The Independent Review of the Modern Slavery Act UK; the Government responds to calls in the Final Report for tougher government action. - Compliance Training - Interactive Services

Introduction

In July 2018, the UK government commissioned Frank Field MP, Maria Miller MP and Baroness Butler-Sloss (the former president of the Family Division of the High Court) to undertake an independent review of the Modern Slavery Act 2015; their final report and recommendations were published in May 2019.

The report makes clear that the Modern Slavery Act has not achieved its intended effect of ensuring that there is no slavery or human trafficking in UK businesses or their supply-chains.  It asserts that it is ‘time for the Government to take tougher action’ and must act ‘quickly and effectively’ to ensure thousands of victims of modern slavery in the UK are protected.

In response to the review, on July 9^th 2019, the government announced; ‘The UK government has committed to strengthening section 54 (transparency in supply chains requirements) of the Modern Slavery Act. We are gathering views on proposed measures intended to increase transparency and compliance, improve reporting quality and extend the scope of the legislation.’

It seems clear that new legislation will soon be enacted which will place additional pressures on businesses operating in the UK.  Compliance training will be essential if firms are to understand their obligations with regard to the Modern Slavery Act.

The Modern Slavery Act 2015

In 2015, Home Secretary Amber Rudd introduced the new legislation: ‘Modern slavery is a heinous crime and tackling it is a top priority for this Government and for me personally as Home Secretary…But my message is clear. Businesses must not be knowingly or unknowingly complicit in this horrendous and sickening crime.’

Section 54 of the Modern Slavery Act 2015 places obligations on UK businesses with a turnover of £36 million or more to ensure that their businesses, and their supply chains, are free from modern slavery. They must also include a “modern slavery statement” in their annual report; a link to the statement has to be included on their business website. The statement must set out any steps they have taken during the financial year to ensure that modern slavery is not occurring in their supply chains and in their own organisation.

A guide to the Act can be found here.

Business Compliance with the Modern Slavery Act 2015

The modern slavery statement must be “written in simple language that is easily understood” and include all the steps, if any, that the business has taken. It could include:

• The structure of the business and its supply chains
• Policies in relation to slavery and human trafficking
• Due diligence processes in relation to slavery and human trafficking
• Those parts of the business and its supply chains where there is a risk of slavery, and the steps taken to assess and manage that risk
• The business’s record in ensuring that slavery and human trafficking is not taking place, as measured against performance indicators

Findings of the Independent Review

The review was positive about the intent of the modern slavery law, describing it as “an innovative piece of legislation that has influenced parliaments across the world”.  However, it said that the section targeting businesses has had limited impact because of a lack of enforcement or consequences; there are no direct penalties for not complying with the law, and although businesses are required to produce statements, these can simply state that they have taken no steps to address modern slavery in their supply chains.  ‘While [the Modern Slavery Act] has contributed to greater awareness of modern slavery in companies’ supply chains, a number of companies are approaching their obligations as a mere tick-box exercise, and it is estimated around 40 per cent of eligible companies are not complying with the legislation at all.’

‘Stakeholders were clear that the lack of clarity, guidance, monitoring and enforcement in modern slavery statements needed to be addressed to increase compliance and quality. We agree and recommend that companies should not be able to state they have taken no steps to address modern slavery in their supply chains, as the legislation currently permits, and that the six areas of reporting currently recommended in guidance should be made mandatory. We also recommend that Government should set up a central repository for statements; that the Independent Anti-Slavery Commissioner should monitor transparency; sanctions for non-compliance should be strengthened; and that Government should bring forward proposals for an enforcement body to enforce sanctions against non-compliant companies.’

Recommendations

The final report’s recommendations concerning the Section 54 disclosure/transparency requirements can be found in full on pages 39-47 of the report.

