Three years on from its introduction, organisations doing business in the UK are coming under increased pressure from the Home Office and non-governmental organisations to comply with the Modern Slavery Act 2015.
The Act requires commercial organisations engaged in the provision of goods or services which do business in the UK and have global revenue exceeding £36 million to publish an annual transparency statement. The statement must set out what steps affected organisations have taken over the course of the most recent financial year to reduce the risk of slavery and human trafficking within its business and supply chain.
The Home Office has reportedly written to 17,000 businesses which it considers may be required to publish a statement but have yet to do so. Some organisations are receiving similar correspondence from NGOs such as Modern Slavery Registry, with the underlying threat of naming and shaming those who fail to comply.
Where companies did initially publish a statement, some have overlooked the obligation to renew the statement annually, and fewer have complied with the government's guidance requiring previous years' statements to be retained on an organisation's website so that stakeholders can assess year-on-year improvements. The NGOs are also policing these actions. The Business & Human Rights Resource Centre has published its third annual assessment of transparency statements by the FTSE 100 under the MSA . The report comments that "Three years on, most companies still publish generic statements committing to fight modern slavery, without explaining how. Sadly, only a handful of leading companies have demonstrated a genuine effort in their reporting to identify and mitigate risks." The report found that 35% of those companies provided little or no disclosure on measuring effectiveness of efforts to address modern slavery, although this was an improvement, down from 50% of companies the previous year. The report provides key recommendations for each of the UK Government, companies and investors.
The Government recognises an ongoing need to monitor how the Act is operating in practice, and whether the legal framework for tackling modern slavery is fit for purpose now. In summer 2018 the Government launched an independent review (which follows two previous reviews since the legislation came into force). This will gather evidence and seek views from relevant stakeholders on the operation and effectiveness of, and potential improvements to, provisions in the Modern Slavery Act 2015. It includes consideration of:
- Transparency in supply chains and how to ensure compliance and drive up the quality of statements produced by businesses which are in scope
- The role of the Independent Anti-Slavery Commissioner and how to ensure their independence
- The legal application of the Act including how to ensure both that the act is ‘future-proof’ given our evolving understanding of the nature of modern slavery offences and how to ensure access to legal remedies and compensation for victims.
The review will also take into account any significant political, economic, social and technological changes since the Act was passed.
A final report is due by the end of March 2019. Ahead of this, the review will produce interim reports, the first two being on transparency in supply chains and the role of the Independent Anti-Slavery Commissioner which are both due to be published by the end of November 2018.
The renewed focus on the Act reflects the priority it is given by the Government. In the absence of strict legal penalties for failing to publish a statement, it will be the threat of reputational damage that will give it teeth, and that threat is increasing. Now is the time for all affected organisations to consider what action might be needed to demonstrate compliance with the law, or to review their original statement.
Remember, the Government's approach is part of a wider push for corporate sustainable business and better governance. To help organisations with this we have developed the Business 360⁰ framework. This includes guidance from Taylor Wessing on the areas of risk and governance most relevant to building a more valuable business, trusted by the market, investors and regulators.
For more information about the Act and any steps your organisation may need to take to ensure compliance with it, please contact Colin Godfrey or Kathryn Clapp or try out our Modern Slavery assessment tool to assess whether your organisation may come within the Act's scope.
