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Transparency in supply chains: forthcoming changes to Modern Slavery Act

Posted on 05 September 2019

Transparency in supply chains: forthcoming changes to Modern Slavery Act

Changes are expected to the Modern Slavery Act 2015 in light of proposals in the Independent Review of the Modern Slavery Act's final report earlier this year.  The Review made some 80 recommendations to government, with the fundamental aim of ensuring that systems in place are sufficiently independent of government, that legislation is consistently interpreted, and to ensure organisations are effectively reporting on modern slavery within their supply chains.

Both the Independent Review, and the government in its response, indicated a commitment to increasing the significance of the Act's impact on tackling modern slavery and maintaining the UK's status as an international leader in the fight against the threat of modern slavery.  In particular, the government has issued a consultation, closing on 17 September 2019, which sets out how it intends to address and, in some cases implement, the Review's recommendations relating to supply chain transparency.  

Supply Chain Transparency

Section 54 of the Act established a statutory requirement for commercial organisations (namely body corporates or partnerships) carrying out trading businesses in the UK, and with an annual turnover of £36 million or more, to publish an annual modern slavery statement, highlighting what steps (if any) the organisation has taken to remove slavery from its business and supply chain. In our overview of the Act, we set out the main criteria. We have also previously report upon the Updated Guidance issued by the government a year after the Act came into force.

Recommendations

The Independent Review made no fewer than 20 recommendations concerning section 54, aiming to place a stronger responsibility on both organisations and the government as to how they comply, or enforce compliance, with section 54, and as to what statements should now include.

Key recommendations in the Review include the following:

  1. Whilst responsibility for compliance still rests with individual organisations, the government should establish a list of organisations that fall within the scope of section 54.
  2. Organisations should improve the quality of their modern slavery statements with mandatory requirements to report on the (currently discretionary) six areas listed at section 54(4). These are: (i) the organisation's structure, business and supply chains, (ii) its policies in relation to slavery and human trafficking, (iii) its due diligence processes in assessing slavery and human trafficking within its supply chains, (iv) the parts of its business that are at risk of slavery and human trafficking and the steps taken to assess that risk, (v) its effectiveness at preventing slavery and human trafficking from occurring within its supply chains, and (vi) the training it provides on slavery and human trafficking to its staff.  
  3. Organisations should no longer be able to merely state, as their report, that they have taken no steps.
  4. Organisations should report on their entire supply chain.
  5. The government should establish a central registry of section 54 statements, which the public can freely access.
  6. Proposals to set up an enforcement body, to be funded by fines levied from non-compliant organisations, should be escalated.
  7. Section 54 should extend to the public sector.

Government response

The government has responded positively to most of the Independent Review's recommendations. For example, it has already identified approximately 17,000 UK organisations that it believes are likely to fall within the scope of the legislation and has written to the CEOs of these organisations with information directing them on how to provide clear, detailed section 54 statements.

It has also only rejected outright three of the Review's recommendations, focused mainly on strengthening the obligations of and sanctions against company directors, as follows:

  1. Appointing a board member to be specifically accountable for producing a modern slavery statement.
  2. Amending the Companies Act 2006 and section 54 of the Modern Slavery Act 2015 so that companies are required to report on their section 54 statement within their annual report.
  3. Creating an offence under the Company Directors Disqualification Act 1986 penalising companies that fail to fulfil their modern slavery reporting requirements or act where modern slavery is discovered within their supply chains.

The government's rejections of these suggestions derived from concerns that reporting requirements should be a collective responsibility for organisations rather than falling to one organisation representative, and that establishing more onerous reporting requirements/penalties would result in organisations releasing high-level, superficial statements. This would undermine the entire objective of the Independent Review and the government's desire to improve the quality and impact of section 54 statements.

Otherwise, four years on from the introduction of the Modern Slavery Act, the government has committed to step up "its ambition" to strengthen transparency in the Act's supply chain provisions, improve the quality of reporting, and ensure better engagement and compliance, given its goal of ending modern slavery by 2030.

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