• Scope clarification – the Government should establish an internal list of companies in scope of Section 54 and check with companies whether they are covered by the legislation; non-inclusion in the list should not be an excuse for noncompliance, i.e. individual companies should remain responsible for determining if they need to produce a slavery statement;
• No steps taken abolition – Section 54(4)(b), which allows companies to report they have taken no steps to address modern slavery in their supply chains, should be removed;
• Mandatory coverage areas – in section 54(5) ‘may’ should be changed to ‘must’ or ‘shall’, with the effect that the six areas set out as areas that an organization’s slavery statement may cover will become mandatory. If a company determines that one of the headings is not applicable to their business, it should be required to explain why;
• Coverage areas template – the guidance should be strengthened to include a template of the information organizations are expected to provide on each of the six areas that a slavery statement (currently) may cover;
• Future steps inclusion – the UK government official guidance should make clear that reporting should include not only how businesses have carried out due diligence to prevent modern slavery in their supply chains but also the steps that they intend to take in the future;
• Supply chain coverage – the legislation should be amended to require companies to consider the entirety of their supply chains in respect of modern slavery. If a company has not done so, it should be required to explain why it has not and what steps it is going to take in the future;
• Annual financial reports coverage – the Companies Act 2006 should be amended to include a requirement for companies to refer in their annual reports to their slavery statement. Section 54 should be amended to impose a similar duty on non-listed companies that meet the £36 million threshold but would not be captured by the Companies Act 2006 reporting requirements;
• Board member responsibility – businesses should be required to have a named, designated board member who is personally accountable for the production of the slavery statement;
• Compliance failure criminalization – failure to fulfil slavery statement reporting requirements or to act when instances of slavery are found should be an offence under the Company Directors Disqualification Act 1986;
• Government statement repository – there should be a central government-run repository where companies are required to upload their slavery statements, which should be easily accessible to the public and free of charge;
• Compliance role for Commissioner – the ‘Independent Anti-Slavery Commissioner’ should monitor businesses’ compliance with the Section 54 compliance disclosure/transparency requirements;
• Further sanctions over time – the Government should make the necessary legislative provisions to strengthen its approach to tackling non-compliance (with Section 54), adopting a gradual approach of initial warnings, fines (as a percentage of turnover), court summons and directors’ disqualification. Sanctions should be introduced gradually over the next few years so as to give companies time to adapt to changes in the legislative requirements;
• New enforcement body – the Government should bring forward proposals to set up or assign an enforcement body to impose sanctions on non-compliant companies that fail to publish a slavery statement; fines levied for non-compliance could be used to fund the enforcement body; and,
• Procurement ban – the Government should strengthen its public procurement processes to make sure that non-compliant companies in scope of Section 54 are not eligible for public contracts.

The Future

In its response to the review, the government announced a public consultation on proposed changes to the Modern Slavery Act 2015, specifically with regard to transparency in supply chains.  This consultation closes at midday on 17 September 2019.

Responses to the consultation are invited at: https://www.homeofficesurveys.homeoffice.gov.uk/s/06W8A

Meanwhile, in anticipation of imminent measures to strengthen the legislation, businesses need to take stock and ensure that they have solid and defensible modern slavery practices in place. The two starting points here are to have in place a modern slavery policy and to undertake compliance training.

Some Warning Signs That Modern Slavery May Be Taking Place

(from Gold S, Trautrims A, Trodd Z. (2015) Modern slavery challenges to supply chain management. Supply Chain Management: An International Journal, 20(5): 485-494.(DOI: 10.1108/SCM-02-2015-0046)

It is advisable that supply chain managers, auditing teams, and certification bodies take an especially careful approach if one or more of these conditions apply:

• Low worker protection due to inadequate laws, enforcement, and government accountability
• High percentage of working poor
• Lack of other employment opportunities and domination of labour market by one or a few employers
• Agent-based recruitment of labourers
• Social acceptance of worker exploitation
• Widespread discrimination against certain groups of workers
• High percentage of migrants or minorities in the workforce
• Location of production activities in conflict zones
• High proportion of low skilled labour in industries such as raw material extracting and/or processing industries