Modern slavery: firms face tougher stance on transparency in supply chains

United Kingdom

The government has published its long-awaited response to the consultation on proposed changes to the requirements for transparency in supply chains under the Modern Slavery Act 2015. The response endorses most of the proposed changes in the consultation, meaning that businesses to which the transparency requirements apply will face stricter reporting requirements and harsher penalties for compliance failures.

The current position is that section 54 of the Act requires certain commercial organisations which 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 July 2019 Consultation Paper followed an independent review of the Act which determined that the provisions of section 54 needed stronger enforcement. In summary, the consultation considered the need to  enhance the reporting requirements under section 54 and formally extend them to public sector bodies.

The main features of the government’s response are: 

  • Mandating the inclusion in a firm’s modern slavery statement details of:
  • The structure and nature of the organisation;
  • Internal policies in place regarding slavery and human trafficking;
  • Due diligence processes currently in place;
  • How particular areas of risk in the business and supply chains are identified and the steps that are taken to mitigate these risks;
  • The organisation’s effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, which can be measured against any performance indicators as the organisation considers appropriate;
  • The training and resources available to staff in the organisation regarding slavery and human trafficking.
  • Extending section 54 of the Act to capture public bodies with a budget threshold of over £36 million

Whilst 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 £36 million 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 section 54 of 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 is intended to have a positive effect on accountability and enforcement.

  • Mandating format for board approval of 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 Act with regard to statements is fairly toothless; driven by reputational concerns rather than positive steps by 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, although any such measures will need to be expressly legislated for.

The above 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, there remains no timeline for the implementation of these proposals other than the generic comment that the proposals will be progressed “when parliamentary time allows”. At a time when the government has been warned that issues of modern slavery could be surging during the Coronavirus pandemic this does not seem an issue that should be delayed.

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 Niamh Morrison if you would like to discuss how these issues affect your business.