Supply chains & modern slavery

The Modern Slavery Act 2015 made headlines in the UK and generated significant interest worldwide as an attempt to address slavery and human rights abuses in supply chains. Foreign interest comes from the extra-territorial reach of the 2015 Act, which applies to UK-based businesses and businesses based outside the UK but conduct business in the UK.  There is a particular risk where businesses manufacture or procure their products from jurisdictions with poor records on human rights.

The 2015 Act forms part of a combination of international law that businesses must take into account in their policies focused on slavery and human rights.

Section 54 of the 2015 Act requires organisations to report publicly on their efforts to address slavery and human trafficking within their supply chains. This applies to any entity that carries on a business or part of a business in the UK with turnover meeting or exceeding of £36 million.

The 2015 Act applies irrespective of where an organisation is incorporated or headquartered. The focus of section 54 is where the organisation carries on its business. If a foreign organisation carries on a business or part of a business in the UK and meets the £36 million turnover threshold the 2015 Act will probably apply.

The £36 million annual turnover threshold is calculated by reference to the organisation’s business activities anywhere in the world and includes any subsidiary, including those operating wholly outside the UK. This means foreign businesses with global operations can be caught by the reporting provisions of the 2015 Act even where they do relatively little business in the UK.

The penalties for failing to comply with the 2015 Act’s reporting requirements include the granting of an injunction to compel a report. A subsequent failure to comply might result in contempt of court proceedings and a fine. Organisations also risk reputational damage if they fail to comply. This risk can run throughout the supply chain, including forwarders found to have shipped the offending goods.

Demonstrating compliance with 2015 Act and avoiding being complicit in human rights abuses in general should be seen as the chance to generate positive impression, with the reporting requirements incorporated into corporate social responsibility policies and the chance to reassure customers that the business is meeting its ethical obligations.

2017-06-14T13:25:05+00:00 June 14th, 2017|Forward Law|