UK firms grappling with mandated modern slavery reports

The Act, the first of its kind in Europe, requires large organisations to publish a slavery and human trafficking statement each year. It came into force on 29 October 2015 but transitional measures mean the reporting requirement only applies for financial years ending on or after 31 March 2016. The Act applies to organisations with global turnover of £36m or more that are either based in the UK or carry out business in the UK. They are required to disclose what action they have taken to ensure there is no modern slavery in their business or supply chain. Section 54 of the Act requires organisations to produce an annual Transparency in Supply Chain statement, which sets out actions taken to identify and eradicate slavery in the supply chain. The statement must be approved by the company's board, signed by a director and made available through a link from the company's website homepage. However, analysis of early compliance reports by UK companies found the majority failed to contain the mandatory information required by the Act. Of 75 statements analysed by the CORE Coalition and Business & Human Rights Resource Centre, only 22 were signed by a director and available through a link on the company's homepage.hideHowever, according to David Tate, retail food and beverage practice leader at Marsh, the Act has led many companies to "step-up" their risk management activities in this area and focus more attention on combatting modern slavery in their businesses and supply chains. "Modern slavery is high on the agenda for many of our clients, especially in sectors like retailing, food and beverage and manufacturing, which rely on overseas supply chains," said Mr Tate. Modern slavery is a prevalent exposure that may not always have been fully recognised in the past, he continued. The new disclosure requirements create liabilities for companies via financial penalties for non-compliance. There is also the potential for significant reputational damage. "The increased transparency that the Modern Slavery Act 2015 requires should galvanise those organisations that have not previously considered these issues to become more proactive and implement ethical business practices," said Mr Tate. "Taking a disciplined approach when working with suppliers - such as gaining end-to-end visibility of the supply chain and ensuring that their procurement and processes are aligned - will help achieve this, minimise reputational risk and safeguard the business from the significant financial impact of a breach of the Act," he said. The implementation of the Act has already resulted in companies looking to include human trafficking and modern slavery in contractual requirements and supplier codes of conduct. "Liability for modern slavery is being pushed into the supply chain and suppliers are being held more responsible," said Mr Tate. A recent survey of leading brands and retailers by the Ethical Trading Initiative found that 71% of companies believe there is a likelihood of modern slavery occurring at some stage in their supply chains. An index from Verisk Maplecroft also shows just how wide ranging the risk of modern slavery is. The company found that modern slavery was "rife" in 58% of 198 countries, with China and India among 25 economies posing "extreme" related supply chain risk. While developing nations dominate the top of the rankings, only four Western economies are rated low risk, with the European Union as a whole deemed medium risk. In 2008, UK fashion store Primark sacked three of its suppliers after media uncovered evidence of child labour being used to produce garments in its supply chain. Children have also been shown working in cobalt mines for the Apple and Samsung supply chains, while refugees were also enslaved in the Thai fishing industry, which supplied prawns to supermarkets in the US and UK. In the past, companies may have looked to tackle the risk of modern slavery by focusing on key suppliers. Under the new Act, they will have to dig much deeper, according to Mr Tate. "With the Modern Slavery Act, companies will need to dig deeper and carry out greater due diligence on their suppliers. There will need to be deeper engagement with suppliers - and not just the top tier. This goes right through the supply chain," he said. The first slavery and human trafficking statements are due at a time of increased scrutiny for modern slavery. UK Prime Minister Theresa May, who as Home Secretary introduced the Modern Slavery Act, recently announced that her government is setting up a taskforce to coordinate its attempts to tackle modern slavery. Studies have shown that modern slavery is a major problem. The International Labour Organization estimates that globally, there are 21 million victims of forced labour. Even in the UK, there are thought to be around 10,000 to 13,000 potential victims of modern slavery. In the first year of the Modern Slavery Act, there were 289 modern slavery offences prosecuted, a 40% increase on the number of victims identified by the state.

UK firms grappling with mandated modern slavery reports

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