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Supply chain reporting: many more companies will be caught as turnover threshold for compliance reduced to £36m

07 August 2015 #Employment

Following consultation, the government has decided not to limit the new reporting requirements of the Modern Slavery Act affecting supply chains just to very big companies. Speaking on his tour of south east Asia, prime minister David Cameron has now confirmed: “From October we will also require all businesses with a £36 million turnover or above to disclose what they are doing to ensure their business and supply chains are slavery free. He went on to say, “This measure is one of the first of its kind in the world and it will be a huge step forward, introducing greater accountability on business for the condition of their supply chains.”

In consultation, the government had been considering a compliance threshold as high as £1 billion. It is estimated that with a £36 million turnover threshold, some 12,000 companies will be caught by the new obligations.

The announcement means that from October 2015, all companies with a turnover of £36million or above and doing business in the UK will have to publish a “slavery and human trafficking statement” each financial year. This is a statement of the steps the organisation has taken during the financial year to ensure that slavery, i.e. forced labour, and human trafficking is not taking place either in any part of its business operations worldwide or in any part of its supply chains anywhere in the world. In respect of such a serious issue, it is potentially a very onerous obligation, particularly where an organisation may have a large, complex global supply chain. It will be possible to provide a statement saying that no steps have been taken to combat slavery and human trafficking but that is very unlikely to be a viable option, given the reputational risks to the business. That would entail stating in effect that no steps have taken to assess the level of risk of slavery or human trafficking taking place in its organisation or supply chain or carry out any due diligence.

The Act will apply to any business, not just companies incorporated in the UK. Turnover will be calculated based on total global turnover, not based on the amount of business done in the UK. The Act will therefore apply equally to organisations based in the UK but with some operations abroad and also organisations based abroad but carrying out some part of their business in the UK. For more detail see recent our article Global supply chains and human rights: new obligations for business from October 2015

Speaking to the publication Supply Chain Management, David Noble, group CEO of the Chartered Institute of Procurement and Supply said: Modern day slavery is not a problem confined to the supply chains of large multinational corporations. On the contrary, SMEs can have long and complicated supply chains. In fact, our research shows that four out of five British SMEs say they are struggling to gain end-to-end visibility of their own supply chains. They are, therefore, perhaps in most need of guidance."

Ahead of his south east Asia trip with business leaders (where the recent announcement was made) covering Indonesia, Singapore, Malaysia and Vietnam, David Cameron said: "Over the next 20 years, 90 per cent of global growth is expected to come from outside Europe.”

The government said Vietnam ranked in the top five countries for victims of modern slavery, while in 2013 it was estimated there were between 10,000 and 13,000 potential victims of modern slavery in the UK alone.

The whole issue of labour standards and human rights in global supply chains will be dealt with at the UN International Labour Conference in 2016, which Clarkslegal support on behalf of the CBI. As part of that discussion, global trade unions are pressing for new international labour standards to be set.


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