Posted on 06 Nov, 2015 by Murray Dilks

supply_chainThe Modern Slavery Act 2015 was introduced to the UK statute books in March 2015. From October 29, a further provision was added called "Transparency in Supply Chains". 

The UK is the first European country to take formal action against slavery and human trafficking and one of the first globally - although the US state of California has similar transparency requirements.

The legislation will affect UK companies with a turnover greater than £36 million.

As an original equipment manufacturer (OEM), you know how important maintaining a stable supply chain is for delivering quality products on a consistent basis to your customers. However, as previously seen within the electronics industry, RoHS, REACH and the Dodd-Frank Act, continue to threaten stability for those responsible for managing them.

So what will the Modern Slavery Act 2015 now demand from you and your supply partners and what timescales should you be working to?

Slavery is a form of severe exploitation that refers to the condition of treating another person as if they were property and owned and controlled by another. It is thought that modern slavery affects around 35.8 million people globally and various estimates exist regarding the number in the UK. The Home Office suggested that in 2013 between 10,000 and 13,000 people in the UK were the victims of slavery or trafficking.    

As a result of this legislation, UK organisations are expected to take proportionate actions in tackling modern slavery. Organisations will be expected to provide a statement approved by the board, signed by a director for each financial year and included on the company’s website. The statement should explain the steps the company is taking to reduce the risk within their supply chains.

To help, the government has identified a list of the things that companies should take into consideration when preparing their statement to ensure compliance with the requirements. Their advice states that statements should include:

  • A brief description of the organisation's business model and supply chain relationships.
  • The organisation’s policies on slavery and human trafficking, including its due diligence and auditing processes in relation to slavery and human trafficking in its business and supply chains.
  • Identification of those 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.
  • The organisation’s effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against performance indicators to chart progress year on year.
  • Details regarding the training relating to slavery and human trafficking available to the organisation’s staff.

The government has emphasised that these are notes for guidance and are not prescriptive. There is no particular form that the statement must take and its contents are likely to vary from business to business depending upon their activities.

How might it affect you?

Organisations within or close to the threshold should be thinking about:

  • Mapping supply chains by identifying suppliers and contractors and where they operate.
  • Identifying who within their organisation will be responsible for compliance.
  • Identifying those areas of their business where the risk of modern slavery is the greatest.
  • What staff training will be needed for those employees involved in procurement and supply chain management and for staff more generally and how this might be provided?
  • Whether contracts with suppliers and contractors ought to include appropriate provisions regarding their own procedures.

Initial feedback and comments

There may be some organisations that have already witnessed or been aware of slavery and human trafficking and consequently policies may already be in place, and appropriate clauses added to contracts throughout their supply chain. All responsible businesses, regardless of whether they fall within the threshold, should take serious consideration of the Act as this may well be deemed just good practice, whether or not a company is required to comply.

While the requirement of the Act is for a company to prepare a statement, rather than to take positive steps to eradicate slavery from its supply chain, the government envisages that commercial pressure will be brought to bear on those organisations that fail to take actions.

In addition, if an organisation fails to prepare a statement as required by the Act, the Secretary of State can bring enforcement proceedings, but these are limited to enforcing a company to make a statement.

Link to conflict minerals

The Act may well have a positive consequence in relation to the requirements of various conflict minerals legislation that are either in place or being proposed around the globe. It is thought that modern slavery and trafficking are inherent in the trade of minerals in the Democratic Republic of the Congo and surrounding countries - so this new legislation may well place more pressure on companies to open up their supply chains to closer inspection and audit.  

Conclusion

Most organisations will benefit by focussing on the development of clear procurement policies that address modern slavery and the inclusion of contractual protection in supply contracts, such as warranties and audit rights. For those operating in high-risk jurisdictions, enhanced due diligence and implementation of more stringent measures are likely to be required.

Hopefully, this blog post has highlighted to you some of the areas that your company and, specifically, those responsible for your supply chain, should be aware of and working towards. Demonstrating early on that you understand these and that you are actively pursuing compliance could help increase customer confidence and show you are fully in touch with the legislation and best practice. 

Image by DeptfordJon

Supply Chain Excellence

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About the Author

Murray Dilks
Murray has worked in a number of industrial sectors over the last 25 years, including Automotive, Aerospace and Oil and Gas in a variety of roles covering Procurement, Supply Chain and Operations.read more