Modern Slavery and Corporate Responsibility – How can Commercial Organisations measure up in the UK?

On the 28th March 2019, Felicity Gerry QC from Carmelite Chambers appeared at a panel event together with Jo Pride, CEO of Hagar Australia and Dr Marie Segrave, Associate Professor at Monash University. The event was part of a Women Lawyers event series and was held at Maurice Blackburn Lawyers in Melbourne, Australia hosted by Jacinta Lewin, Senior Associate in the Social Justice Practice.

After discussion of the wide definition of Modern Slavery to include human trafficking in organised crime as well as corporate and Government responsibility for slavery in commercial supply chains, the panel considered three pieces of legislation which might require corporate and Government reporting:

  1. UK Modern Slavery Act  2015 – turnover of more than £36 million – Has appointed a Commissioner. Currently no sanction for not reporting slavery in supply chains but potential for reputational damage and loss of opportunity to bid for Government work. A recent review indicates legislation likely to be tightened soon.
  2. Australian Modern Slavery Act  (Cth) 2019 – turnover of more than $100 million – currently no Commissioner and no sanction for not reporting slavery in supply chains but potential for reputational damage or loss of opportunity to bid for Government work.
  3. NSW Modern Slavery Act  2019 – turnover of more than $50 million – Has appointed a Commissioner and imposes a sanction for not reporting which is up to $1.1million. There is also potential for reputational damage and loss of opportunity to bid for Government work.

The MSA (UK) came into force on the 29th of October 2015. In the context of supply chain regulation, the Act introduced a reporting requirement. Commercials organisation supplying goods or services in the United Kingdom that have an annual global revenue of at least £36 million must publish an annual slavery and human trafficking statement, which must be displayed publicly by the company (normally on their website). Companies must also undertake to do the following:

  • Develop anti-slavery and human trafficking policies and/or include these in corporate social responsibility (CSR) policies.
  • Develop processes to investigate business and supply to determine the level of risk or exposure to risk.
  • Identify and prioritise high risk areas in the supply chain and plan steps to be taken to address the risk.
  • Appoint senior individuals within companies with responsibility for investigation, compliance and the production of the statement.
  • Identify training needs within companies to ensure that all responsible staff involved in supply chain management and procurement are aware of the new obligations.
  • Put effective grievance and whistleblowing mechanisms in place to cover any concerns about slavery or human trafficking within any business or supply chain.

Section 54 mandates that an MSA (UK) transparency statement for a relevant commercial organisation should set out the ‘steps taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains or in any part of its own business, or a statement that it is taking no such steps’. This does not require the immediate eradication of human trafficking in all its forms but requires public statements about steps being taken by the affected commercial organisations. Section 54 has extraterritorial effect, in that it applies to any commercial organisation who supplies goods or services wherever incorporated which has a demonstrable business presence in the UK and a global turnover of £36 million or more. ‘Commercial organization’ is defined broadly to include:

  1. a body corporate (wherever incorporated) which carries on a business, or part of a business, in any part of the United Kingdom, or
  2. a partnership (wherever formed) which carries on a business, or part of a business, in any part of the United Kingdom.

Home Office guidance includes large charities and other not-for-profit organizations. The first businesses required to publish statements were those with a financial year-end on or after March 31 for the financial year 2015-2016.  All companies were required to publish statements in 2017. Comprehensive statements have begun to appear including, for example, from communications company British Telecom which has reported for two years, thus far. Their reports give some detail of steps taken and are clearly approached in the context of a marketing tool for ethical business practice. The reporting obligation under the UK Act is legally enforceable by the Home Secretary, who can apply to the High Court for an injunction requiring a business to publish a statement or, in Scotland, for specific performance of a statutory duty under section 45 of the Court of Session Act 1988. If the organisation further fails to comply with the injunction, it will be held in contempt of a court order, an offence punishable by an unlimited fine.

Three years on, the reporting requirements have generated mixed results. An evaluation of the top 100 listed companies found that while some leading businesses are taking meaningful action to identify and respond to modern slavery risks in their supply chains, the majority are still not doing enough. Half of the companies failed to provide meaningful data on whether their actions were effective, and company statements have been criticised as being too broad and lacking detail in their risk assessments. As at January 2019, the Transparency in the Supply Chain (TISC) database shows that approximately 57% of the 19,200 companies required to submit statements have done so.

In Australia, the Commonwealth MSAcame into force on 1 Jan 2019. The definition of ‘slavery’ is wide and modelled on part of the MSA (UK). It requires commercial organisations including Government Departments in Australia (with turnovers of more than $100 million) to produce ‘modern slavery statements’ that acknowledge the risks of modern slavery in their operations and supply chains, as well as including information about actions being taken to address those risks. At the state level, New South Wales has added to federal law by passing its own Modern Slavery Act (‘NSW Act’).This differs in a few significant ways from the Federal act. Firstly, the NSW Act lowers the revenue reporting threshold; a company must fulfil reporting requirements if turnover exceeds $50 million.Secondly, it imposes monetary penalties of up to $1.1 million for businesses that fail to comply.Finally, it appoints an independent anti-slavery commissioner to oversee business compliance. 

The panel gave examples of their experiences and knowledge in the corporate, criminal, migration and NGO sectors and in the Q and A made suggestions for how lawyers can assist in the development of corporate responsibility in this field.

Felicity Gerry

Felicity Gerry QC specialises in substantial and complex criminal matters often with an international element and also with a corporate cross over.

If you would like to contact Carmelite Chambers in relation to this article, please email clerks@carmelitechambers.co.uk.