For fashion businesses which source materials or manufacturing garments or footwear especially overseas, the advent of the Modern Slavery Act 2015 (MSA) has huge significance. For UK businesses the trafficking provisions have extraterritorial application: this means an offence is committed regardless of where in the world the arranging or facilitating of trafficking takes place.

This article covers the following topics:
Which businesses does the MSA apply to?
Start planning now
What should the Statement include?
Approving the Statement
Public scrutiny
Time for compliance
Penalties or toothless?

The aim of the Act is for companies with turnover of £36m or more to state what they are doing to tackle modern slavery and human trafficking.   The requirements of the MSA cover every link in the supply chain, regardless of where in the world each entity operates.  The Act consolidates current offences relating to trafficking and slavery. It also criminalises aiding, abetting or procuring forced labour or human trafficking, or being an accessory to such offences.

The industry should avoid seeing this as a name and shame crusade. Rather, brands should seize this as a chance not only to tackle ‘sweatshop slavery’ but to build confidence in supply chains, which can never be bad for business.

By the same token, failure by a business to be seen to be committed to this important aspect of corporate social responsibility will impact on its reputation and, in consequence, the bottom line. 

The evolution of the MSA has its origins in the fashion sector. Long before the Act came into being, the fashion sector had begun to take action, sparked by events such as Rana Plaza – just three years ago – and other reports about the working conditions in textile factories. Earlier this year, Rip Curl had to publicly apologise for selling ski jackets that were made in a state-owned North Korean factory with terrible working conditions. Rip Curl blamed a rogue supplier for outsourcing to ‘an unauthorised subcontractor’.

The Act requires large businesses to publish a slavery and human trafficking statement, which enables businesses to demonstrate their transparent working practices and overall commitment to the Act.

Which businesses does the MSA apply to?

The MSA requires large businesses to publicly state each year the actions they have taken to ensure their supply chains are slavery free. Adverse human rights impacts can occur at any level of a supply chain – from direct suppliers, all the way through multiple layers of sub-suppliers and sub-contractors, to raw material providers and franchisees or distributors.

The requirement applies to fashion businesses of all types so long as they carry on a business or part of a business anywhere in the UK with an annual worldwide turnover of £36 million or more. Turnover means the amount derived from the provision of goods and services falling within the ordinary activities of the commercial organisation or subsidiary undertaking, after deduction of trade discounts, value added tax, and any other taxes.

Start planning now

Fashion businesses caught by the provisions should start work now on compliance plans, so they can publish the steps they have taken in their Statement. Such steps include:

  • Ensure slavery and human trafficking is covered in human rights, CSR policies and whistleblowing polices;
  • Audit labour standards within in the core business and with suppliers;
  • Update commercial agreements to include obligations on suppliers to: (1) comply with minimum labour standards within the jurisdiction it operates; (2) provide information on their own supply chain mechanics and; (3) allow access to for inspections and auditing checks to be undertaken.
  • Identify and prioritise high risk areas and geographical locations in the supply chain;
  • Seek assistance in carrying out audits
  • Appoint someone in the organisation to oversee the investigation and the production of the Statement;
  • Raise the issue with your board;
  • Seek training on how to fulfil compliance requirements; and
  • Develop tailored programs to ensure compliance.

What should the Statement include?

The MSA Statement should address matters such as:

  • The organisational structure, group relationships and the business’s operating model
  • The make-up and complexity of the supply chains
  • The countries from which the business sources materials, textiles, garments and all other goods, highlightinghigh risk countries where modernforms of slavery , child labour and poor working conditions are prevalent.

Regardless of any findings, the Statement must confirm that the organisation iseither:

  1. Taking steps to ensure that slavery and human trafficking are not taking place in any of its supply chains or in any part of its own business and identifying what steps are being taken; or
  2. That no steps are being taken

Although a business can satisfy the requirements of the Act by stating that no steps are being taken – such a declaration is not an attractive proposition!

Approving the Statement

The MSA requires commitment to and approval of the Statement from senior management.  Depending on the type of corporate entity, different approval levels will be required:

  • Companies – the board of directors must approve the Statement and it must be signed by a director.
  • Limited Liability Partnerships (LLPs) – The LLP members must approve the Statement and it must be signed by a designated member.

Public scrutiny

The Statement must be published in a prominent position on the website homepage. If the organisation does not have a website, it must provide a copy of the Statement to anyone who makes a written request for one within 30 days of the company receiving the request.

Consumers, investors, campaigners and the public will be better informed about the business as a result of those new provisions and likely to show increasing interest in a fashion business’s commitment, especially when compared to other competing businesses.

Time for compliance

A business with a financial year ending on 31 March, 2016 will be required to publish a Statement “as soon as reasonably practicable after the end of their financial year” and are encouraged to do so within 6 months.

Organisations with financial year ends falling between 29 October 2015 and 31 March 2016 will have to publish a Statement in the next financial year. For example, an organisation with a financial year end of 31 December 2015 will have to produce its first Statement in relation to the financial year 1 January 2016 to 31 December 2016 “as soon as reasonably practicable” after the financial year end. The UK Government’s Practical Guide (Transparency in Supply Chains) (the “Guidance”) encourages reporting within 6 months of financial year end.

The Guidance acknowledges that many organisations may choose to publish the Statement alongside other annual financial and non-financial reports.

Penalties or toothless?

The UK Government is relying on consumer pressure to encourage compliance. Although the MSA states that a failure to produce a Statement can result in the Secretary of State applying to the High Court for an injunction to force the business to comply, such action seems unlikely to be commonplace.

The real risk to businesses is likely to be reputational rather than legal.

According to the Guidance “It will be for consumers, investors and Non-Governmental Organisations to engage and/or apply pressure where they believe a business has not taken sufficient steps”.

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