The Modern Slavery Act requires businesses to publish annual 'transparency in supply chains' report

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The Modern Slavery Act requires businesses with a turnover of £36 million or over to publish annual 'transparency in supply chains' report.

The Modern Slavery Act (s.54) requires commercial organisations to produce an annual report setting out the steps they have taken to ensure there is no modern slavery or trafficking within their businesses or supply chains.

S. 54 applies only to commercial organisations with a certain turnover which is not set out in the Act.  However, on 29 July 2015, the Government published a report on the results of a public consultation on the applicable turnover. The report sets out the Government's intention to make any commercial organisation with a turnover of at least £36m liable to publish a report (or publish a statement on the home page of its website stating it has not taken any steps to ensure there is no modern slavery in its supply chains). £36m appears to have been favoured as it is the figure which defines a 'large business' for other reporting requirements under the Companies Act 2006.

The Government has said it will table the relevant legislation in October 2015 with transitional provisions for organisations whose financial year ends shortly after the requirement coming into force. It is likely therefore that organisations will have to be compliant in the next 18 months or so.  This means that businesses in the UK will have to get to grips very quickly with the requirements of s.54 and how to prepare, draft and publish the transparency in supply chains report.

Robert Lyons, a corporate partner at Blake Morgan LLP, said:

'This new measure is indicative of the growing importance of corporate responsibility in the business world and will impact upon businesses of a size that, in the past, would not necessarily have paid as much attention to corporate governance and responsibility issues.  Businesses that meet the revenue threshold should not delay in taking steps now to start assessing supply chains, engaging with suppliers, drafting policies and training staff so that the business can effectively extract information along its supply chain that can be confidently relied upon in its transparency report. The alternative – publicising the business' lack of human rights compliance on its website – may well be unpalatable to many organisations'.

S.54(4) sets out what may be included in the report, including 'its due diligence processes in relation to slavery and human trafficking in its business and supply chains'.

The s.54 reporting requirement is a milestone in the advancement of business and human rights. It emerges in parallel to a growing global trend towards making commercial organisations accountable for human rights norms, following in the footsteps of the UN Guiding Principles on Business and Human Rights and commercial leaders such as Unilever, the world's first business to publish a report under the UN Guiding Principles Reporting Framework.

In its July report the government has said that it wants 'businesses to take the issue of modern slavery seriously at the highest levels'.  Businesses will need to address the commercial realities of preparing the report as well as the commercial sensitivities of making enquiries of suppliers and being forthcoming with clients about which steps are being taken to ensure there is no slavery in their supply chains.

For further information about the impact of the Modern Slavery Act on your organisation, or if you require assistance preparing the report, please contact Lisa Parsons, contact details below.