Why I am excited by the Modern Slavery Act
It is not often I would be excited by an Act or a new law. It is part and parcel of a lawyer's job to keep up with changes in the law and such changes are, in the main, incremental. There are some obvious examples of law which were game-changers such as the Human Rights Act or the Equalities Act. I would not put the Modern Slavery Act in the same category as the Human Rights Act, but nevertheless it is a very progressive piece of legislation and one that has taken everyone by surprise.
Although there is much to talk about in the Modern Slavery Act, the part of it that most interests me with my 'business and human rights' hat on is s.54 and the proposed requirement that all commercial organisations with a world-wide turnover of at least £36m (about US $57m) will need to prepare an annual 'transparency in supply chains' statement. Despite the relative lack of publicity about the requirement to prepare the statement, the implications for commercial organisations that are affected are far-reaching and indeed potentially onerous.
Although many companies might see the report as a welcome extension of their existing efforts there is no doubt that many (or most) will regard it as yet another layer of compliance and bureaucracy and will seek to do the minimum. It is yet unclear what exactly the report will need to contain. S.54 merely states that the report should be '(a) a statement of the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place— (i) in any of its supply chains, and (ii) in any part of its own business.'
The Act does state what may be in the report, such as:
- 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; and
- the training about slavery and human trafficking available to its staff.
However, these provisions state what may be in the report, and do not actually impose requirements. Will it be enough, for example, for the organisation to merely ask its supplier to confirm there is no modern slavery or trafficking within the supply chain and then report that? Should the organisation ask only its direct suppliers or should it ask its suppliers' suppliers? These are just some of the issues and questions that will hopefully be answered by the Government before the requirement to prepare the statement comes into force (probably in October 2015).
It appears that the requirement to prepare the report will extend to any business, with a turnover of at least £36m, which does business in the UK. It seems the UK turnover does not need to be £36m. So a Chinese commercial organisation, for example, that does a small amount of business in the UK will need to prepare the statement if its worldwide turnover exceeds £36m. The Act may require such a company to prepare the report even if the majority of its business is outside the UK. It is almost impossible therefore to estimate how many commercial organisations will be affected by the Act.
Although the requirement to prepare a statement might be onerous, it must be a welcome development. The terms 'modern slavery' and 'trafficking' might seem alien in 2015 but the evidence suggests they are still significant problems around the world. Recent scandals in the clothing industry show that a public relations disaster for any business may be only a story away. But of course it is not just for business reasons that companies may wish to avoid being unknowingly complicit in modern slavery or trafficking. All companies are run by people, and most people do not wish to build their businesses on the back of modern slavery or trafficking. In the Google age we are well into the era of compassionate and responsible business.
It might be therefore that s.54 and the Modern Slavery Act will be seen in the future as a milestone in the development of business and human rights, and it is for that reason I am excited about it!