Kim Nihill writes that companies must help fight modern slavery or face severe reputational damage.
“SLAVES ON OUR STREETS” scowled the front page of the Evening Standard on September 12, 2017. Together with the Independent, the newspaper has launched an investigation into modern slavery in London. The Standard is calling on Londoners to aid in the fight against modern slavery and is dedicated to helping deliver change by helping to force the closure of businesses in London that use slave labour and campaigning for new policies and laws to crack down on slavery, wherever it occurs.
The Modern Slavery Act 2015 (MSA) contains three key criminal offences: slavery, servitude and forced or compulsory labour; Human Trafficking; and Committing an Offence with the intention to commit Human Trafficking. The MSA also created the Transparency in Supply obligation, which applies to commercial organisations in any sector that supplies goods or services, carries on a business or part of a business in the UK, and has a total annual turnover of £36m or more. The Act states that commercial organisations must have a “demonstrable business presence” within the UK. However, parent companies of UK subsidiaries will not automatically be liable, and parent companies that must themselves comply are encouraged to report on the business of their UK subsidiaries, even those that do not fall within the criteria of compliance.
These organisations are required to prepare a slavery and human trafficking statement for each financial year. The statement may include:
- 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 in its business and supply chains;
- 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;
- The training about slavery and human trafficking available to its staff.
According to a recent survey carried out by the Chartered Institute of Procurement & Supply, one in 10 UK supply chain managers say that they have found evidence of modern slavery in their supply chains since the MCA came into force. As per the same survey, roughly one third of UK companies required to complete a statement have failed to do so. Additionally, 60% of foreign companies required to comply have not. There does appear to be a lack of clarity as to what the Act requires organisations to do; and yet, it has been reported that a number of the statements which have been published are insufficient and do not comply with the obligations under the Act.
The Modern Slavery (Transparency in Supply Chains) Bill 2017, which recently (September 8, 2017) had its second reading in Parliament, seeks to amend the MSA to make further provision for transparency in supply chains. The Bill clarifies what must be included in the statement, forcing organisations to provide reasons for failing to take steps to eradicate human trafficking and slavery. Furthermore, the Bill comprises a list of all commercial organisations required to publish a transparency statement and bans organisations that fail to comply from participating in a public procurement.
Interestingly, the Bill does not propose to apply sanctions for failure to comply. However, what cannot – and should not – be ignored by those companies affected by this legislation, and perhaps even those who currently are not, is the devastating reputational damage that failure to engage in the Government’s efforts to eradicate this practice may lead to. Companies must ensure that they have proper processes in place to enable them to identify such practices within their business and supply chain. They must prepare how to deal with an anomaly in the event that it is suspected or identified and they must keep track of precisely what their evolving compliance obligations are under the Act.
Reputational damage can be irreversible. The onus is very firmly on companies to reassure the public of their integrity, the integrity of their products and of their support of the international effort to eradicate modern slavery.
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