Transparency in Supply Chains

The Central Registry

The Central UK Registry for business transparency statements is now in operation and can be found at www.tiscreport.org. The Central Registry provides consumers, the public and investors with one central point to access transparency statements and understand the steps businesses are taking to prevent modern slavery in their supply chains and own organisations.

What is ‘Transparency in Supply Chains etc.’ clause all about?

The Modern Slavery Act addresses the problem of modern slavery and human trafficking, and Section 54 requires greater transparency from businesses about what they are doing to tackle modern slavery in their business and supply chains. The keyword in the title is ‘etc.’ as this is not simply about supply chains – it is about the whole operation of a business.

The Act came into force in October 2015, with transitional relief until March 30th, 2016. It places a disclosure reporting obligation on all companies with a UK footprint and a global turnover in excess of £36M per year. These organisations will need to publish a disclosure statement each financial year outlining the steps they have taken in the course of that financial year to safeguard that there is no modern slavery in their business, practices and supply chains.

Is it relevant to your business?

Any commercial organisation meeting the turnover threshold will be affected. Therefore, partnerships and limited liability partnerships, as well as private and public companies, will be caught. The threshold does not relate to just UK turnover – rather global turnover: therefore, an organisation exceeding the threshold globally, but carrying out only a very small part of its business in the UK, will be caught by the requirement to publish a disclosure statement of actions undertaken. There is no minimum threshold for the level of business conducted in the UK.

There is no need for the organisation to be resident in the UK, provided it operates part of its business in the UK. The Act covers all sectors and applies to goods and services.

What information should be in the annual statement?

The annual statement must describe the steps an organisation has taken in the financial year to ensure that slavery and human trafficking are not taking place in any of its supply chains and in any part of its operations.

The Act advocates that the statement may broadly include:

  • A description of the organisation's structure, business and supply chains
  • Its policies relating to slavery and human trafficking
  • Its due diligence processes 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 taking place and the steps it has taken to assess and manage that risk
  • Its effectiveness in ensuring slavery and human trafficking are not taking place, measured against such key performance indicators as are appropriate to the particular organisation
  • What training in slavery and human trafficking is available to staff?

Who is accountable?

The statement needs to be approved by the board of directors (or equivalent management body) of a company and signed by a director (or equivalent). In the case of a limited liability partnership, the members will need to approve the statement, which will be signed by a designated member. If the organisation is a limited partnership registered under the Limited Partnerships Act 1907, it must be signed by a general partner. For other types of partnership, a partner will approve and sign the statement. Companies falling within the scope of the Act will, therefore, need to factor this approval process into the timetabling and agenda of relevant board meetings each year.

Publication of the statement

The statement must be published on the organisation's website with a link to it on a prominent place on the homepage. If the organisation has no website, a written copy of the statement must be provided within 30 days of a request. Where a company has a subsidiary, and the subsidiary also meets the turnover threshold, the subsidiary will need to prepare its own statement. Where turnover applies to both parent and subsidiary, the Government consultation indicates that only one statement would be required, but that it would need to appear on the websites of both the subsidiary and the parent.

Enforcement

The Secretary of State has the power to force compliance of the publication of the annual statement requirement via a High Court injunction. If obtained, an organisation will be subject to a Court Order to produce the statement.

Whilst a High Court injunction is not in itself a financial penalty, an organisation may be liable for the costs of the injunction in addition to the cost of future compliance. The directors of an organisation that subsequently breaches the Court Order may find themselves held in Contempt of Court, for which the ultimate sanction is imprisonment. The wider consequences of a breach will almost certainly include ensuing negative publicity.

It is very unusual for a High Court Injunction to be the only means of enforcement of a regulatory breach. To that end, the Government may well introduce further financial penalties by way of future secondary legislation.

Government guidance

The Government issued guidance for businesses in October 2015, which coincided with the provisions coming into force. This guidance sets out what is expected of qualifying businesses. Transitional provisions up to March 30 th, 2016 (subject to parliamentary approval) will apply for companies whose financial year ends around the time the provisions coming into force. Click here to read "Transparency in Supply Chains etc: A practical guide".

What do you need to do now?

If you have UK operations and a global turnover in excess of £36M, you should start to prepare and consider:

  • Reviewing the Government's guidance (once issued) at a senior level
  • Ensuring the board or executive team and those involved in key areas, such as procurement, HR, and employee representatives, are aware of the Act and the potential effect on the business. Buyers and other parts of the business involved in dealing with suppliers need to be asking pertinent questions of their suppliers;
  • Reviewing the organisation's policies to ensure they include a policy to address modern slavery and human trafficking
  • Conducting an audit of the parts of the business or the supply chain which are at risk of slavery and human trafficking and planning to mitigate identified risks
  • Reviewing internal training for staff and adapting or implementing new training where appropriate

In addition, it may be useful to appoint someone internally with overall responsibility for this area (in most large organisations this is likely to fall to the compliance officer).