20 November 2015

  • Corporate Responsibility and Annual ‘Transparency in Supply Chains’ Statements, Modern Slavery Act 2015

    Dr Sonia Morano-Foadi , Reader in Law, Oxford Brookes University

    Iulia Mirzac, Law Student, Oxford Brookes University

    Starting from 31 March 2016, commercial organisations with an annual turnover of £36 million or more that do business in the UK will be required to publish an yearly ‘transparency in supply chains' statement setting out the steps they have taken to ensure their business and supply chains are free from slavery and human trafficking. The requirement is set out in s. 54 of the Modern Slavery Act 2015 and it forms part of the UK’s implementation of Directive 2011/36/EU of the European Parliament and of the Council on preventing and combating trafficking in human beings.

    The requirement for transparency in supply chains provision has far-reaching positive implications: as well as giving businesses an opportunity to play a much more active role in combatting human trafficking and modern slavery, the requirement allows businesses to establish reputations as private enforcers of human rights law. The Government seeks to encourage companies to adopt policies that leave no place for human trafficking, and to use their leverage to motivate suppliers to do the same.

    Consumers and investors expect businesses to provide products and services that do not involve any human rights violations. In this regard, the requirement to publish a 'transparency in supply chains' statement is set out on a voluntary basis rather than a punitive one. Organisations that comply with the provision are more likely to see an increase in their brand recognition and consumer approval. Consumers will have greater confidence in the goods and services they purchase; and workers will be better protected for slavery and trafficking which will be more effectively managed.

    Companies should include in their supply chains statements information on the following areas:

    • the organisation's structure, its business and supply chain;
    • 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;
    • risk assessment of slavery and trafficking and steps to manage that risk;
    • its effectiveness in ensuring that there is no slavery or trafficking in its business and supply chain, measured against performance indicators, and
    • staff training.

    The provision came into force in the light of the California Transparency in Supply Chains Act of 2010. The American legislation is similar to the UK one in that it requires retail sellers and manufacturers that do business in California, and have over $100 million in gross annual receipts, to disclose publicly their efforts to eradicate slavery and human trafficking from their supply chains.

    The Californian experience confirms that consumers do expect businesses to provide products and services that do not breach human rights principles; and that non-compliance or poor compliance will result in organisations facing a court injunction for compliance. In California, two retail companies are currently being alleged of having included false information in their statements, and facing the risk of paying damages ‘in excess of $5,000,000.

    The new legislation will also apply to organisations in the hospitality sector. Thus, those businesses which fall under the requirement will have to produce a statement as per s. 54 of the Modern Slavery Act 2015. An example of a high risk area identified in the hospitality industry would be in relation to the recruitment of members of staff, particularly those hired for seasonal or construction work, through recruitment agencies rather than by the organisation itself. Organisations will have to develop policies and practices that combat the risk of hiring potential victims of human trafficking.

    Following the Californian and British legislation on the issue of modern slavery in supply chains, a proposal for similar legislation has been made to the European Union for a Directive of the European Parliament and of the Council amending Council Directives 78/660/EEC and 83/349/EEC regarding disclosure of non-financial and diversity information by certain large companies and groups. If the proposal is accepted, it will require large companies across the EU to disclose annual statement information relating to environmental, social, and employee-related matters, human rights protection, bribery and anti-corruption.

    This blog reflects only the author’s views and not those if the European Commission. The European Commission is not responsible for any use that may be made of information contained in this blog.