New Reporting Obligations Under the Modern Slavery Act 2015: Is Your Business Ready?

The Modern Slavery Act 2015 (MSA) seeks to combat slavery and human trafficking by requiring businesses to ensure that their operations and supply chains do not allow for either. Under section 54 of the MSA, organisations must publish a compliance statement each year documenting efforts they are taking to prevent slavery and human trafficking in their operations. The Home Office has published a practical guide on the government’s expectations for this compliance statement. As section 54 has extraterritorial effect and non-compliance may have far reaching implications for your business, it is advisable to start making the necessary preparations as a matter of urgency.

Does section 54 of the MSA apply to my business?

Section 54 of the MSA applies to your business (whether it is a company or a partnership) if:

• it is based in the U.K., or is based outside of the U.K. but carries on business within it;
• supplies goods or services;
• has a global turnover of £36 million or more; and
• has a financial year ending on or after 31 March 2016 (companies with a financial year ending before 31 March 2016 do not need to comply with the reporting requirement until next year).

Section 54 does apply to me

If section 54 of the MSA applies to your business, you will be required to produce an annual statement setting out the steps your business has taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains or any part of its own business—or confirming that it is taking no such steps. The statement must be published publicly and accessible by a link placed in a prominent place on the homepage of the organisation’s website.

Although your business may choose the format it considers to be most appropriate, the MSA suggests that the section 54 statement include information about:

• the organisation’s structure, its business and its supply chains;
• its policies in relation to slavery and human trafficking;
• its due diligence process in relation to slavery and human trafficking in its business and supply chains;
• the parts of its business and supply chains where there is a risk of slavery and human trafficking, and the steps it has taken to assess and manage risk;
• its effectiveness in ensuring that slavery and human trafficking are not taking place in its business or supply chains, measured against performance indicators it considers appropriate; and
• the training and capacity building about slavery and human trafficking available to its staff.

Section 54 does not apply to me

Even if section 54 of the MSA does not apply to your business today (for example, because your current financial year ends before 31 March 2016), it is prudent to consider whether your business will eventually be affected and to start preparing for the future. Such preparations should include:

• Carrying out an assessment of your business’s ability to gather relevant information across its operations, which could involve companies and individuals in different countries. Although some businesses may already evaluate and report on slavery issues through voluntary disclosures, and therefore have relevant reporting and auditing mechanisms in place, others will not and you may have to consider for the first time how best to implement such mechanisms.
• If your business has a large number of suppliers, carrying out a risk assessment to flag supply chains that are most at risk of slavery and human trafficking so that efforts can be focused on those areas. Relevant individuals in these supply chains should be provided with adequate training and support. Early thoughts should also be given to how and by whom this training will be structured and delivered.
• Drafting and implementing a policy on slavery and human trafficking if your organisation does not have one already. This policy should cover items such as who must comply with it, who is responsible for its implementation, what the consequences will be for those who breach it and how one can raise concerns related to slavery and human trafficking risks. Any definitions adopted in the policy should mirror those provided in the MSA.

Consequences of non-compliance

The reporting obligation is legally enforceable by the Home Secretary, who has been given power to apply to the High Court for an injunction requiring a non-compliant business to publish a statement. Failure to comply with such a court order could result in an unlimited fine.