Tackling Modern Slavery

by Dechert LLP
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Dechert LLP

Pressure on businesses to do more to address slavery is ramping-up. In July, the UK Prime Minister described slavery as ‘the greatest human rights issue of our time’. Today, 18 October, marks Anti-Slavery Day in the UK. Despite the new requirements in the Modern Slavery Act 2015, the Anti-Slavery Commissioner’s first report to Parliament1 on 12 October criticised the lack of action by businesses. And an independent review2 of slavery statements by FTSE 100 companies has found serious shortcomings. What do companies need to do?

All commercial organisations with a turnover over £36m doing business in the UK are required to publish an annual statement setting out the steps they have taken to prevent slavery in their businesses and supply chains in the UK and overseas.

The judgement on their progress to date is harsh. The UK Anti-Slavery Commissioner, in his first annual report, said: “There is still much more to be done to ensure that companies produce statements that both comply with the Act’s obligations and point to decisive action being taken, as opposed to merely being a ‘tick box’ exercise.”

A separate, independent analysis by the Business & Human Rights Resource Centre of the 27 modern slavery statements issued so far by FTSE 100 companies found only two that were of a high standard. The majority demonstrated weak risk assessment and due diligence. The study concluded that most companies provide too little information on the structure and complexity of their supply chains. It also concluded that without this crucial understanding of their own operations, companies are unlikely to be able to take meaningful action on slavery.

What do businesses need to do?

There are four steps.

1. Determine whether the Modern Slavery Act (‘the Act’) applies to your organisation

The requirement to publish an annual statement applies to all corporate bodies and partnerships (wherever incorporated or formed) which: supply goods or services; carry on a business or part of a business in any part of the UK; and have a global annual turnover of or above £36 million. Turnover is calculated as the global turnover of the organization and of any of its subsidiaries, including those operating wholly outside the UK. An organisation will be caught if it engages in commercial activities irrespective of the purpose for which profits are made.

Organizations that do not have a demonstrable business presence in the UK will not be caught. Having a UK subsidiary will not in itself mean that a non-UK parent company is carrying on a business in the UK. But each parent and subsidiary (whether based in the UK or not) that meets the requirements must make a statement in their own right. 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.

More generally, parent companies are recommended to include the actions of their non-UK subsidiaries, particularly those in a high-risk industry or location. 

2. Determine the timing and approval process of the statement

The first organisations required to publish a statement were those with a year-end of 31 March 2016, for their full 2015-16 financial year. Organisations are expected to publish their statements as soon as reasonably practicable, and within six months, after the end of each financial year. To ensure senior level accountability and the fostering of a culture of zero tolerance for modern slavery, the statement must be approved by the board and signed by a director; or by the members and signed by a member; or by a general partner or partner, as appropriate to the type of organisation. The statement must be published on an organisation’s website with a prominent link on the homepage.

3. Conduct an audit of the business and supply chains

This is an essential first step in order to ensure that resources are focused in the highest risk areas. Businesses need to understand the structure of their supply chains and to consider, in particular, country and sector risks.

4. Review current policies or draw up new ones

Modern Slavery policies should be tailored and proportionate to the risks of each organisation. But even a basic policy should include at least the following elements:

  • a clear statement of commitment to preventing all forms of slavery in the business and in all tiers of its supply chains in the UK and overseas;
  • clarity on which parts of the business are covered by the Act;
  • nomination of those responsible for the policy, both overall and at operational level;
  • how the policy will be enforced and the penalties for any violations;
  • assurance for those who come forward to report concerns in good faith;
  • awareness-raising and training for all relevant staff in particular those responsible for supply chain management and procurement and, if appropriate, for relevant supplier organisations;
  • a regular annual process to review modern slavery risks at all tiers of the supply chain, as well as in its own business;
  • informing all new suppliers, and all existing suppliers on an annual basis, of the business’ zero-tolerance of slavery, its expectations of them as suppliers and a requirement for them to report on their policies and the actions they are taking to identify and address the risks of slavery. This may be reinforced by a Supplier Code of Conduct, to be signed by all suppliers;
  • contractual obligations on suppliers to include provisions requiring them to comply with the business’ slavery policy;
  • as appropriate, conducting audits of suppliers or investigations of credible allegations of slavery, and requiring any specific measures to be taken to ensure that risks of slavery are addressed effectively;
  • in the event of slavery being identified, requiring that immediate remedial action is taken to address it in a timely manner and providing appropriate support to achieve the safest outcome for potential victims of slavery. In the event of failure to resolve the situation rapidly and satisfactorily, consideration should be given to terminating the contract;
  • identify key performance indicators that will help demonstrate progress and that can be set out in the annual statement.

Footnotes

  1. Independent Anti-Slavery Commissioner: annual report 2016
  2. At the Starting Line: FTSE 100 & the UK Modern Slavery Act

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