The Government has recently published its response to last year's consultation on transparency in supply chains. The consultation has resulted in a number of proposed changes to the reporting requirement under section 54 Modern Slavery Act 2015 (MSA), a provision which has received much criticism over the past few years arising from inadequate compliance and lack of enforcement powers. The Government suggests that its proposed package of measures will future-proof the transparency requirement.
The key proposals include requiring businesses to:
- Report on a mandatory basis, in relation to specific topics, rather than on a voluntary basis as present. It appears that this will include an obligation to report against the existing six areas mentioned in section 54(5) MSA, and may include additional topics. The Government hopes that consistent reporting will increase comparability between organisations, allowing a proper assessment of efforts to combat modern slavery. It is also hoped that this will encourage businesses to take a proactive and long-term approach to identifying and dealing with modern slavery in their supply chains. The Government will issue updated guidance later in 2020, including best practice approaches.
- Make clear in their reports if they have taken no steps within a required area or otherwise do not wish to report against one of the required areas.
- Submit reports on a single deadline of 30 September on a Government-run reporting service (as March is the most common month for financial year ends). This will make it easier for external, interested parties to monitor statements.
- State the date of Board approval and Director sign-off (or equivalent) on statements.
- Identify the entities covered by the statement. Currently organisations are able to produce group statements, when more than one entity in the group is required to produce a statement. However, the MSA does not currently require the statement to specify the entities covered by the statement making it difficult to determine whether the entities are in fact compliant with their MSA obligations.
The Government will also extend the reporting requirement to public bodies with a budget threshold of £36 million or more.
Since its introduction, the reporting requirement under s54 MSA has often been criticised as a "tick box" exercise. Part of the problem has been that it is very easy for companies to state that they have taken no steps to combat modern slavery and the optional reporting requirements under s54(5) MSA. Whilst the Government's response looks to address some of these concerns, there remains a lack of tangible development around sanctions for failures to comply with s54 MSA. On the issue of enforcement, respondents' views differed and the Government makes no proposals, leaving this to further consideration in line with the development of a Single Enforcement Body for employment rights.
In terms of timing, the Government's response simply says that the proposed changes will be implemented "when parliamentary time allows", in circumstances where it has now been some considerable since the Independent Review into the MSA which reported in 2019.
The Government's response to the supply chains transparency consultation follows its recent announcement of a proposed deforestation law. Certain similarities exist between the proposed deforestation law and the MSA, as both require rigorous due diligence by companies and look to drive positive change in organisation's supply chains. This mirrors the trend that companies are increasingly expected to be accountable for their supply chains.
Raina Singh, Indian Qualified Associate