Government gets tougher on Transparency in Supply Chains

United Kingdom

Following on from the findings of the Independent Review published in May (see our previous law-now here) the government has now launched a consultation on proposed changes to the transparency in supply chains requirements set out in section 54 of the Modern Slavery Act 2015. These reflect an intention to further embed the reporting requirements and introduce tougher sanctions for non-compliance.  It also sees the extension of the requirements to the public sector.  A copy of the consultation paper can be found here.

The key elements of the proposals are:

  • To make reporting on specific topics compulsory.

Current government guidance recommends that a modern slavery statement should report on the following areas:

  1. The organisation’s structure, its business and its supply chains; 
  2. Its policies in relation to slavery and human trafficking; 
  3. Its due diligence processes in relation to slavery and human trafficking in its business and supply chains; 
  4. 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; 
  5. 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; 
  6. The training and capacity building about slavery and human trafficking available to its staff.

However, there is no strict requirement to report on these areas and many organisations choose not to.  In mandating areas for reporting the government has acknowledged the need for some flexibility and is proposing to allow organisations to justify why they have not reported on a particular area.  Fundamentally the government is also promising more guidance for organisations on how to comply with the requirements of section 54.

  • The government will be developing an online registry for modern slavery statements and mandating publication on this registry

Alongside this proposal the government is proposing a single reporting deadline, rather than the timing being linked to an organisation’s financial year-end, aimed at allowing increased engagement by businesses and scrutiny of such engagement.  It will also negate the need for the different registers that have sprung up by not-for-profit organisations in the absence of a central government one.  A single register will allow the government transparency on which organisations have published a statement, thereby hopefully curtailing the speculative correspondence from the Home Office to businesses. 

  • Greater enforcement

Whilst currently the government can take injunctive action to require an organisation to publish a statement no such action has been taken.  The government is seeking views on a new civil penalties scheme to be imposed by a new enforcement body, which would not come into place until at least a year after any changes more generally to the transparency requirements.

  • Public sector supply chains

Whilst some public sector bodies are already caught by section 54, the government is proposing to extend 54 to cover public sector bodies who have a budget of £36 million or more.

Overall, the above proposals are a positive step in strengthening the requirements of section 54 and enhancing the accountability and enforcement of this element of the Modern Slavery Act.  The government’s proposals however do not go as far as adopting all of the recommendations of the Independent Review and notably exclude the requirement for organisations to consider the entirety of their supply chains in relation to the risk of modern slavery, requiring the modern slavery statement to be part of a company’s corporate reporting requirements and the government compiling a list of companies within scope of section 54.

The consultation ends on 17 September but there is no clear timeframe for when the changes may come into force.  The hope is that the government will follow the recommendation of the Independent Review by running the consultation with ‘alacrity’ and announcing at what point sanctions will come into force.

The employment team at CMS have advised numerous clients on the impact of section 54, business and supply chain due diligence, the introduction of relevant business policies and the preparation and publication of modern slavery statements. Please contact Sarah Ozanne or Anthony Hollands if you would like to discuss how these issues affect your business.