Part Two: What should a Section 54 statement include under the Modern Slavery Act 2015

In our blog dated 11 November 2015, we discussed the introduction of section 54 statements under the Modern Slavery Act 2015 and promised to look in more detail at the guidance on what section 54 statements should address. The Home Secretary has issued some Guidance, a copy of which can be found here.

In short, it states that a section 54 statement should include:

1. details of the business’ structure, business and supply chains;
2. its policies in relation to slavery and human trafficking;
3. its due diligence processes in its business and supply chains;
4. its risk assessment, risk management and resources committed to tackling the risk of slavery and human trafficking;
5. its effectiveness in tackling slavery and human trafficking measured against performance indicators;
6. the training about slavery and human trafficking available to its staff; and
7. the statement being signed by an approved person.

Taking each of these in turn, we make the following comments:

Structure, Business and Supply Chains

A section 54 statement should outline the sectors in which a business operates, whether any of its work is seasonal, the business’ structure and the relationships between the group companies. It should also state the countries from which the business sources its goods and services including any countries where modern slavery occurs or is at greater risk of occurring.

In addition, for the sake of transparency, a section 54 statement should also include information about the make-up and complexity of the business’ supply chains, its operating models and relationships with suppliers and other local stakeholders such as trade unions.

‘Supply chain’ has its ‘everyday meaning’ which includes the suppliers and/or customers of a business’ products and/or services.

Policies

The business should give details of its policies in relation to slavery and human trafficking, its due diligence to new suppliers or renewals with existing suppliers and its processes for policy development.

Slavery and human trafficking policies should include the business’ minimum labour standards that it expects of itself and its suppliers and set out how these compare with the industry standards, and how it ensures that workers’ wages are both legal and fair. Businesses should also state the person(s) responsible for tackling modern slavery in the business, the resources set aside for doing so and any financial incentives paid to workers to tackle modern slavery.

The section 54 statement should state the procedures for reporting slavery such as a whistleblowing procedure and outline what would happen where a supplier is found to have engaged in modern slavery or human trafficking as well as guidance where a supplier is willing to remedy any involvement in modern slavery.

Businesses may already have similar policies relating to business relationships including a supplier code of conduct, employee code of conduct, ‘know your customer’ policies, recruitment policy or procurement policy. Those policies can simply be listed in the section 54 statement and should be adapted to show that it meets the requirements of a section 54 statement.

Due Diligence

A business must set out the due diligence it has undertaken in its supply chains that due diligence should be proportionate to the risks of modern slavery and human trafficking and could include, for example, engaging directly with related third parties such as trade unions to gain a greater understanding of the welfare and conditions of workers.

Risks of modern slavery can vary depending on the length and nature of business relationships. For example, a business should know more about its first tier suppliers but it may also be necessary to engage with its lower-tier suppliers to ensure greater transparency to help eliminate modern slavery in its supply chains.

Assessing and Managing Risks

Risk assessments should be proportionate to a business’ size, structure, location of business activities and supply chains and the nature of its business. The Guidance identifies four types of risk:

1. Country risks – identifying parts of supply chains in countries where human rights protection is limited (such as the right of foreign contract workers to retain identification documents). A list of countries where there is a high risk of modern slavery can be found here.
2. Sector risks – risks of modern slavery differ between sectors and are more likely to occur in certain sectors. On airlines, people could be trafficked on flights. In construction, bonded labour may be used.
3. Transaction risks – banks or financial institutions may be involved in financing or supporting modern slavery in its operations, supply chains or through money-laundering.
4. Business partnership risks – there is a risk that business partners might be involved in various forms of modern slavery. This risk may be lower if there is a longer business relationship (and there is a greater understanding of the other business’ supply chains and organisation).

The section 54 statement should then set out the steps taken by the business to manage the risks of modern slavery with reference to the business’ policies and procedures.

Performance Indicators

A business should measure its effectiveness in tackling slavery and human trafficking by setting appropriate performance measures recognising that standard commercial performance indicators, which are intended to cut costs and increase efficiency, may unintentionally, cause situations of modern slavery or bonded labour to occur.

A section 54 statement should, therefore, include those performance indicators which could cause modern slavery or human trafficking to occur. It should also outline any additional performance indicators which may have been introduced to tackle slavery in its supply chains which might include targets for anti-slavery training and alerting staff to modern slavery issues, measuring changes in risk, updating grievance and whistle-blowing procedures and using its influence to ensure that its suppliers do not engage in slavery.

Training

Section 54 statements should demonstrate how the business is training staff to tackle modern slavery. This can be in conjunction with other training and should be targeted and adapted to people to ensure that the policy is effective in preventing modern slavery from occurring.

Who Signs a Statement?

For a company, a section 54 statement must be approved by the board of directors (or equivalent management body) and signed by a director. For a limited liability partnership, it must be approved by the members and signed by a member. For a limited partnership, it must be signed by a general partner. For a partnership, it must be signed by a partner.

The Statement must then be published on the Organisation’s website and there must be a prominent link to the Statement on the website’s homepage. If a company does not have a website, it must provide a copy of its section 54 statement within 30 days of receiving a request.

If you would like further advice on the preparation of a section 54 statement, please contact Linky Trott – Partner or any member of the Edwin Coe Employment Team.

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