Strengthening corporate accountability through the Modern Slavery Act
Since its inception in 2015, the UK Modern Slavery Act has been criticised as relying on ‘tick-box’ disclosures that lack substance and provide little consequence for affected companies. An independent review in 2019 emphasised “that the lack of clarity, guidance, monitoring and enforcement in MS statements need to be addressed”. However, there have been more recent developments that may signal a response to such concerns.
1) Responding to criticism
In the face of such criticism there appears to be a growing trend towards more scrutiny of organisations. This comes after the government published a set of commitments in September 2020 having sought views through a consultation on Transparency in the Supply Chains. These commitments entail:
Online Central Registry
The online registry for modern slavery statements was launched on 11 March 2021 by the Home Office with the goal of improving transparency and making it easier to hold organisations accountable. Scrutiny from Investors, Civil Society Organisations and Customers will be enhanced because statements will be easily compared with peers and competitors. Companies are thus more closely under the microscope as it becomes easier for stakeholders to gain a better picture of the steps taken to highlight and prevent modern slavery risks.
Mandatory Reporting Areas to be covered by the Statement
Due to widespread criticisms that some statements were of poor quality and patchy in its compliance, tougher mandatory reporting will ensure organisations critically engage with the matter. It is now compulsory to include:
- Organisation structure and supply chains
- Policies relating to slavery and human trafficking
- Due diligence process relating to slavery and human trafficking
- Risk assessment and management
- Appropriate KPIs measuring effectiveness of any actions taken
- Training on modern slavery and trafficking
Single Reporting Deadline for Statements
Organisations will report on the same 12-month period (April to March). They will then have 6 months to then prepare their statements for the deadline of 30 September.
Improved clarity and scrutiny
Statements must state the date of approval by the board and director sign off. Further, entities covered must be named in group modern slavery statements.
Civil Penalties for non-compliance under the Act
While there is no concrete commitment to civil penalties, organisations are put on notice that the government is to consider this further.
2) Introduction of offences through the Modern Slavery (amendments) Bill 2021
Beyond commitments made in response to the Transparency in Supply Chains Consultation last year, there is an ongoing legislative attempt to drastically improve accountability. Amendments were proposed via a Private Members bill in the House of Lords in hopes of toughening aspects of the Modern Slavery Act. It is currently only at Second Reading in the House of Lords, however if implemented it proposes:
Criminalising false information. The person responsible for the statement in the organisation (defined as director, member, or partner) will be liable if they knowingly or recklessly include false or incomplete information.
Making it a crime to continue to source from suppliers/sub-suppliers which fail to demonstrate minimum standards of transparency after being issued a formal warning by the Independent Anti-Slavery Commissioner.
Stringent disclosure and transparency requirements. If implemented this will go beyond current expectations creating the obligation to:
- Publish and verify information about the country of origin of sourcing inputs in the supply chain.
- Arrange for external inspections, audits and unannounced external spot-checks.
- Report on the use of employment agents acting on behalf of an overseas government.
The proposed consequences for non-compliance can include imprisonment and a fine amounting to 4% of the organisation’s turnover to a maximum of £20 million. This would mean that organisations will have to take diligent steps to ensure their suppliers are appropriate, and statements are an accurate depiction of matters.
The Bill lacks governmental support and therefore may not pass, at least in its current iteration. Nevertheless, this illustrates the direction of travel towards more comprehensive disclosure and stringent compliance. It is indicative of the UK’s increased efforts to address modern slavery, and the possible shift from the carrot to the stick.
3) Moving forward
With the move away from a light touch approach, it is incumbent on companies to remain aware of the developing landscape. Companies may want to start by engaging with the mandatory reporting areas and analysing how their present position stands up against expectations. This is crucial because effective engagement:
- Aids transparency which builds trust with customers and other stakeholders.
- Allows organisations to remain agile in anticipation of any further increase in expectations.
- Enables organisations to identify and minimise human rights risks in their operations and supply chains, to support their operational effectiveness and avoid reputational and legal jeopardy.
If you would like to discuss your organisation’s readiness to meet increased modern slavery expectations, get in touch with Rachel Weller, at Rachel.Weller@sancroft.com.
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