By Kate Jalbert, Engagement Manager at GES
This week marks an important milestone in the push for companies to provide greater transparency on supply chains and forced labour with the UK Modern Slavery Act 2015 taking full effect.
Starting on 31 March 2016, UK companies (either those incorporated in the UK or carrying out business in the UK) with a turnover above £36 million will need to produce a slavery and human trafficking statement at the end of every financial year.
The statement, published on the company’s website, must describe the steps that the organisation has taken during that year to ensure that slavery and human trafficking are not taking place in any of its supply chains and any of its own business. To ensure that companies are taking this obligation seriously, the statement must be approved by the company’s board and signed by a director.
This reporting obligation is one of the first of its kind in the world and was inspired by similar legislation introduced in California in 2012. The new law aims to get companies to audit their supply chains, identify any possible risks in relation to forced labour and address any issues.
While the reporting obligation only applies to companies with a turnover greater than £36 million, legislators hope that there will be a trickle-down effect as larger businesses start to ask their smaller-company suppliers questions. Furthermore, greater transparency on this issue will allow investors, consumers and other stakeholders to make their own judgements about how well a business is approaching this risk.
Ultimately, there is a hope that this new reporting requirement will crack down on forced labour and human trafficking throughout the whole supply chain. But this really depends on how companies approach it.
There is some evidence that companies may just treat it as a compliance exercise. As of early March, the UK-based Business and Human Rights Resource Centre noted that the majority of company statements published to date do not comply with the UK Modern Slavery Act’s requirements. Furthermore, some argue that the legislation lacks teeth – companies could simply state that they have taken no steps and the biggest sanction that they face for not publishing a statement is a court order to comply with the legislation.
However, these critiques fail to take into account the damage that could be done to a company’s reputation if it does not adequately address these issues and the subsequent value that could be lost. With reporting on forced labour and human trafficking under the spotlight with the introduction of these new disclosures, UK companies – and any others doing business with a UK company – cannot afford to ignore these issues.