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Non-SMEs face new rules to stamp out ‘modern slavery’ in UK and overseas

31 July 2015

Confirmation on the Transparency in Supply Chains (TISC) clause in the Modern Slavery Act – taking effect from October 2015 – will mean that any UK firm with a turnover above £36m and operating overseas or solely in the UK will be required to complete an annual slavery and trafficking statement.

And from October 2016, companies with a turnover above the threshold will be expected to publicly share their policies and strategies to tackle modern slavery in their supply chains.

The scope of the clause, confirmed this week by prime minister David Cameron, will cover construction products companies importing goods or components to the UK, as well as contractors and consultancies operating in the home markets and/or overseas.

The TISC clause is expected to help drive reform in overseas markets where forced, trafficked or child labour has been a persistent feature. The issue was recently highlighted by the CIOB in its report, Modern Slavery: The Dark Side of Construction.

"This is welcome news; the £36m threshold is what we called for in our submission. We believe that by setting it at this level, the government is going a long way to help level the playing field for businesses that are committed to operating ethically."

Cindy Berman, Ethical Trading Initiative

Victoria Ball, projects and construction associate at law firm Trowers & Hamlins, told Construction Manager:"This is an obligation that companies will have to take extremely seriously. The UK government has committed to tackle the issue of 'modern slavery' and will therefore want to see active commitment in return from companies who can make a real difference. Additionally, it goes without saying that the implications of non-compliance with this reporting obligation in such a morally compelling context could leave a large dent in an otherwise sterling company reputation. 

"This legislation therefore has echoes of the Bribery Act 2010, in that companies will want to act quickly to instil changes in their corporate governance procedures to conform with the new outward-facing displays of compliance with legislation, and further, illustrate the direction of their moral compass." 

The government issued a consultation on the threshold in the spring, and the decision to adopt the £36m figure – equivalent to the EU definition of the maximum turnover of an SME – has been welcomed by the Ethical Trading Initiative (ETI), an alliance of companies, trade unions and NGOs that promotes respect for workers’ rights around the globe.

Cindy Berman, head of knowledge and learning at the ETI, said: “This is welcome news; the £36m threshold is what we called for in our submission. We believe that by setting it at this level, the government is going a long way to help level the playing field for businesses that are committed to operating ethically.

“It will avoid the problem of unfair competition from unscrupulous companies that have been operating below the radar and undermining the efforts of socially responsible businesses.”

However, in the construction sector, Ian Nicholson, managing director of sustainability consultancy Responsible Solutions, acknowledged that it was difficult to set a “fair” threshold and the £36m figure would embrace many construction businesses with little experience of supply chain transparency.

He commented: “The Modern Slavery Act is a welcome addition into the armoury for dealing with the horrendous implications of slavery. I understand the logic of the £36m threshold but feel it is a double-edged sword for the construction industry.

“On the one hand £36m can be considered too high on the basis of the vast number of SMEs in the sector and so the Act will not penetrate as far enough into the supply chain as other sectors. On the other hand ethical sourcing is still a relatively new topic that construction is still getting to grips with, this is illustrated by the lack of construction respondents to the consultation. As a result the £36m threshold will represent significant amount of effort for the industry to comply.”

He added: “This provides further evidence that the training and guidance we are currently producing on behalf of the APRES network and CIRIA is incredibly timely.”

At the ETI, Berman said that the new legislation would be a “game-changer”, ending cycles of exploitation and worker abuse in the UK and overseas.

It would also force UK companies to thoroughly investigate their supply chains, and take responsibility for what they find.
“It will involve a deep dive into the supply chain to understand what’s really going on many tiers down – getting visibility of the many layers to truly see the conditions of workers at the bottom of the chain.

“The message to companies is clear – it is no longer an option to stay below the radar, refuse to take responsibility for problems in your supply chain and hope you won’t get exposed.”

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