken on suppliers and customers, 
• parts of the business which are ‘at risk’ and how this risk is managed, 
• the effectiveness of the steps taken measured against appropriate performance indicators, and 
• staff training undertaken.

How should an organisation authorise a statement?
The statement must be approved by the board of directors and signed by a director, member or partner of the company. 

Where should an organisation present its statement?
The statement must be published on the organisation’s website, on a prominent place on the homepage – this should either be presented as a link which is easily visible or part of a drop-down menu. The link should also be clearly described- the Guidance suggests using a title such as ‘Modern Slavery Act Transparency Statement’. 

When should an organisation publish a statement?
When the provision was enacted in October 2015, it was appreciated that many organisations would not be in a position to publish a statement immediately. Therefore, businesses with a financial year-end date ending on or before 30 March 2016 will not be required to publish a statement for that financial year. So, for example, if an organisation’s financial year ended on 31 Dec 2015, then it will need to issue its first statement (coverings its activities in the financial year just ended) after 31 Dec 2016.

Businesses with a financial year-end of 31 March 2016 will be the first businesses required to publish a statement for their 2015-16 financial year. Organisations will be required to produce a statement covering the full financial year. However, where an organisation has only recently undertaken relevant activities they may choose to produce a statement which indicates that their activity covers only a particular part of the financial year.

Organisations are expected to publish their statements as soon as reasonably practicable after the end of each financial year (the Guidance recommends that organisations do so within six months of their financial year-end). Organisations may choose to publish the statement alongside any other annual or non-financial reports they are required to produce.

How far does an organisation need to investigate down its supply chains?
It is important to bear in mind that Section 54 of the Act requires an organisation to make a statement of the steps that it is taking to ensure that slavery and human trafficking are not taking part in any part of its supply chain: this does not mean that the organisation must guarantee that the entire supply chain is slavery free, or indeed that the organisation must actively take steps to combat slavery and human trafficking. Instead, it means that an organisation must set out all of the steps it has taken in relation to any part of its supply chain. ‘Supply chain’ shall be given its ordinary meaning in English. 

What if an organisation is already addressing the issue of slavery through other policies or ethics codes?
An organisation may already be undertaking procedures or have specific policies (such as corporate social responsibility or ethical trade procedures and policies) that go some way towards addressing the issue of modern slavery, and it may already be publicly disclosing this in some form . Therefore, it may not always be necessary for an organisation to start from scratch. Any relevant material used in other related reports may be used in an organisation’s statement. A separate statement must, however, be issued in accordance with this provision. 

Likewise, if an organisation has a compliance programme in place, the statement can simply provide a link to the appropriate information on the organisation’s website. The statement itself should be succinct and written in plain English.