Modern Slavery Act (UK) and supply chain transparency in the construction sector

For the international construction sector, modern slavery (a concept covering slavery, servitude, forced and compulsory labour and human trafficking) is a major supply chain issue, particularly for those involved in large or high profile infrastructure projects in challenging labour environments. While modern slavery is a global phenomenon that all affected organisations should be actively addressing, for those subject to the reporting requirements under the UK's Modern Slavery Act 2015 (MSA), the issue of preventing modern slavery in supply chains is about to become very public and a compliance and public relations challenge moving forward.

Reporting requirements

Commencing October 2015, commercial organisations supplying goods or services with a minimum turnover of GBP 36 million will be required to publish on their website an annual ‘slavery and human trafficking statement’. This is a statement of the steps (if any) taken to ensure modern slavery is not taking place in the organisation’s business and supply chains. Given the global nature of the construction sector, the MSA is likely to have knock-on effects throughout the global supply chain.

A slavery and human trafficking statement may include (among other things): information about the organisation’s policies on modern slavery; the modern slavery due diligence undertaken across its business and supply chains; the parts of its business and supply chains where there is risk of modern slavery taking place and what steps have been taken to assess and manage that risk; and the training on modern slavery available to staff. The UK Government will publish statutory guidance covering the reporting requirement and good practice for the prevention of modern slavery in supply chains to coincide with the obligation coming into effect in October.

Name and shame

Public scrutiny will provide the primary incentive for complying with reporting requirements. Negative attention from customers, shareholders, trade unions and civil society (NGOs and human rights groups) is likely to prove an effective incentive, particularly if an organisation, sector or issue is already in focus. California has similar legislation in effect and dedicated NGOs, such as KnowTheChain, are already engaged in ‘public shaming’ exercises, publishing details on their website of companies that are non-compliant with reporting requirements under the California Transparency in Supply Chains Act 2010. The London and New York-based Business and Human Rights Resource Centre has also been active in approaching non-compliant organisations under the Californian regime and is very likely to turn its attention to businesses who fail to comply with reporting requirements under the MSA. Organisations subject to the reporting requirement will need to ensure their slavery and human trafficking statement is underpinned by appropriate and proportionate action that it is defensible in the face of scrutiny and criticism from inside and outside of the organisation (eg, from trade unions and whistleblowers with intimate knowledge of an organisation's approach to modern slavery on the ground).

There will undoubtedly be significant differences in the approaches organisations in the construction sector take to supply chain due diligence, management and the reporting requirement given risk profiles will vary (eg, an organisation undertaking a construction project in the UK will have a lower risk profile for modern slavery than an organisation undertaking public works in a jurisdiction where labour practices for migrant workers have been historically poor). Procurement policies addressing modern slavery, contractual protections in supply contracts, clear labour and whistleblowing policies and consistent messaging throughout the supply chain will be important wherever organisations are operating. However, for those organisations operating in high risk jurisdictions, enhanced due diligence and the implementation of more stringent preventative measures will undoubtedly be required.

Clyde & Co LLP - Clare Hatcher and Brett Hartley





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