In March 2015, the UK government enacted the Modern Slavery Act 2015 ("MSA2015") 1. Pursuant to this Act, from October 2015 certain commercial organisations doing business in the UK must prepare a "Slavery and Human Trafficking Statement" concerning their own business and their supply chains. A UK government study indicates this duty will apply to over 12,000 UK and non-UK companies. On October 29, the UK government published a practical guide2 of the Act. In this issue, we will take an in-depth look at the MSA2015 and how it may be relevant to your company.
MSA2015: Background and content
Slave labor remains an issue even today. Modern slavery refers to bonded, child, and forced labor and human trafficking in which people are held in slavery or servitude. A survey by the International Labor Organization (ILO) in 2012 estimated that nearly 21 million people in the world were the victims of forced labor at the time, and that USD150 billion in illegal annual profits were generated through forced labor3. In 2014, the UK government reported that there were between 10,000 - 13,000 people4 subject to modern slavery in the United Kingdom.
Around 2010, NGOs, including in the UK, began to lobby for a new, comprehensive law to tackle this scourge. The UK government recognized modern slavery as a global, organized crime. The Modern Slavery Bill was introduced in 2014, and in 2015 the MSA2015 became the first law in Europe aimed at eliminating modern slavery and human trafficking from supply chains.
Among other provisions, the Act requires that subject companies make a Slavery and Human Trafficking Statement containing either (a) the steps they have taken in the financial year to ensure there is no trafficking or slavery in their own business and supply chain, or (b) a statement that they have not taken any such steps. According to section 54(5) of the MSA2015, a slavery and human trafficking statement may include information about:
- a. the organisation's structure, its business and its supply chains;
- b. its policies in relation to slavery and human trafficking;
- c. its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
- d. the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;
- e. its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate;
- f. the training about slavery and human trafficking available to its staff.
If the organisation has a website, it must post the Statement there and include a link to it in a prominent place. Furthermore, it must be approved by the board of directors (or equivalent management body) and signed by a director (or equivalent).
Organisations subject to MSA2015 and the way forward
Organisations with an annual turnover of over GBP36 million and which carry on a business in the UK are subject to the new law, regardless of whether their headquarters are in the UK or abroad. There are roughly 1,000 Japanese companies doing business in the UK5, and those subject to MSA2015 must address it. On the other hand, in its guidance, the Government refers to applying a "common sense approach", meaning that organisations that do not have a demonstrable business presence in the UK will not be caught by the provision. The courts will be the final arbiter as to whether an organisation 'carries on a business' in the UK.
The law is in force as of 29 October 2015 and establishes procedures by which fines can be imposed on organisations which do not prepare a Slavery and Human Trafficking Statement. Businesses with a year-end of 31 March 2016 will be the first businesses required to publish a statement under the transparency provision. Companies that are listed in the UK are already required to publically report on their human rights policies and their effectiveness pursuant to amendments to the UK Company Act 20066. In 2014, the EU enacted a directive requiring roughly 6,000 subject companies in the EU to report non-financial information - including on human rights - by 2017. These developments are part of a growing trend towards greater regulation of non-financial reporting. Going forward, Japanese companies would be well advised to prepare for these kinds of global developments, establish a human rights policy, conduct due diligence in line with the United Nations Guiding Principles on Business and Human Rights and publically disclose such information.
Ernst & Young's Climate Change & Sustainability Service (EY CCaSS) is able provide information and advise on the latest developments and business impacts by coordinating with experts in this field across many regions, including the team at EY UK. Our CCaSS Tokyo team can also provide services related to the preparation of annual reports on forced labor and human trafficking, so please feel free to contact us with any inquiries you may have.
Mieko, a member of Japan CCaSS team, conducts business and human rights research, drafts human rights policies and implements human rights due diligence processes. Before joining EY, she was an expert with the Japan International Cooperation Agency where she coordinated between state governments, financial institutions, businesses and civic groups and managed projects to provide business support and local revitalization for small to medium enterprises in Africa. She has a Master's degree in Project Planning and Management from the University of Bradford. She is fluent in Japanese, English and Portuguese.