The Modern Slavery Act 2015 is cracking down on modern slavery within the UK and beyond. As well as consolidating current offences of slavery and human trafficking, and introducing new preventative measures, support systems and regulatory body, the act also imposes annual reporting obligations on organisations above a certain size.
The recently announced turnover threshold of £36m is lower than many people expected. So what does this mean for supply chain risk management in the UK?
Comparisons to California
The California Transparency in Supply Chains Act was introduced across the pond in 2012, requiring similar reporting obligations. A turnover threshold of $100m (£60m) was set for businesses organised or commercially domiciled in California, or making sales in California that exceed either $500,000 or 25% of total sales.
Section 54 of The Modern Slavery Act may be inspired by California’s supply chain legislation, but several differences makes the new UK regulation far more far reaching. Whereas California only considers supply chains for goods in the retail and manufacturing sectors, the UK act looks at both goods and services. The Modern Slavery Act also covers organisations carrying out any part of their business in the UK, however small the percentage.
In its consultation paper, “Modern Slavery and Supply Chains”, the UK Home Office acknowledged that the reporting requirement should “ensure that large businesses cannot turn a blind eye to modern slavery simply because of their corporate status or domicile.” The act aims to encourage as many organisations as possible to tackle the supply chain risk, and this requires casting a wide net.
Setting the limit
The UK Government launched a consultation back in February to collect opinions on the transparency in supply chains clause within the Modern Slavery Act, and the results were recently published.
They revealed that 80% of respondents thought the turnover threshold should be set at £36m. This figure is already used in the Companies Act 2006 to define large businesses for other reporting requirements, and respondents felt that businesses with this turnover are likely to have the necessary purchasing power, resources and influence to create effective change.
By electing for a lower figure than set by the California Act, the Government ensures that the measure applies to as many businesses as possible in the UK. Many respondents suggested that small and medium sized businesses should be able to opt in to the act, and should be required to report in the future following a gradual lowering of the set threshold.
What are the supply chain risks?
It will be possible for businesses to comply with the act simply by stating that they have taken no steps to protect their supply chains from modern slavery. However, the act will make a company’s behaviour absolutely transparent, allowing investors, consumers and the general public to form their own opinions.
Reputational supply chain risks can have a huge effect on a company’s turnover and long term stability. Stakeholders and consumers alike may be concerned by conditions of modern slavery, and choose to distance themselves from the company.
However, last year as the Modern Slavery Bill was entering Committee stage, YouGov revealed that more than one in ten British business leaders thought modern slavery was ‘likely’ to be playing a part in their supply chain. With serious problems so common, there is a long way to go before unethical working conditions are eliminated from UK supply chains.
Clause 54 of the Modern Slavery Act is not expected to come into force until October, but UK companies would be wise to start working towards compliance now. Supply chain risk management could make all the difference to their public image in future.
How Segura can help
Luckily for UK businesses, help is out there. Segura is an affordable, flexible and practical solution which allows companies to monitor and manage their secondary supply chain. Our cloud-based software can be used out-of-the-box for instant results, or tailored to fit your unique business needs. Either way, our easy to use interface and accessible supplier portal can enable your company to tackle risks in the supply chain in no time at all.
