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The UK Modern Slavery Act: The Bottom Line for Business

17/06/2016 16:59

Five years ago on 16 June 2011, the UN Human Rights Council adopted the UN Guiding Principles on Business and Human Rights, articulating the roles of States and businesses in preventing and remedying corporate abuses.

Today, there is a widespread and growing recognition of the commercial, legal and moral imperative for businesses to take this responsibility seriously and take meaningful action.

This is demonstrated particularly clearly by the scourge of modern slavery.

There are more people - the majority of them women - ensnared today than ever before. In the UK alone there are thought to be some 12,000 people trapped in modern slavery today and over 30million globally, generating illegal profits of $150billion.

Only last week, the High Court provided a poignant reminder of the reality and risks of this cruel practice, ruling for the first time that a British company must compensate victims of modern slavery.

On 10 June, the Court found in favour of six Lithuanian men trafficked to the UK to work on chicken farms across the country. Their employer was found guilty of a range of exploitative practices, including unlawfully low pay and withheld wages, charging prohibited fees, and providing inadequate facilities for washing, eating, drinking and resting.

Belatedly, governments and international organisations are recognising that existing efforts to address industrial-scale abuse of human rights are insufficient. Increasingly, they are looking to harness the purchasing power of the private sector to drive the slave masters out of business.

The EU Commission is expected soon to publish its new strategy on corporate social responsibility and the French Parliament is currently discussing a bill requiring companies to develop due diligence plans for their supply chains.

The UK has again taken the lead with the Modern Slavery Act. Passed last year, a key new requirement began to take effect only this spring. Large enterprises doing business in the UK - regardless of where they are based - must now publish an annual statement setting out the steps taken to prevent slavery in their businesses and supply chains in the UK and overseas.

The statement must be approved at the highest levels within the organisation and accessible via a prominent link on its homepage. But the law deliberately leaves businesses to decide on the content.

Rather than imposing sanctions, the Government hopes that a combination of pressure from civil society, consumers and investors will kickstart a race to the top amongst businesses, ushering in real changes in corporate behaviour.

In a room packed with corporate leaders brought together recently by our firms, we examined what the new "transparency in supply chains" provision means in practice for businesses.

It is a sad truth that slavery may exist in the supply chains of most major businesses. The example of the Lithuanians is, sadly, by no means unique. The challenge for all businesses will be to put into practice effective means to identify and to address this. This raises hard-edged legal and practical questions. For example, how far should companies focus their efforts on their suppliers in the UK rather than those overseas? (Some are arguing that the Act only applies to slavery in the UK - we disagree.) If a company finds slavery in one of its suppliers, what would be the consequences of either breaking the contract or continuing it?

While businesses are starting to wake up to this challenge, it is clear from looking at the first of the statements to be published that there remains a long, long way to go. There is no one-size-fits-all easy fix. But some major companies are beginning to give a lead in implementing proportionate, practical policies.

Others cannot afford to get left behind, and the latest decision from the High Court again highlights the risk. The human cost is simply too great. Plus, with the added legal, financial and reputational risks - and the spectre of new sanctions if companies do not act themselves - the business case for taking action is now compelling and urgent.

Cherie Blair CBE, QC is Chair of Omnia Strategy LLP
Miriam Gonzalez is a Partner at Dechert LLP.

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