Transparency in supply chains – ensure you comply
The transparency in supply chains provisions are now in force. Shoosmiths partner Ron Reid explores their impact
Under the provisions, a commercial organisation (including manufacturers) with a turnover of £36 million or more which carries on business (or part of a business) in the UK and supplies goods and/or services is required to produce a slavery and human trafficking statement for each financial year of the organisation. It should not be thought that it does not have an effect on smaller companies who are likely to receive requests for supply chain information from those they supply.
The statement must set out the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place in any part of its business or in any of its supply chains. Alternatively, the organisation can choose to make a statement that the organisation has taken no such steps.
The statement must be approved by the board of directors or an equivalent management body and signed by a director or equivalent.
top” through competition to ”drive up standards”. Transitional provisions are in place giving time for organisations to formulate and implement strategies rather than adopting a hasty approach.
Organisations with a financial year-end from October 29, 2015 up to and including March 30, 2016.
If the organisation
is a limited liability partnership it must be approved by the members and signed by a partner. Once completed, a link to the statement must be published in a prominent place on the homepage of the company website.
Manufacturers should decide what activities are reasonable and proportionate to carry out in order to obtain the information to comply with the provisions.
Manufacturers who fail to comply risk being served with an injunction by the Government. Failure to comply with the injunction amounts to a contempt of court and is punishable by an unlimited fine. The expectation is that enforcement will not be necessary because pressure groups and consumers will look for such statements on company websites and require compliance.
Failure to comply will amount to brand risk and damage to reputation. The anti-slavery commissioner is expected to follow the trend of ‘naming and shaming‘ organisations who fail to comply.
The Government says the provisions are designed to create a ”race to the
THE BUSINESS MAGAZINE – THAMES VALLEY – FEBRUARY 2016
Organisations with a financial year-end on or after March 31, 2016, are required to publish a statement for the financial year 2015/16 within six months of their year-end.
Those who comply sooner rather than later will be in a better place when winning contracts.
Inevitably tender
documentation will include questions around this topic.
Manufacturers should:
• agree a strategy on compliance and take steps/make decisions as to how to address them
• carry out a risk assessment of modern slavery in their supply chain and take proportionate steps to mitigate the risk
• amend terms and conditions to enable contract termination if modern slavery is discovered. Without such a contractual arrangement an organisation could be vulnerable to a claim for breach of contract by a supplier whose supply it terminates. Make it clear that you only allow subcontracting either with the approval of your business or with companies having a zero tolerance to such practices
Where an approved supplier‘s list exists with audits of suppliers, compliance with these issues should be added to that audit regime. If modern slavery is identified, organisations must consider what approach will result in the safest outcome for the victim(s). The guidance suggests that termination of contracts should be a last resort which should only be considered after attempts to collaboratively remedy the situation have been exhausted.
Manufacturers should:
• make buyers and those involved in procurement aware of the changes and, together with the audit team, train them to spot signs of modern slavery
• ensure that the issue of modern slavery is covered in their policies and that whistleblowing policies are amended so that concerns about slavery or human trafficking can be raised.
Any organisation making an acquisition, that may take it above the compliance threshold, should consider safeguards by obtaining warranties from the previous owner of the business. Due diligence, going forward, will need to cover this area.
The most practical step any organisation can take is to appoint a senior person within the organisation to lead its response and ensure that they take action. The ”race to the top” has begun.
SOUTHERN MANUFACTURING
100 TM
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www.businessmag.co.uk
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