12 Aug 2016

The Modern Slavery Act and big business

Deok Joo Rhee, a barrister at 39 Essex Chambers, considers what the Modern Slavery Act 2015 means for big business and the value of being a leader in the field of prevention.

Rafael Ben-Ari Rafael Ben-Ari

Theresa May, the new British prime minister, has recently announced that £33.5 million from the UK’s aid budget is to go towards funding overseas initiatives to deal with the people trafficking trade, alongside a new taskforce that is to co-ordinate the UK Government’s response to modern slavery.

This initiative comes off the back of the enactment by the UK Parliament of the Modern Slavery Act 2015, which was promoted and delivered by Theresa May during her tenure as home secretary. The law was passed in response to the reality that slavery is present in the UK (as elsewhere), including in the supply chains of everyday products that British people consume.

The available figures indicate that there are between 10,000 and 13,000 potential victims of slavery in the UK (for example, people trafficked in the sex industry, domestic slavery and forced labour), while the Home Office estimates there are around 45 million people worldwide living in conditions amounting to modern slavery.  The International Labour Organisation estimates that modern slavery generates as much as $150 billion per year in illegal profits, a third of which is through forced labour.

A total of 289 slavery offences were prosecuted in the UK in 2015 and there was a 40 per cent rise in the number of victims referred for support. Whilst there are areas for improvement in the domestic criminal justice system to bring perpetrators to account, there are indications that the issue of modern slavery is being taken more seriously. In light of these developments, a key question for businesses is whether they are inadvertently implicated in the incidence of slavery due to actions and decisions made further down their global supply chains.

It is this phenomenon that section 54 of the Modern Slavery Act 2015 seeks to address. This provision requires every organisation with a total global annual turnover of over £36 million that is operating a business (or part of a business) in the UK to produce a slavery and human trafficking statement (otherwise known as a Transparency in Supply Chain or ‘TISC’ statement) for each financial year. The statement must contain details of the steps that the organisation has taken in that year to identify and eradicate modern slavery from both its own business and its supply chain (or state that no steps have been taken, if this is the case).  The statement must be approved by the company’s board, signed by a director and there must be a link to statement from the company’s homepage.

Critics of the act point to the fact that there are no monetary or criminal penalties for companies that do not comply with the supply chain legal reporting requirement. Furthermore, there are no legal requirements on the content of the statement. Instead, the legislation suggests six areas on which information may be included, such as organisational structure, company policies and due diligence.

What is clear is that section 54 creates no form of strict liability offence. Nor does it even require businesses to take any steps to eradicate modern slavery.  Instead it merely requires company to report on any steps it has taken (or that none have been taken). 

However, section 54 of the Act reflects a new way of bringing about changes in the eradication of modern slavery – by seeking to harness the willingness of businesses to bring about the desired changes themselves.  So, while the government could in theory seek to enforce compliance with section 54, what really underpins the provision is the notion that businesses should see the incentives of ensuring meaningful compliance with it. This rationale underpins the establishment earlier this year of a central registry of section 54 statements. This registry (known as the TISC Registry) has been created as a social enterprise to provide a neutral platform on which businesses can demonstrate their commitment to tackling modern slavery, and engage consciously and proactively with this issue.

In particular, in circumstances where there are often huge financial incentives for companies to turn a blind eye to any potential use of slavery in their supply chains, a legalistic approach to monitoring compliance (e.g. through imposing a tickbox approach to risk assessment for slavery in supply chains) may struggle to have meaningful impacts. Rather, a company with strong policies that can show that it is taking effective action to combat slavery will be more attractive to new clients, investors, and business partners. Furthermore, increased awareness of the reality of modern slavery has led to goods and services linked to labour abuses being rejected by consumers, procurement professionals and industry buyers.  Human rights compliance is therefore increasingly being seen as an added value from a consumer perspective.

Companies that take the issue seriously – by developing policies in relation to slavery and human trafficking within a broader human rights due diligence framework and by carrying out a human rights impact assessment with a specific focus on labour rights and children’s rights in relation to the company’s direct operations, supply chains and other business relationships in high-risk environments – may therefore place themselves in good stead.  Whilst compliance with section 54 remains an issue, the fact that companies such as Ford and Intel are among the businesses that have published detailed TISC statements (when it possible to state that no steps have been taken) is an indicator that some leading businesses are seeing the value of this approach.

The Modern Slavery Act 2015 is, in legal terms, an example of an emerging trend of imposing legal obligations on corporations to promote and protect human rights laws. It finds a broader resonance in the UN Guiding Principles on Business and Human Rights and the related movement by the United Nations Human Rights Council to develop a treaty on business and human rights. Other examples include the finance industry’s application of the Equator Principles (which focus on the environmental and social impacts of development) being applied to all borrowers and requiring a human rights impact assessment to be provided before financial support will be given, as well as the development of the International Code of Conduct for Private Security Companies and the International Code of Conduct Association. Given these developments, businesses may see the value in being seen to lead rather than follow in this trend.

Deok Joo Rhee is a barrister at 39 Essex Chambers.

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