Firms facing a tougher stance on modern slavery

Sarah Ozanne explains how the government has responded to its consultation on proposed changes to the requirements for transparency in supply chains

While the number of reported instances of modern slavery in the UK has fallen there is a concern that this belies the reality. The pandemic has potentially created new opportunities for exploitation and has hampered the efforts of anti-slavery organisations. 

In response to the pandemic, the government has not suspended the reporting requirements under the Modern Slavery Act 2015, but it has allowed firms to delay publication if they can explain the reasons that this is necessary.

Against this background, it is welcome news that the government has published its response to the consultation, which took place last year on proposed changes to the requirements for transparency in supply chains under the Act. 

The response endorses most of the proposed changes in the consultation. This means that businesses to which the transparency requirements apply will face stricter reporting requirements and harsher penalties for failings.

The current position is that section 54 of the Act requires certain commercial organisations that supply goods and services to publish an annual modern slavery statement setting out “the steps that the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place either in its supply chains or in parts of its business”, or a statement that the organisation has taken no such steps. To date, monitoring of compliance with this obligation, and the quality of statements, has largely been undertaken by not-for-profit organisations rather than the government. 

The main features of the government’s response are: 

Mandating the inclusion in a business’s modern slavery statement details of:

  • the organisation’s structure, its business and its supply chains;
  • its policies in relation to slavery and human trafficking;
  • its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
  • 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;
  • 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; and
  • the training on slavery and human trafficking available to its staff. 

Extending reporting requirements to the public sector

While public sector bodies currently report on a voluntary basis, the government proposes extending the mandatory reporting requirements to public bodies that have a budget threshold of £36m or more. This is a world first, and is intended to reflect the importance with which the UK government views issues of modern slavery.

Creation of a new government reporting service

Currently, statements under the Act are only required to be published on an organisation’s website with a link to the statement in a ‘prominent place’. In future, organisations will also be required to publish their statement on a central government portal, which is being developed by the Home Office. 

Introduction of a single reporting deadline

All organisations will report on the same 12-month period from April to March and will have six months to prepare their statement in advance of the annual single reporting deadline of 30 September. A set deadline will have a positive effect on accountability and enforcement. 

Mandating the format for board approval of a statement

The response provides that the current best practice, whereby the date of board approval is included in the statement and that the signing director should also sit on the board of directors, be made mandatory.

Harsher penalties 

At present, the enforcement of the Modern Slavery Act regarding statements is toothless – driven by reputational concerns rather than positive steps by the government. The government’s response anticipates the creation of a new enforcement body and the potential introduction of civil penalties for non-compliance with section 54. 

These proposals signal a step towards enhancing the accountability of private sector and public bodies in relation to issues of modern slavery and transparency in supply chains. However, it remains unsatisfactory that there is still no timeline for the implementation of these proposals other than the generic comment from the government that they will be progressed ‘when parliamentary time allows’. 

Sarah Ozanne is an employment lawyer at CMS