Abolishing Modern Slavery – are you doing enough?
In July last year, the Home Office announced plans to launch an independent review of the Modern Slavery Act 2015.The aim of the Review was to understand and report on how the 2015 Act was operating in practice, how effective it was, and whether the legal framework continued to be fit for purpose.
The Review is now complete and was published in May 2019.
What was the purpose of the Modern Slavery Act 2015?
Modern Slavery involves human trafficking, forced labour, domestic servitude and sexual exploitation and according to the Report “pervades in every country in the world and every community within the United Kingdom.” The Act was put in place to tackle Modern Slavery in this country and sought to give law enforcement the tools necessary to tackle these heinous offences. After three years of the Act being in force it was considered that there were far too few convictions handed down and Slavery and Trafficking Prevention and Risk Orders issued to make a dent in the appalling number of suspected cases of slavery (conservatively estimated at ten to thirteen thousand; but with other bodies suggesting far higher numbers into the hundreds of thousands). Hence, the call for an independent report.
What were the main findings of the Report?
The report focussed on four main areas:
- transparency in supply chains,
- the role of the Independent Anti-Slavery Commissioner,
- the Act’s legal application, and
- the safeguarding of child victims of Modern Slavery
As governance specialists, we will focus on the first of these areas in particular – the transparency in supply chains requirements – looking at the recommendations made in terms of actions required by business to identify and eradicate modern slavery from their supply chains. The Report recommends putting teeth into this part of the Act so that all businesses take their responsibilities to check their supply chains seriously.
Transparency in Supply Chains (s54 of the Act) – Recommendations
Under the 2015 Act, all commercial organisations that turnover £36m+ per annum (including incorporated charities that turnover the same) must report annually “on the steps, if any, they have taken to ensure modern slavery is not taking place in their organisation and supply chains.” Government guidelines currently suggest six areas that businesses should report on, but these are not mandatory. The Report has found that although there is a greater awareness of modern slavery in companies’ supply chains, a number of companies are ‘approaching their obligations as a mere tick box exercise’ – an all too common problem when companies are faced with new governance requirements. Further, the Report estimates that about 40% of eligible companies are not complying at all. No injunctions have been sought nor penalties issued against non-compliant companies even though such provisions are provided for within the Act.
Therefore, the Report makes 21 specific recommendations on the Transparency of Supply Chains (including suggested changes to the Companies Act 2006), some of which we have summarised below. These, if adopted by the Government, will affect both the eligibility of organisations and how they should comply:
- Government should establish an internal list of companies that are required to publish a slavery and human trafficking statement and check with companies whether they are covered by the legislation (although non-inclusion on a list will not be an excuse for non-compliance)
- Companies should no longer be able to report that they have taken no steps to address modern slavery in their supply chains. Ensuring that taking appropriate steps will become
- the six areas set out as areas that an organisation’s statement may cover should become mandatory and if any of the headings are not applicable to their business, the company should be required to explain why. Therefore, the following areas would be compulsory for a slavery and human trafficking statement rather than optional:
- the organisation’s structure, its business and its supply chains;
- its policies in relation to slavery and human trafficking;
- its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
- 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;
- 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;
- the training about slavery and human trafficking available to its staff.
- Reporting should include steps to be taken in the future as well as due diligence already carried out.
- Companies should be required to consider the entiretyof their supply chains.
- The Companies Act 2006 should be amended to require for companies to refer in their annual reports to their modern slavery statement, as well as requiring non-listed companies that meet the £36m requirement to report on such.
- Businesses should be required to have a named, designated board member who is personally accountable for the production of the modern slavery statement.
- Failure to fulfil modern slavery statement reporting requirements or to act when instances of slavery are found should become an offence under the Company Directors Disqualification Act 1986.
- Companies should be required to upload their modern slavery statements a central government-run repository accessible to the public.
- Requirement for the Independent Anti-Slavery Commissioner to monitor compliance
- Sanctions for non-compliance should be increased, adopting a gradual approach: initial warnings, fines (as a percentage of turnover), court summons and directors’ disqualification. (introduced gradually over the next few years to give companies time to adapt to changes).
- Section 54 should be extended to the public sector. All Government departments should be required to publish a modern slavery statement as well as those local government, agencies and other public authorities whose annual budget exceeds £36 million.
When should we expect to see changes?
Whilst the Report at the moment just provides recommendations, the Report states that the authors expect the Report and the Government’s Response “to be laid in Parliament within two months of this report being approved by the Home Secretary and certainly well in advance of the next Queen’s Speech”. The report was presented to the Home Secretary on 29 March 2019. To date, a response from the Government has not yet been published, although the next State Opening of Parliament is not expected until sometime in the autumn. The Report goes on to say that specific measures that don’t require legislative changes could (and the inference is should) be “implemented without delay”.
Given that the Report was commissioned by the Government, and assuming that it intends to make as much progress against Modern Slavery as possible, it seems likely that many, if not all, the recommendations will be adopted. Therefore, eligible businesses should be encouraged to start looking at their current compliance with the Act and how it will adapt its processes to ensure full compliance of the new, more stringent standard.
We, of course, will track the Government’s response and keep our readers updated on when any recommendations are due to come into force.
Steps to take now to ensure compliance with the current requirements
Even prior to any changes, businesses should take time to ensure current compliance and best governance practice:
- Does your company turnover more than £36m annually?
- If yes, do you produce a Slavery and Human Trafficking Statement? (If no, you are breaching the law. You must produce a statement, it is not optional).
- Does your statement refer to the six areas suggested in s54(5) (see above)? If not, you should consider including all these areas within your statement to abide with best practice, and to prepare for the imminent changes.
- Have you produced/reviewed/updated your policies in relation to slavery and human trafficking?
- Do you have appropriate due diligence processes relating to slavery and human trafficking processes in place for your business and supply chains?
- Where there is risk of slavery and human trafficking in areas of your business, have you appropriately identified these and taken steps to mitigate such risks?
- Have you taken measures and set KPIs for monitoring your approach to reducing the risk of slavery and human trafficking within your business and supply chains?
- Do you ensure your staff are sufficiently trained and aware of slavery and human trafficking?
Help where you need it
Bridgehouse Company Secretaries are brilliantly placed to help with your compliance with the Modern Slavery Act. We offer a number of services including review of current statements and practices; Slavery and Human Trafficking policies; due diligence procedures; and Risk Management.
For advice on your Modern Slavery Act requirements and to get in touch click here.
S54(5) Modern Slavery Act 2015