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UK HR e-briefing: September’s deadline approaches for first modern slavery statements

  • United Kingdom
  • Employment law - Business and human rights
  • Employment law - HR E-Brief

05-09-2016

The Modern Slavery Act signalled a new push in the fight against slavery and trafficking – including a duty on businesses to play their part in stopping modern slavery in global supply chains.

The pressure on UK employers to act is mounting further, given this year’s Immigration Act which tackles labour exploitation, the sharp rise in the number of slavery victims and police prosecutions and Theresa May’s new Cabinet anti-slavery taskforce. Developments abroad are also gaining traction with US, French and EU legislative moves and growing global corporate scrutiny, reflecting, for example, NGO benchmarking activities, such as Know the Chain’s slavery in supply chains business ranking.

As the September deadline approaches for the first qualifying businesses to publish their slavery and trafficking statements under the Modern Slavery Act, we examine below how organisations are responding and identify practical lessons learnt. Businesses should be aware that the government is already being lobbied to strengthen the Act in the event that such corporate slavery statements are deemed unsatisfactory in quality and quantity. In particular, a private member’s Bill seeks to extend the reporting provisions. While the Bill is unlikely to succeed without government support, which it does not currently have, it reflects the close attention being paid to slavery and trafficking statements.

A recap: the duty to report under the Act

The Act requires qualifying businesses to publicly report, in a slavery and trafficking statement, the steps they have taken to ensure their operations and supply chains are trafficking and slavery free. The duty applies to organisations with year-ends from 31 March 2016.

Qualifying businesses are those companies and partnerships supplying goods or services (wherever incorporated or formed) with global turnovers of £36 million and above, providing they carry on business in the UK.

To comply, organisations are expected to report annually and within six months of year-end, on policies, risk assessments, due diligence processes, training and the effectiveness of measures taken to combat slavery and trafficking. The annual report must be signed and approved at the highest level in the organisation and made accessible from the organisation’s homepage. Read our guide to the Act for further information.

How have businesses responded to the new reporting duty?

The increasing number of slavery and trafficking statements published by businesses over recent weeks is a measure of the Act’s success. Some statements suggest significant efforts by organisations to examine their role in preventing slavery and trafficking. Even where statements are more cursory in nature, the mere fact of publication reflects a recognition by businesses that corporate accountability matters. A review of these statements shows the following:

Policies
Many of the businesses reporting have introduced new or amended policies, such as anti-slavery, ethics, recruitment, whistleblowing, procurement and other policies. Government guidance lists issues to consider when drawing up an anti-slavery policy.

Practical tip: Research shows that top-level commitment is a key factor in successfully embedding anti-slavery policies. Ensure executives and the board are demonstrably supportive (e.g. obtain their approval for key policies, ensure that a director or CEO communicates the change to employees and a director/board level committee is accountable for anti-slavery policies etc).

Risk assessments, results and steps taken in response
Typically, a risk assessment involves the organisation researching and identifying slavery and trafficking risks where they have operations and supply chains, and then prioritising those risks for further investigation and action. Reflecting the potentially huge task that risk assessments involve, particularly with long and complex global supply chains, the Government has stated that they should be proportionate to the organisation’s size, structure, location of activities and supply chains, and nature of its business.

Risk assessment reporting in recent statements is noticeably patchy. Some sectors, such as manufacturing, retailing, food and extractives, already undertake risk assessment activities. These activities include reviewing and acting on independent supplier audit reports, working collaboratively with other sector businesses to together identify and combat problems and setting up hotlines to encourage workers/stakeholders to bring potential slavery concerns to their attention. Such activities are reflected in some statements, however, many other statements reveal little about whether or how risk assessments are carried out. Given the important role risk assessments play in focusing preventative action, businesses should expect critical attention if they do not address them in reporting in the future.

Practical tip: Appropriate resources are needed to ensure that risk assessment activities are effective, however, publicly available risk data is available to businesses. Many avenues can help identify potential risks: for example, Department of Labour’s reports on child labour and slavery around the world, the Global Slavery Index, Verité’s forced labour commodity atlas as well as other corruption and rule of law indicators. News stories, internet research and, in particular, getting close to local country experts and stakeholders.

Due diligence processes
Due diligence processes include embedding new and amended policies, procedures and other measures aimed at addressing the results of risk assessments.

The statements show that businesses are typically introducing or amending supplier codes of conduct, supplier self-certification questionnaires and contract terms to include anti-slavery compliance (and sometimes for suppliers’ suppliers). Some medium or higher risk organisations detail additional due diligence processes, such as strengthening supplier vetting, reducing supplier numbers and building the anti-slavery capacity of those retained, restricting sub-contracting, inspecting sub-contractors and requiring suppliers to attend training.

Practical tip: Due diligence can appear overwhelming where multiple geographies, activities and supply chains are involved. To overcome this in practice businesses should be led by risk - prioritising due diligence activities in any high or medium risk areas identified - and be pragmatic. Both risk assessment and due diligence require ongoing attention and are not one-off activities.

Training
Many of the statements published make reference to training staff, for example, all new employees during their inductions and buyers and other targeted roles. Some organisations train all employees on a regular basis, such as annual ethics training. Online learning is a popular option when training large numbers. A minority of businesses report supplier education activities.

Practical tip: Given the hidden and clandestine nature of slavery and trafficking and the key role of frontline staff, raising their awareness is a critical step in helping them spot the tell-tale signs. In addition, educating suppliers is also important: organisations with a track record in tackling human rights risks in their supply chains have reported greater success where they collaborate with suppliers, including providing training, in contrast to relying solely on audits and self-certification.

Performance indicators to measure effectiveness of anti-slavery steps taken
To date, only a minority of statements identify performance indicators to measure the effectiveness of anti-slavery steps taken. With many businesses focusing on their initial steps to combat slavery risks, it is probably too early for most to report on progress made. Undoubtedly, NGOs and others tracking corporate accountability will be looking to future statements with an expectation that KPIs should be included.

Practical tip: Businesses should consider instituting performance measures from the outset to enable progress to be recognised, problems identified and to keep a focus on fulfilling commitments. Linking to, or integrating with, existing business indicators may help them gain more traction.  Depending on risk, KPIs might include the numbers of: risk assessments undertaken, first tier suppliers contacted/audited/trained/signed up to Codes of Conduct, lower tier supplier actions, slavery and trafficking grievances or complaints received, employees trained, existing procurement contracts updated with anti-slavery clauses, etc.

Signed by director and approved by the board or equivalent
Many statements published in response to the Act have been signed by one (or more) of the following: Chairman, Managing Director, Finance Director, CEO. Some fail to comply and are published without any reference to the approval process.

How we can help
We provide practical, legal and strategic advice on modern slavery, as well as human rights, reporting obligations, your risk factors, due diligence steps and integrating change. We train businesses on slavery and trafficking issues and will shortly have e-learning modules available.

Our Business and Human Rights Hub has a range of materials for your assistance, including a webinar, videos, research findings and briefing notes. If you have any questions, please do not hesitate to contact Tom Player.

For more information contact

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