Out-Law News 4 min. read
30 Oct 2015, 5:24 pm
Under the Act, organisations with a turnover or group turnover of £36 million of more which are either incorporated in the UK or carry on a business in the UK must report annually on the steps that they have taken during the financial year to ensure that slavery and human trafficking are not taking place in their own business or in their supply chains.
The obligation to produce a financial statement came in to force on 29 October, although the government indicated its intention earlier this week to apply the supply chain transparency provisions to financial years ending 31 March 2016 onwards.
In newly issued guidance aimed at helping organisations subject to the Act (46-page / 1.87MB PDF) to comply with the new rules in relation to their supply chain, the UK government confirmed the transitional arrangements.
The guidance said: "The requirement for organisations to publish a statement was commenced on 29 October 2015. However, many organisations may not be in a position to produce a statement immediately. Therefore, transitional provisions have been included to allow organisations sufficient time to understand the requirement and produce a statement. Businesses with a financial year-end date between 29 October and 30 March 2016 will not be required to publish a statement for that financial year of the organisation."
"Businesses with a year-end of 31 March 2016 will be the first businesses required to publish a statement for their 2015-16 financial year. These organisations will be required to produce a statement covering the full financial year of the organisation. However, where an organisation has only recently undertaken activities they may choose to produce a statement that indicates that activity undertaken covers a particular part of the financial year," it said.
The government said the slavery and human tracking statements should be issued "as soon as reasonably practicable after the end of each financial year in which they are producing the statement", and in practice no more than six months after the end of the financial year.
The guidance sets out more details about which companies the Act applies to, including how it relates to franchise and parent and subsidiary company arrangements.
According to the guidance, the slavery and human tracking statements companies must make should be "succinct but cover all the relevant points". It encourages companies to "provide appropriate links to relevant publications, documents or policies for your organisation" if they can and to write the statements in "simple language". Companies can re-use information they have already included in other reports about their efforts to combat slavery and human trafficking in their statements, it said.
Companies that identify cases of modern slavery in the UK should report the matter to the police. If cases are identified in other jurisdictions then "the response should be tailored to the local circumstances", the government guidance said.
"In some cases the most appropriate response will be to engage with local NGOs, industry bodies, trade unions or other support organisations to attempt to remedy the situation," the guidance said. "In other cases, it will be more appropriate to contact local government and law enforcement bodies. Organisations must always consider which approach would produce the safest outcome for the potential victims but should always remember the economic influence and control which the organisation holds over those who may be committing these crimes."
"If the local response seems inadequate and the local company seems unable to address coercion, threat, abuse and exploitation of workers, then the organisation should seek to give that company more support, guidance and incentives to tackle the issue. This could include working with at-risk suppliers to provide training, messages and business incentives or guidance to implement anti-slavery policies. If, after receiving support, the supplier is not taking the issue seriously, the organisation ultimately could reconsider their commercial relationship with that supplier. These actions could then be included in the next statement produced," it said.
Tara Hepworth, expert in reputation management in the universities sector at Pinsent Masons, the law firm behind Out-Law.com, highlighted that there is some confusion as to whom the Act applies to, including whether it applies to organisations in the higher education (HE) sector.
Many HE providers could be considered as a body corporate that supplies services with a turnover of £36m or more', as the Act requires, she said. However, she said it has been open to debate whether HE providers "carry on a business within the UK”.
Hepworth said the newly issued guidance suggests that the Act is likely to apply to HE institutions. The guidance states that there are many ways that a body corporate can pursue business objectives and that it does not matter if the organisation pursues primarily charitable or educational aims.
Hepworth said there are a number of practical steps organisations can take to ensure they meet the obligations under the new Act. Those steps range from conducting risk assessments, conducting staff training and appointing someone to take responsibility for compliance issues surrounding the Act.
Organisations subject to the Act should also identify each member of the labour supply chain and introduce controls on subcontracting, she said. Supplier contracts should be reviewed and organisations should also consider training staff involved in procurements about their obligations to conduct due diligence on vendors, she said.
However, Hepworth said that the introduction of the Act should not be viewed as a burden for HE providers or other organisations alike, but should be viewed as "an opportunity" for organisations subject to it "to increase consumer confidence in the goods and services they buy".
"Demonstrating attempts to tackle modern slavery will also contribute towards protecting and enhancing reputation and brand whilst developing a more responsible and stable supply chain," she said.