Update: Modern slavery – the drive for supply chain transparency

This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.

Summary and implications

The transparency in supply chain provisions of the Modern Slavery Act 2015 came into force on 29 October 2015.

The Government is keen to take a strong stance against modern slavery and intend, by way of this new regulatory requirement, to drive up standards by incentivising commercial organisations to better understand and tackle this global issue. As a result, certain commercial organisations are now legally obliged to make a public slavery and human trafficking statement for each financial year.

It appears that the Government’s intention is that this requirement will be “enforced” primarily by the market, as any failure to publish may damage businesses’ reputations. Their expectation is that consumers, investors and NGOs will apply the necessary pressure where it is perceived that businesses have not met an adequate standard of transparency.

Details of which businesses will be affected, what steps must be taken, and the possible sanctions for non-compliance can be found in our alert of 10 September 2015.

New statutory guidance

The Home Office has now published statutory guidance entitled Transparency in Supply Chains: A Practical Guide, this guidance includes further detail about the information which may be included in the statement.

Application of the regime

There is no definition in the enacted legislation or the guidance which confirms exactly what is meant by the “supply of goods and services” or “carrying on of a business”, in the context of clarifying which organisations will be caught by the new provision. The guidance suggests that a common-sense approach should be adopted in interpreting these terms. It appears that the government’s intention is to cast a wide net over a spectrum of commercial bodies.

Deadlines

The statutory guidance provides that organisations should publish their statements as soon as reasonably practicable after the end of each financial year in which they are producing the statement. In practice, organisations will be encouraged to report within six months of their financial year-end.

Transitional provisions have been included to allow organisations sufficient time to understand the requirement and produce a statement. Businesses with a financial year-end date between 29 October and 30 March 2016 will not be required to publish a statement for that financial year of the organisation. Businesses with a year-end of 31 March 2016 will be the first businesses required to publish a statement for their full 2015–16 financial year.