Should there be stricter reporting to tackle modern slavery?

A second interim report has been published in the Government’s independent review of the Modern Slavery Act (the Act). The Act provides the legal framework for tackling modern slavery and improving supply chain transparency but the review is looking into the operation and effectiveness of its provisions.

Many countries have followed the UK’s lead in introducing their own modern slavery legislation. Most notably, Australia recently introduced its own modern slavery legislation, the provisions of which feature in the UK government’s review as potential approaches which the UK could look to adopt.

‘Carrying on a business’

A key requirement under the Act is for large commercial organisations supplying goods or services, and carrying on a business in the UK, to prepare a modern slavery statement every year.

Many organisations have reported a lack of clarity over which companies fall within the scope of this requirement. In particular, the term ‘carrying on a business’ is not sufficiently defined. The report highlights the work done in relation to gender pay gap reporting, specifically the list of employers identified by the Government Equalities Office as being within its scope. The report recommends that the Government should establish a similar list of companies which may be within the scope of the Act and then check with these companies that they are indeed covered by it. A company should remain responsible for determining its need to produce a modern slavery statement and its absence from this list will not be an excuse for non-compliance.

Quality of statements

A company essentially has free rein over what its modern slavery statement should include and how it should be compiled but this leads to inconsistency in the quality of statements published. A company can even state that it has taken no steps to combat modern slavery and still remain compliant. The report states that this element of the Act should be removed.

The Act includes six key areas that a company’s modern slavery statement may cover and these are expected to be included. However, the Act merely states that a company ‘may’ include this information. The interim report states that this should be changed to ‘must’ or ‘shall’ in order to make it mandatory to include information in these areas. If a company does not believe that one of the categories is applicable to its business, it must state why.

The report also recommends improving statutory guidance on these statements, in particular proposing that a template statement should be provided setting out the information required in each of the six areas.

There is currently no requirement for a company to set out in its annual statement how far down its supply chain it has considered. The report recommends requiring a company to consider the entirety of its supply chain in its statement.

Embedding reporting into business culture

The report advocates treating modern slavery issues in the same way as bribery, corruption and equality, in that a company should feel a degree of pressure to satisfy the requirements. It recommends that a company should be required to refer to a modern slavery statement in its annual report so as to increase the degree of public and shareholder scrutiny levelled at compliance.

The Act’s requirements should also be extended to the public sector with any non-compliant entities being excluded from involvement in public procurement processes.

Transparency

Currently, a company is required to publish its statement in a prominent place on its website but there is no obligation to upload it anywhere else, such as to a central government register. The interim report refers to the introduction of such a register where the public will be able to access statements free of charge. This mirrors the Australian model.

Enforcement

The report states that a more robust and systematic approach is need to tackle non-compliance. This should be done by adopting a gradual approach to sanctions – ranging from warnings, to fines and then ultimately to director disqualification. An enforcement body should also be established with any fines being used to fund it going forward.

One board member should be given personal accountability to ensure a company produces a modern slavery statement. Any failure of that member to fulfil the requirements in a satisfactory manner should result in potential disqualification.

With these stricter requirements in the pipeline, companies review their previous modern slavery statements and consider how these can be improved to satisfy a more robust approach. With more substantial consequences for non-compliance seemingly likely, strengthening reporting now will leave companies in a better position once the outcome of the report is published in March.