UK business with a turnover over £36m? Have you prepared your Modern Slavery statement? It's not an obligation to be taken lightly
08 September 2016
Slavery might sound like a problem from centuries gone by. But in recent weeks, I’ve had several conversations that indicate some clients could be risking unnecessary reputational damage – because they’re falling to appreciate that slavery remains a very modern issue.
The reputation risk springs from the UK’s recently-enacted Modern Slavery Act, which applies to year-ends finishing after March 31st 2016. You can read more about the Act as a whole here. And tucked away in section 6 is a requirement for UK companies to publish an annual "slavery and human trafficking statement" on their website.
This obligation applies to any company that’s operating in the UK, supplies goods or services, and turns over £36 million or more. In its statement, the organisation must spell out the steps it’s taken during the financial year to ensure that modern slavery is not occurring in its business, or within its wider supply chain. Crucially, if the company hasn’t taken any actions to do this, then it must say so or face penalties for failing to issue the statement. And it’s here that the big reputation risk starts to arise.
Why? Well, when the Act was first published last year, the need to publish the statement didn’t sound too onerous. Many companies’ initial response was that it would require just an A4 sheet with some commentary on their policies in this area. But with the assessment having to apply not just to the company itself but also its entire supply chain, companies are now waking up to the fact that the statement actually demands much more.
The challenge is increased by the relatively broad definition of modern slavery. The Home Office has published guidance that defines different types of slavery, which can include sweatshops and zero-hours contracts. Also, some services used by virtually every business – such as cleaning – present especially high risks, as do some countries. A recently-published global index found that 58% of countries are at high or extreme risk of employing slaves somewhere in their supply chains.
With the Modern Slavery Act now fully in force, companies need to focus on its implications as a matter of urgency. Imagine waking up to news reports that your business is taking no steps to combat slavery. It doesn’t bear thinking about.
So, what should companies be doing to ensure this doesn’t happen? Two things. First, identify what your modern slavery statement should say, and how. And second, run a risk assessment across your whole supply chain to pinpoint the biggest risks and enable actions to tackle them. We’ve worked with a number of clients to pilot a diagnostic tool for doing this, and it’s now seeing growing take-up across many industries.
The message is clear. As companies prepare to issue their first statement on modern slavery, there’s no room for complacency. In an environment where corporate reputations are more vulnerable than ever, companies take this obligation lightly at their peril. Better focus on it now than after the damage is done.
Edward Naish is a part of the Sustainability team in the UK Wales & West region, providing assurance and consultancy services relating to sustainability and sustainable development to clients in all sectors and industries, from SMEs and local government to FTSE-100 firms and national government. Edward also has experience in Controls Assurance, ITGCs, and Data Assurance at PwC, and has experience in IT Management and the Financial Services and Asset/Investment Management industry.
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