Ask any business in the UK if it is involved in slavery or human trafficking and the reaction is likely to be one of astonishment that the question is even being raised.
But from March next year, many businesses in the UK will have to answer the question whether it is asked or not.
Making a statement
The Modern Slavery Act came into force in October 2015 and, clearly, its primary aim is to stamp out human trafficking and slavery in the UK. But with the outcry which arose from suggested links between large clothing retailers and conditions in what can only truly be described as 'sweat shops' operating in third world countries, the onus is now being put on all businesses to be more open about how they operate.
Every business established or operating in the UK which have a group worldwide turnover of more than £36 million must, in relation to all of their financial accounts for years ending from 31 March 2016 onwards, prepare a statement of the steps it has taken during the financial year to ensure that slavery and human trafficking is not taking place, not only in any part of its own business but also in any of its supply chains; though there is an 'out' for the business simply to state that it has taken no such steps.
There is no compulsory form of statement, but it is suggested that it may include information about:
- the organisation's supply chains
- its policies
- due diligence processes in its supply chains the parts of its supply chains where there is a risk of slavery and human trafficking
- steps the business has taken to assess and manage that risk.
The statement must be approved by the board of directors, signed by a director and published on the business' website.
While initial public clamour for such action arose primarily due to retailers, the Act does not distinguish between types of business, and so any company which supplies goods or services and has turnover above £36m will be caught.
The supply chain conundrum
While the operation of a company's own business will be within the full knowledge of its directors, the position in its supply chain may be different.
Food manufacturers are likely to be particularly at risk. To take one popular chocolate bar, for example, while it may be manufactured in the UK, you might be surprised to know that its ingredients have to be sourced from over 15 countries worldwide – perhaps not surprising when you think about the need for ingredients which grow in particular countries, exacerbated by the need for year-round supplies, meaning that crops and other ingredients have to be grown in many locations to ensure ongoing supply.
Many large manufacturers already take part in the 'Fairtrade' programme and may suggest that they rely on that as part of their policy. But Fairtrade only covers certain crops and ingredients and, alone, will not be the answer.
Shout out about the source and quality of Scottish produce
Many Scottish food producers pride themselves on local sourcing and the natural quality of their ingredients. For them, the requirements may be seen not as a risk of adverse publicity by having to either state openly what may go on in their supply chain or that they do not know; but rather, an opportunity to further trumpet the fact that all their ingredients are locally sourced.
Indeed, while it has been assumed that this is an onerous task for larger businesses, we may now see smaller businesses, well below the turnover threshold of £36m, using this as an opportunity to make a further public statement about the natural and ethical source of their own ingredients.
At present, there are no financial penalties which will apply if a business fails to comply; but a court can order them to publish the statement. The aim, however, is to rely on the fear of bad publicity and desire for public goodwill to force businesses to comply.
Scotland prides itself on its high quality food and drink, and so Scottish producers, rather than seeing this as more red-tape, should perhaps instead treat it as a further marketing opportunity.
Get in touch
If you wish to discuss how this might affect your business, and the steps you can take not only to comply but to actively police such activity in your supply chain, please contact us.
Scott Kerr is head of Harper Macleod's Food & Drink Group