The Modern Slavery Act: Frequently asked questions

Dan Ostergaard
posted by Dan Ostergaard
7 December 2015

The United Nations’ International Labour Organization reports individuals and enterprises exploit more than 18.8 million people in the private economy.

While most of these modern slaves live in Asia, many also reside in sub-Saharan Africa and Latin America. Women and children form the vast majority of the victims. Slavery generates profits of more than £100 billion per year.

In March the UK passed into law the Modern Slavery Act 2015, the first of its kind in Europe, to address modern slavery and human trafficking issues. As of October the Act requires companies to publish an annual slavery and human trafficking statement. The scope of the Act is broad. It does not simply cover a company’s home operations; it extends to the entire supply chain.

Here are some questions posed by our clients regarding the Act:

Which companies does the UK Modern Slavery Act 2015 affect?
Any company, which carries on a business or part of a business in the UK with turnover of more than £36 million, will be affected by this new legislation. Most people expected the threshold to be much higher.

Is the Act industry specific? Does it only apply to retail stores and manufacturers?
There is a false assumption the Act covers only the clothing retail and manufacturing industries. California’s Anti-slavery and Human Trafficking Act applies only to retail sellers and manufacturers whereas the UK Act has a much broader reach. In fact, it applies to all industries.

What about medium-sized firms with main offices based in the UK?
The Act specifically lowered the threshold to include medium-sized firms. A company with a turnover of more than £36 million falls under its scope. The main goal of the Act is to ensure companies based in the UK are paying attention to what is happening in the entire supply chain. Where the goods come from and how they are made is now as important as where a company’s offices are located.

Can you summarise the Act?
Simply put, the Act requires procurement practices not contribute to modern slavery. Firms are required to disclose whether they are making efforts to eliminate slavery in their supply chains. This new legislation will now place a spotlight on how companies monitor their supply chains, not just their immediate suppliers but the entire route. Companies can choose to do nothing but must state that fact publicly.

What constitutes slavery and forced labour under the Act?
The Act defines slavery or forced labour as holding “another person in slavery or servitude and the circumstances are such that the person knows or ought to know that the other person is held in slavery or servitude.”

How can we ensure that someone in a supply chain in a village in Asia is not using forced labour?
You can never be sure whether someone in a distant country is used forced labour. But since you are using the goods coming from those companies, you can take definite steps to put a process in place to assure that your procurement practices do not contribute to modern slavery.

What must the required statement contain?
The statement must set forth the efforts, if any, the organisation has made during the financial year to ensure slavery and human trafficking are not taking place in any of its own businesses, or in any of its supply chains.

How and where and when do we disclose the statement?
Once a year, the board of the corporation or the partners of the partnership must approve and sign off on the required statement.  The statement must be published prominently on the homepage of the company’s website. This will be a public demonstration of the responsibility and transparency that the company is adopting within its supply chains.

What if the company chooses to do nothing?
A company can decide to do nothing but will be required to state that fact in its annual statement. The ramifications with shareholders are unknown; but the new anti-slavery commissioner, Kevin Hyland, told the Financial Times he fully intends to name and shame any UK companies that fail to take action to eradicate slavery in their supply chains.  Some people believe all companies should contribute to addressing this societal challenge.

Don’t you think that it is nearly impossible to ensure compliance throughout complex and increasingly global supply chains?
Companies can use modern technology such as the free PolicyApp (from PolicyStore.ch) to equip employees and third parties with professional and user-friendly compliance policies, including those pertaining to human rights and anti-slavery, enabling companies to publish a solid statement as required by the Act.

Where can I get more information on the Act?
The full text of the Act can be accessed here.

Dan Ostergaard is the CEO and founder of PolicyStore.ch, a Swiss-based company that has developed the PolicyApp. He is also the managing partner of Integrity by Design, an integrity advisory firm with dozens of Fortune 500 clients

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