The focus on modern slavery continues with, during May, a Modern Slavery garden winning gold at the Chelsea Flower Show (celebrating the day the Modern Slavery Act 2015 (“MSA”) was passed). Whilst less publicised, a private members bill on the subject is also working its way through the House of Lords.
Section 54 MSA requires certain commercial organisations to publish a statement of the steps that they have taken during the last financial year to ensure that modern slavery and human trafficking are not occurring in their supply chain or business. The requirement applies to organisations who have a financial year end on or after 31 March 2016. The statement must be published on the organisation’s website, if it has one, with a prominent link to the statement from the homepage.
Section 54 is not prescriptive with regard to the information that a statement must include and the sanctions provided under the Act relate to a failure to provide a statement at all rather than the quality of the statement. The government has so far resisted a central register of statements and anticipates that the risk of reputational damage will encourage a ‘race to the top’ attitude. The Modern Slavery (Transparency in Supply Chains) Bill 2016-17 has been introduced to address, to some extent, this lack of formal regulation.
The Bill requires commercial organisations and public bodies (including contracting authorities and central government authorities) which are in scope to include the modern slavery statement in their annual report and accounts. It also requires that the Secretary of State publish a list of all commercial organisations required to publish a statement, categorised according to sector. The aim being to increase the level of scrutiny by placing the spotlight on those organisations caught by section 54 and highlighting an organisation’s response to its shareholders, stakeholders, the press and public.
The Bill also provides that any economic operator who has failed to produce a slavery and human trafficking statement shall be excluded from any public procurement exercise, thereby providing direct commercial repercussions for bidders who fail to comply with section 54. This builds on the amendment already made by the MSA to the Public Contracts Regulations 2015 that a conviction under the MSA for modern slavery or human trafficking is a mandatory exclusion from participating in a public procurement.
The whole tenor of the Bill is to increase visibility with regard to organisations’ responses to section 54 and require the government to play a more active role in requiring compliance with section 54. The timing of the Bill notably follows on from negative reviews by commentators on the quality of some statements that have been published since section 54 took effect.
Aside from the poor quality of some of the statements that have been produced so far many of them fail to comply with the legal requirement to be approved by the board and signed by a director. The key aim of this requirement was to ensure that issues of modern slavery within an organisation were on the agenda of its senior management. However, it also allocates accountability to the signing director and board of directors to ensure that the statement is correct at the time of signing. The board and/or the signing director may face allegations for failing to act with reasonable skill, care and diligence when approving and signing off statements. Whilst primarily organisations should ensure their compliance with section 54, care should be taken by affected organisations to ensure that its directors and officers liability insurance policy is robust enough to cover directors and officers for failures, both with regard to the statement but also to protect management from criminal prosecutions arising from offences under the MSA.
CMS is advising a number of UK and international organisations on the requirements of section 54 and has produced the following guide highlighting key considerations. If you or your organisation would like assistance on how it impacts you and how to respond please contact any of our CMS team below.