Following its introduction in 2015, the Modern Slavery Act (“the Act”) has sought to address trafficking and slavery in the UK. The Act has revamped the criminal offences faced by those directly involved in forced labour but also imposes new legal duties on corporate entities. The difficulty with these duties is they are only the first step in addressing the risk of modern slavery within businesses, and often fail to deliver the real benefits available from a pro-active approach.
The Legal Obligation
Initially, the draft legislation did not require specific steps to counter the use of slave labour in supply chains. Following public pressure and campaigning, however, a new duty was placed on businesses (with a turnover of over £36 million) to publish an annual statement setting out the steps taken to address modern slavery, or to confirm that no such steps have been taken.
In principle, failing to do this allows the government to seek an injunction requiring a business to comply. Failing to comply with that injunction will place the business in contempt of court, exposing the business to an unlimited fine.
In May 2019, a review was undertaken of the efficacy of the Act. It found that many businesses saw the statement as a tick box exercise, or ignored it entirely. The quality of statements produced was generally described as poor. Enforcement of the Act was also failing, with no real action being taken at a government level. Numerous reforms have been proposed:
- Excluding non-compliant businesses from public contracts
- Requiring a named board member who is personally accountable for modern slavery issues, and
- Toughening enforcement, including fines as a percentage of a business’ turnover, and personal prosecution in serious cases.
Aside from the strict requirements of the law, the problem for businesses is that the steps required by the Act do not really begin to address the problem of modern slavery. Most businesses would be distressed to discover modern slavery within their supply chains, but the reality of modern slavery is that it is often hidden from view within complex global arrangements that often resist external scrutiny.
If you are a supplier, there is always the risk that your customers will hold you responsible for slavery in your supply chain and termination of contracts is one of the consequences that can follow if they want to distance themselves from reputational damage. Lawyers in our Business Risk Team have dealt with a number of cases where slavery and exploitation in the supply chain has caused a ripple of commercial consequences which can be very damaging if not controlled.
Managing modern slavery risk in your supply chain can take a range of forms, but the crucial steps are to begin your relationship with your contractors on the right footing. There is no one-size-fits- all solution, but steps can include:
- Making compliance with the Act a contractual term, allowing termination where modern slavery is discovered
- Requiring your contractors to pass this obligation further down the supply chain
- Requiring your contractors to set up their own independent processes to manage risk (or to comply with anti-slavery procedures defined by you), and
- Only engaging contractors who have been accredited by relevant schemes
The old adage of “what gets measured, gets done” rings true. Regular reporting and review (and taking action where necessary) is the best way to ensure that your system is actually working for you, and to identify gaps where it isn’t.
Tackling the scourge of modern slavery has an intrinsic value. In more commercial terms, however, there can also be real financial benefits. Consumers are increasingly interested in the ethical standards of the businesses they buy from; lagging behind on modern slavery can cause real reputational damage, and being ahead of the market can set you apart from your competitors.
This trend is gathering pace in the investment and commercial markets. The rise of ethical investing funds continues, and evidence of acting to eradicate slavery will be viewed positively (or even expected) by investors. Likewise, businesses and the public sector are increasingly likely to vet their suppliers and partners for modern slavery compliance when awarding contracts.
In order to obtain those benefits, you will need to ensure that your management system is right for you. Systems like this don’t have to be a burden, and when properly done can be a net positive. Think about:
- What systems do you already have in place?
- Where has that system been successful, and where has it failed?
- What practical steps are available to you if you discover an issue in your supply chain?
- What changes can you make to give you greater flexibility and protection in the future?
Our Business Risk and Regulation Team can provide you with the advice and support you need to ensure your anti-slavery systems work for you. Our experienced team can help with:
- Drafting new systems and procedures
- Reviewing and updating existing systems and procedures, and identifying areas for improvement
- Ensuring your contractual arrangements are fit for purpose
- Training your directors and senior managers on the risk posed by modern slavery, and
- Designing crisis management and incident investigation protocols to protect your business following an incident.
If you would like further information on managing modern slavery risk, please contact Ben Derrington in Ashfords’ Business Risk and Regulation Team on B.Derrington@ashfords.co.uk, or on 0117 321 8014.