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How to write a modern slavery statement - Article 2 of 6

23 July 2018

In our second article from Barclays on the topic of modern slaver, the company states that every commercial organisation operating in the UK with a global turnover of £36m or more per annum is required to produce a statement.

But, the company asks, what do you need to consider? How is it structured? And what information should be included?

Relatively few businesses like talking about modern-day slavery. After all, the words ‘slavery’ and ‘trafficking’ go against what responsible businesses stand for.

It may be hidden and hard to identify, but no organisation is immune; if you dig deep enough – especially along your supply chains – you are likely to find it.”

There is no shame in uncovering modern slavery, however; it is how you deal with it that counts. By doing things properly, your business can play its part in trying to break the chains of this cruel trade.

It is now a legal requirement for all businesses operating on UK soil with a global turnover of £36 million or more to produce an annual modern slavery statement.

Under Section 54 of the Modern Slavery Act 2015, these organisations must demonstrate that they are tackling slavery and human trafficking in their own business, as well as rooting out the practice in their supply chains. “

This legislation is all about transparency,” says Michael Drew, Head of Modern Slavery Protect, UK Home Office. Actions, not words, are important, too. “The statement should be a good reflection of you as a company,” he says.

“However, we’ve viewed thousands of statements and lots of businesses should be doing much better.

“The government has taken a light-touch approach so far, but this won’t necessarily be the case in the future. Meeting the minimum legal requirements will not do. This is not the spirit of the legislation. Companies need to be proud of their statements.”

How much detail is needed? Legally, there are two types of report a commercial organisation can produce: an ‘active’ or ‘passive’ statement.

An active statement explains the steps an organisation is taking to ensure slavery and human trafficking is not taking place in any of its supply chains or parts of its own business. A passive statement merely states that an organisation has taken no such steps.

“While a passive statement is legally correct, it’s clearly not in keeping with the spirit of the legislation and gives out completely the wrong message,” says Chris Cartmell, Senior Manager and Solicitor at PwC.

Any business that fails to produce a statement can be subject to an injunction requiring them to comply and, if they still fail to act, they could be liable to a potentially unlimited fine. Several firms have already been named and shamed for missing deadlines.

Subsidiaries of global corporates that conduct business in Britain, with a UK turnover of less than £36m but a global turnover above the threshold, will also need to publish a statement.

“Even if companies don’t meet the criteria, I believe they should be publishing statements anyway so that modern slavery and human trafficking issues are front of mind and form part of wider compliance,” adds Cartmell.

“It’s the right thing to do, especially in terms of corporate social responsibility.” Making a statement So, what makes a good statement? First, it needs to be legally compliant.

It also needs to cover:

• The organisational structure of a business and its supply chains

• Policies relating to slavery and human trafficking

• Due diligence in business and the supply chain

• Assessing and managing risk

• Key performance indicators and their effectiveness

• Training.

“The first step should be a risk assessment,” according to Cartmell. “You need to look at things like the sector you are involved in, the jurisdictions you operate out of and the transactions you are entering into to understand what all your risks will look like.

"All other elements of the statement can then be put in place to show the steps you will be taking to manage those risks.

“The government doesn’t expect you to have a perfected gold-plated statement from day one. They understand that supply chains are extremely complex.

"It should be a gradual, continual process – one where you are consistently upgrading and developing your statement.”

Statements also need to be easily understood – and accessible online – so consumers, investors and employees alike can make sense of them. Links to previous statements also show how companies are improving over time.

Mistakes to be avoided Poor statements, on the other hand, usually haven’t been thought through. They don’t specify priority areas of risk or outline future plans.

They are reactive, too, rather than proactive – more about managing risks once something has happened in the supply chain, instead of taking steps to prevent risks occurring in the first place.

Also, there is often very little buy-in from the board.

“A lot of companies have approached legal firms and consultancies and been given very risk averse advice,” notes Drew.

“This means publishing the minimum possible in their statements as they don’t want to open up directors and the board to the risk of legal challenge. But that is not what this legislation is about. It’s all about transparency and sharing information with others about risks in your supply chain and the suppliers you use.”

Consequences of non-compliance Although there is the risk of unlimited fines, in reality the government – for the moment at least – is focused on supporting businesses rather than taking a punitive approach.

“The government can compel organisations to publish a statement, but then they can then just release a passive statement,” says Cartmell.

But even if businesses don’t take their statements seriously, they can still face reputational damage, loss of business and employee retention problems.

“Will customers, employees and shareholders want to be involved with a company that doesn’t take modern slavery issues seriously?” asks Cartmell.

“If you haven’t published a statement, or have just released a passive one, what does this say about your wider compliance culture? Does that mean you have no regard for third parties?”

“It should be an opportunity to sell a vision of what your organisation looks like and how you want to perform in the world. You should want to be seen to be doing the right thing.”

While the UK was the first country to introduce modern slavery laws, there is a growing body of countries trying to adopt legislation along the lines of the British model. Legislation will soon be global, and will no doubt have more teeth.

Modern-day slavery and human trafficking is a very real issue that affects all of society. And it is not confined to just one industry.

Real progress can only be made if all businesses collaborate. Burying heads in the sand, or worse – total disregard for the matter – will not do in 2018.

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