Focus on Manufacturing | Irwin Mitchell

The drive over recent years to bring goods to market more cheaply has led to global complex supply chains and modern slavery has unfortunately become a presence in global supply chains. The 2014 Global Slavery Index estimated that 35.8 million people worldwide are trapped in modern slavery.

The Modern Slavery Act was introduced last year with a view to ensuring that organisations take proportionate action to prevent the use of forced, trafficked and slave labour. It is fundamental for businesses in the manufacturing sector to understand the requirements of the new legislation and to understand the practical steps which should be adopted.

Annual statement

An organisation with a commercial presence in the UK and worldwide turnover in excess of £36 million GBP (including the turnover of all subsidiaries) must produce a slavery and human trafficking statement every financial year. This statement must address the risks of human trafficking in its business as well as its supply chain together with how the business will mitigate these risks.

The legislation is not prescriptive as to its contents but recommends that the following topics should be covered:

The structure of the business and its supply chains
Its policies in relation to slavery and human trafficking
Its due diligence processes in relation to slavery and human trafficking
The parts of its business and supply chains where there is a risk of slavery and the steps it has taken to assess and manage that risk
Its effectiveness in ensuring that slavery is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate; and
The training about slavery and human trafficking available to its staff.

The statement must be signed off by senior members of the business and published on its website with a prominent link from the home page.

Organisations are expected to publish their statements no more than six months after their year end. Only businesses with a financial year ending on or after 31 March 2016 will be required to publish a statement for their 2015-2016 financial year. Organisations with a 31 December 2015 financial year end will not have to publish their first statement until 2017.

Failure to publish as a statement?

At present there are no civil or criminal penalties for failure to report. The Secretary of State may however obtain an injunction to force offending organisations to disclose information. However, the reputational damage to a business is likely to be the most influential factor in compelling an organisation to conform.

What if your turnover does not meet the required threshold?

If your business does not meet the turnover threshold it is not simply a case of ignoring the new legislation. The obligations will flow down the manufacturing supply chain so a business should still be aware of the requirements and consider how it addresses the human trafficking issue. We have seen many instances in recent years of the reputational damage that can be caused by an issue in a supply chain so this is an area which should be taken seriously at all levels. This is also likely to be a criterion for remaining an approved supplier of a large organisation. We are also seeing the requirements flowing down more and more into tenders.

Take responsibility within your supply chain

Ensuring modern slavery is eliminated from a supply chain should now be high on the agenda of every organisation. It is important to ensure that whatever level of the supply chain you are that your business is considering the new legislation and the issues which it is seeking to address.

It would be prudent to consider the following actions proportionate to any perceived risk surrounding your supply chain:

If your business meets the turnover threshold under the legislation the annual statement must be drafted and be readily available on your website
Consider the supply chain which operates around your business and identify locations which may pose a risk as well as any suppliers in the chain which may require further risk assessment (such as audits or factory inspection)
Carry out all necessary due diligence on any new suppliers
Implement an action plan for any perceived weaknesses in the supply chain including whether or not your business should continue working with a high risk supplier.
Put into place an appropriate policy which your suppliers must adhere to and ensure that this is communicated to your employees as well as any party within your supply chain
Consider training for employees
Amend your standard contracting terms to include an obligation to comply with the new legislation and your policy; and
Remain alive to the issue - carry out regular reviews of your supply chain to ensure transparency.

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