Modern Slavery: ongoing confusion

Those of us practising human rights law in the UK are closely familiar with the Modern Slavery Act 2015 (MSA). It is the topic of the moment, and understandably so. Not a week goes by without an invitation to another event deconstructing its requirements and lauding its innovations. The MSA represents a bold move forward by embodying the trend toward increased regulatory/reporting requirements for corporations, joining the likes of the US Ending Trafficking in Federal Contracting Act, section 1502 of the Dodd-Frank Act (on conflict minerals), the California Transparency in Supply Chains Act, and the EU Non-Financial Reporting Directive. The MSA is among this first tranche of hard laws that have crystallised out of the non-binding business and human rights framework embodied in the UN Guiding Principles on Business and Human Rights.

It is a piece of legislation of which the UK can be very proud. Because of its current dominance, those of us in the community of business and human rights practitioners know the MSA like the back of our hand. We know its weaknesses (no teeth/no meaningful penalties) and we know its strengths (allowing companies to take a common sense approach to reporting on slavery and trafficking). But at each MSA-related event I attend it becomes clearer that this conversation amongst lawyers is leaving out crucial stakeholders: the companies that must prepare a slavery and human trafficking statement under section 54. What good is our knowledge and expertise if we fail to share it with the companies who the MSA seeks to regulate?

Confusion around reporting under section 54 is becoming increasingly evident based on 1) preliminary analysis of the initial reports done by Ergon Associates and 2) conversations that I have been privy to amongst General Counsel and other corporate actors tasked with figuring out how  to write a statement. There doesn’t seem to be any consensus as to what a good statement should look like, which entities in a body corporate should produce a statement, or how far down the supply chain a company is expected to report. Beyond the logistics of drafting of the statement, there are deeper questions about best steps to take to ensure that slavery is not taking place. Can a company trust its suppliers to self-report? Is it sufficient for the procurement team just add a new warranty clause into its contracts? What, GCs are asking, exactly are we supposed to do to comply with the MSA?

To be good lawyers, it is time to shift the conversation from singing the MSA’s praises to helping clients achieve compliance whilst balancing their commercial interests. Based on the conversations that I’ve been having, here are a few key questions where we as lawyers can help move things along:

  • Determining which business entity is or isn’t caught by the MSA is the first, and biggest, challenge. Which parts of the group structure should report? The parent, subsidiary, both? What about a parent that doesn’t engage in commercial activity but whose subsidiaries do?
  • Choosing which suppliers to focus on when resources are limited is another key challenge. Is it best to ignore large multinational suppliers, assuming that they are likely to be reporting themselves and/or getting many due diligence requests from other customers? Shouldn’t the decision be based on which supplier presents the highest risk of slavery? Is it okay to focus on suppliers over whom my company can exert the most leverage, even if the risk of slavery is low?
  • The use of warranties in procurement contracts is often queried as a sufficient replacement for sending questionnaires to suppliers as part of due diligence. Do we trust companies in making warranties? What about those who warrant “there is no slavery in our supply chain?” Do we really want to bog down all our contracts with more clauses? What procedures for enforcement of these warranties are in place, if any?
  • If a company chooses to send suppliers questionnaires, can they comfortably rely on the results? What should the content of the questionnaires be? It is essential to ask questions that elucidate the steps a supplier is taking to address slavery in its business and supply chains rather than simply asking, “Are you compliant with the MSA?”
  • What should a company do if it discovers slavery in its supply chain? If it is a key supplier, is it worth jeopardising commercial position by terminating a crucial business relationship? How can the company use leverage to address the problem? How can the company include this information in its MSA statement without being scrutinised by civil society?
  • How can the statement be drafted to strike a balance between showing what steps are being taken and allowing for progress year-on-year? What about steps that have been discussed at board level but not yet implemented? Is it okay to feel our way rather than showing all our cards now?

These are just a few examples of the issues that businesses face in complying with section 54. What appears to be a simple reporting requirement in fact creates a ripple effect, requiring companies to dig deep to provide assurances that they are taking steps to eradicate slavery in their supply chains. This is much tougher than it may seem, and business and human rights lawyers should be willing to get stuck in alongside companies in order to advance the purpose of the MSA.


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