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At a glance: The Modern Slavery Act

The framework governing the responsibilities of businesses in the area of human rights is taking a new turn

To date the focus of human rights organisations such as the UN and ILO has been to encourage businesses to sign up to voluntary codes of best practice.

A new trend in the US, EU and the UK is to require businesses to be transparent about their efforts to address human rights issues in their business and supply chains. The expectation is that by requiring them to do so firms will treat human rights issues as a greater priority to avoid criticism from third party stakeholders, such as investors, shareholders and consumers.

The UK Modern Slavery Act 2015

Implemented in October 2015, the Act requires UK businesses with a turnover of £36 million to publish an annual slavery and human trafficking statement. It must disclose what steps have been taken to ensure that slavery and human trafficking is not taking place in the business and throughout its supply chain (or that no such steps have been taken).

The statements are expected to address where the biggest slavery and human trafficking risks are in the business and supply chain, and the policies, training, due diligence and other steps taken to avoid them.

We expect companies – particularly those operating, or whose suppliers operate – in countries where there are higher risks of such abuses will want to be able to demonstrate a strong approach to management of those risks. In order to publish a robust statement they will need to have robust practices in place.

EU directive

The EU's non-financial reporting directive goes even further. When implemented in 2016 it will require a similar statement to be published that includes information on companies' respect for human rights, environmental concerns, anti-corruption and bribery, and diversity issues.

The EU legislation will impact on fewer organisations (only 'public interest' businesses), but it will also indirectly affect their suppliers, since inevitably those businesses will need their suppliers to be taking steps to address the same issues.

Both the Modern Slavery Act and the EU directive have the potential to be turning points in human rights compliance. Only time will tell if businesses, and their HR functions, rise to the challenges posed appropriately.

Daniel Ellis and Stephen Ratcliffe are partners at law firm Baker & McKenzie