Modern slavery: new naming and shaming risk for businesses
11th December 2018
The Government is increasingly concerned that “…too many [businesses] are still failing to meet their basic legal obligations” when it comes to tackling modern slavery in supply chains. Over the last few months it has stepped up its pressure on companies, stating its intention to name and shame non-compliant employers and to strengthen existing legislation. In our update, we consider recent developments and how business should respond below.
Background - recent progress on modern slavery reporting
Larger organisations must publicly report steps they have taken to ensure their operations and supply chains are trafficking and slavery free. This disclosure duty, contained in the Modern Slavery Act 2015, applies to companies and partnerships (wherever incorporated or formed) supplying goods or services with global turnovers of £36 million and above, providing they carry on business in the UK.
To comply, organisations are expected to report annually. The report must be signed by a director (or equivalent), approved by the board (or equivalent) and made accessible on the organisation’s homepage. While not prescribed, the following information may be included in the annual statement:
- the organisation’s structure, its business and its supply chains
- its policies in relation to slavery and human trafficking
- its anti-slavery due diligence processes in the business and supply chains
- where it has identified a risk of slavery and human trafficking taking place and the steps taken to assess and manage that risk
- its effectiveness in combatting slavery and trafficking measured against performance indicators
- relevant staff training (see our Modern Slavery Act e-learning)
By driving up transparency, the expectation is that modern slavery will be tackled with greater urgency. However, in the third year of reporting the Government estimates that 40% of companies in scope have failed to publish a statement and, of the 60% that have reported, some do not meet the requirements of the Act, are “poor in quality” or fail to show improvements year on year. It should be noted that the Government has recognised that there are also many examples of good practice in statements published to date.
Longer term, there is an expectation that the Government will act to strengthen the reporting obligations under the Act.
Government action: audit, naming and shaming, changes to the law?
The Home Office has been writing directly to chief executives of 17,000 businesses in scope with a general warning that “continued non-compliance will not be tolerated” and urging them to publish their annual statement, if reporting for the first time, or publish their latest annual statement by 31 March 2019.
After the March cut-off, it has committed to conducting an audit of annual statements and publishing a list of non-compliant organisations. At the same time, an independent review of the Modern Slavery Act will report to the Home Office and part of its remit is how to ensure compliance with the Act’s annual reporting duty and to drive up the quality of statements produced by companies.
Given the 31 March 2019 deadline and the threat, in the above letter, of naming and shaming those companies whose annual statements are “not up to date” at that point, we recommend that businesses should not delay publishing their latest statement for the 2018 financial year.
While the requirements of the Act have not changed and the Government’s guidance encourages organisations to report within six months of the financial year end, there is a risk that failing to post the latest statement by the 31 March cut-off will result in companies appearing in a list of non-compliant organisations.
Longer term, there is an expectation that the Government will act to strengthen the reporting obligations under the Act. This could include making the suggested content (bullet points above) compulsory and, perhaps, introducing sanctions and enforcement measures.
For further information on the annual disclosure duty under the Modern Slavery Act, read our briefing.