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Businesses face ever-increasing transparent supply chain compliance obligations and one key legislative development that will increase these compliance trends is the Modern Slavery Act 2015, in force this month. 

Section 54 will require all ‘commercial organisations’ over a certain size to produce a ‘slavery and human trafficking statement’ every financial year. It is estimated the Act will apply to 12,000 UK active companies and applies to both goods and services. The statement must set out the steps the business has taken to ensure slavery and human trafficking are not taking place in any of its supply chains or in any part of its own business. Businesses will be required to publish it on their websites. 

There will be no financial or criminal penalties for failing to comply. However, the government will have the ability to bring proceedings in the High Court for an injunction requiring an organisation to comply. It remains to be seen to what extent it is prepared to take such a step: the most likely implications for businesses that do not comply is the risk of negative publicity - the threat to brand value, company reputation and investor relations.

Large retail businesses need to start thinking carefully about how they are going to satisfy this new obligation, including risk analysis audits and undertaking supply chain mapping. 

In addition, companies that do business in the US as well as in the UK should be aware of a startling new legal development in US courts. Last month, US lawyers began filing consumer class action lawsuits against retailers and manufacturers, alleging companies were not living up to their public statements concerning supply chain practices. 

Companies with a US presence should be very careful about overpromising in their UK disclosures, as there is no reason under US law that UK disclosure statements could not form the basis of such lawsuits. Recent changes under the Consumer Rights Act 2015, making consumer class actions in the UK, theoretically at least, more prevalent, could bite in the modern slavery area too if the government amends the UK legislation to allow for this. 

Simon Garbett is a partner at Squire Patton Boggs