This blog was first published on the Historic Futures website (see here). Historic Futures is an organisation that makes it possible for companies to collect and manage value chain data, from primary production to finished product and to communicate good practice to their customers.
On March 26, 2015 the Modern Slavery Bill was passed. For those who followed the progress of this Bill since its inception, this would seem quite a feat. This is particularly true when one considers that only two years ago the Government was quite adamant that no such piece of legislation was even necessary.
Its first passage through Parliament beginning in 2013 was unsuccessful. Moreover, it included no obligations for business. Stakeholder pressure, including from the business and investment communities, led to a revival of the Modern Slavery Bill in 2014. Even more telling is that this time round there was an expectation that obligations for business would be incorporated. A consultation was held and in November 2014 the draft Bill was amended to include a transparency in supply chains (TISC) clause. This has now been enacted. Why exactly was there a desire from business for such legislation to be introduced? Presumably some sought direction on how to grapple with the growing global issue of managing complex supply chains, an issue which also happens to be receiving increasing media attention worldwide. Many also wanted a level playing field. Whether either of those candidates got what they wanted at this stage is arguable.
What is the TISC clause?
Without going into too much detail, the TISC clause introduces a requirement that certain commercial organisations produce a “slavery and human trafficking statement”. The statement should outline the steps taken by the business to ensure that no slavery or trafficking is occurring in its supply chain and within its operations. If no such steps have been taken, a statement to that effect will suffice for the purposes of complying with the law. Many retailers and businesses who are more vulnerable to criticism and public scrutiny feel this places an unduly burden on them and does anything but create a level playing field. Why? Because those 2nd, 3rd, 4th (and so on..) tier suppliers who remain largely unknown and hidden from the public eye will have little pressure to take active steps whilst being able to easily remain within the remits of the law.
What are the consequences if the TISC clause is breached?
Added to this is the lack of any real consequence for breaching the TISC clause as it stands. If you are not a big brand or household name and civil society and consumers aren’t pressing for change, then who or what will? In contrast, under the Companies Act 2006, directors can be held criminally liable for signing off on wrongful or misleading information in their annual reports, which now must include human rights disclosures for certain companies.
There has also been significant criticism and discontent on the nature of the obligations which currently leaves all “suppliers of goods and services” in the dark.
The Government recently announced a turnover threshold of £36 million, meaning companies with a turnover of £36 million or more will be subject to the legislation. This amendment will likely be effective from October 1 2015. However, the Act currently does not prescribe what is to be included (although it does provide some pointers) in the slavery and human trafficking statement which in addition to generating uncertainty further reinforces the lack of any real benchmark being introduced. Provisions are made in the TISC clause for Government guidance to be published on this.
If business sought consistency, it also didn’t get that. Some advocated aligning the supply chain transparency requirements with the human rights disclosure requirements under the Companies Act 2006. Wouldn’t it have sent a clearer message to business to adopt the same thresholds? Interestingly, it seems there was some political discussion during the drafting of the Strategic Reporting Regulations on whether to make a reference to supply chains (i.e. “human rights, including in supply chains”).
Whether the TISC clause in the Modern Slavery Act will be an improvement on its Californian counterpart on which it is largely based (the Transparency in Supply Chains Act 2010) remains to be seen.
Would should businesses start thinking about?
Putting the uncertainties to one side: it shouldn’t matter if your organisation is at risk of falling subject to the legislation or not, a forward looking business that does not want to be associated with or complicit in slavery or human trafficking, would start thinking about the following:
- the organisation’s structure, its 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 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 how to assess and manage that risk,
- identifying appropriate key performance indicators (KPIs) to establish its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains
- training about slavery and human trafficking that is currently or should be made available to its staff
Moreover, a forward looking business that is subject to human rights disclosure requirements under the Companies Act 2006 might want to think about adopting an integrated approach and address the issue of slavery and modern trafficking at strategic level and as part of broader business objectives.
Ultimately the gathering of the relevant information and drafting of the statement and, above all, developing an understanding of the current company position with regards to slavery and human trafficking is in itself a valuable exercise in risk management for any organisation.