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Modern Slavery Act

Friday 4 December 2015

Background

At the end of March 2015, the Modern Slavery Act, a piece of landmark legislation, came onto the statute. The main thrust of the Act focuses on illegal activity in the UK; however, the legislation also looks at the potential for slavery down the supply chain outside of the UK.

The Act has direct implications for businesses operating in any sector in the UK.

A key element of the Act is the ‘Transparency in Supply Chains’ provision. Businesses above a certain threshold are required to produce a ‘Slavery and Human Trafficking Statement,’ outlining what steps they have taken in their supply chain and own business to ensure slavery and human trafficking is not taking place.

Who does the Act apply to?

a) A body corporate (wherever incorporated) which carries on a business, or part of a business, in any part of the United Kingdom, or
b) A partnership (wherever formed) which carries on a business, or part of a business in any part of the United Kingdom.

The Government’s Consultation

Following the passing of the Act, the UK Government entered a period of consultation with industry and interested parties which ended on 7th May 2015. The consultation process sought views on the turnover threshold that would determine whether or not a company has to report as well as what guidance is required to help businesses understand what a slavery and human trafficking statement might include.

A summary of the consultation was published by the Home Office on 29th July 20151. The document summarises key findings from the responses to the consultation and more specifically provides details of:

  • The threshold for reporting on the ‘Transparency in Supply Chains’ clause.
  • Initial views on the content of the statutory guidance that the Government are compiling which is due for publication late 2015.

Threshold for reporting

Following the consultation, the turnover threshold for reporting has been set at £36million. Companies above this threshold will be obliged to report as detailed in the ‘Modern Slavery and Supply Chains – Government Response2.’

“all commercial organisations carrying on business in the UK with a total turnover of £36m or more will be required to complete a slavery and trafficking statement for each financial year of the organisation.”3

The aim of this measure is to encourage businesses to do the right thing and to drive transparency as companies’ statements are published, scrutinised and compared. According to the Home Office:

“It is possible for a business to comply with the provision in the Act by simply stating that they have taken no steps during the financial year to ensure that their business and supply chains are modern slavery free. However, this requirement will make it absolutely transparent what action a business is or is not taking and will allow investors, consumers and the general public to decide who they should and should not do business with .”

Guidance

The consultation process also sought views on what guidance industry require which would enable them to produce high-quality and informative disclosures.

During the final stages of passage of the Modern Slavery Act, further information was included in section 54(5) of the Act4, setting out the types of information that might be included in a slavery and trafficking statement.

Based on stakeholder engagement through the consultation process and similar legislation which exists in the USA5, the Home Office has identified five general areas of activity that should be included in a slavery and trafficking statement:

a) A brief description of an organisation's business model and supply chain relationships.
b) A business’s policies relating to modern slavery, including due diligence and auditing processes implemented.
c) Training available and provided to those in 1. supply chain management and 2. the rest of the organisation.
d) The principal risks related to slavery and human trafficking including, how the organisation evaluates and manages those risks in their organisation and their supply chain.
e) Relevant key performance indicators (key performance indicators are measures that will assist the reader of a slavery and human trafficking statement to assess the effectiveness of the activities described in the statement).

Over the next few months, the Government will be compiling guidance setting out the kinds of information that might be included in a disclosure. It will set out good practice for businesses to consider in their approach.

The expectation is that each organisation’s slavery and human trafficking statement will be different and specific to their own circumstances.

The impact on NHS Supply Chain and our suppliers

The requirements of the Act have reporting implications for both NHS Supply Chain as an organisation and for many of our suppliers. From an initial assessment, approximately 180 of our suppliers would fall within the threshold for reporting although this may increase as we validate supplier turnovers and more tenders are awarded.

Currently all awarded suppliers to NHS Supply Chain framework agreements sign up to our Supplier Code of Conduct6 which contains a provision around ‘forced labour.’ In addition an increasing number of suppliers are implementing the Labour Standards Assurance System (LSAS) as a condition of contract for tenders within high risk sectors and product categories and indeed this has been referenced in the Government’s Modern Slavery Strategy7. Many aspects of the LSAS align to the five reporting areas that the Government has outlined and should appear within any slavery and human trafficking statement.

The duty of reporting over the £36 million threshold within the Modern Slavery Act comes into force in October 2015 subject to appropriate parliamentary clearance. There are transition provisions outlined below to give businesses sufficient time to prepare;

“transitional provisions will be developed so that statements are not required where a businesses’ financial year end is within close proximity to the date that the duty comes into force.”8

The guidance due out from the Government will be published to coincide with the duty coming into force. NHS Supply Chain will share this with suppliers as soon as it becomes available.

Footnotes

  1. Full details of the consultation responses can be found at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/448200/Consultation_Government_Response__final__2_pdf.pdf
  2. Section 8.3
  3. Section 5.2 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/448200/Consultation_Government_Response__final__2_pdf.pdf  
  4. http://www.legislation.gov.uk/ukpga/2015/30/section/54/enacted
  5. The California Transparency in Supply Chains Act 2012
  6. NHS Supply Chain Supplier Code of Conduct http://www.supplychain.nhs.uk/about-us/sustainability/~/media/Files/Suppliers/Supplier_code_of_conduct.ashx
  7. Section 6.29 https://www.gov.uk/government/publications/modern-slavery-strategy
  8. Section 8.10 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/448200/Consultation_Government_Response__final__2_pdf.pdf

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