Modern slavery statements consultation: How will employers' duties change?

Author: Susie Munro

The Government is consulting on proposed changes to the duty to publish a modern slavery and human trafficking statement. The proposals aim to improve the quality of reporting under the transparency in supply chains legislation, make it easier for people to compare organisations' reports and increase compliance with the duty.

The consultation also covers plans to extend the reporting duty to large public-sector bodies.

We look at the details of the proposals in the Transparency in supply chains consultation and how they might affect employers.

The consultation runs until 17 September 2019.

Modern slavery resources

Modern slavery and human trafficking statement

Writing a modern slavery statement: a guide for employers

The current duty

Section 54 of the Modern Slavery Act 2015, requires commercial organisations with a total annual turnover of at least £36 million to prepare a slavery and human trafficking statement for each financial year. The statement must set out the steps that the organisation has taken to ensure that slavery and human trafficking is not taking place in any of its supply chains, and in any part of its own business. There is no duty to take any such steps, only to publish a statement; an organisation can comply with the duty by publishing a statement confirming that it has not taken any steps.

The statement must be published on the organisation's website, with a link to it from the homepage.

Compulsory reporting on specific topics

One of the proposals being consulted on is to specify mandatory areas that employers must report on in their modern slavery statement.

The transparency in supply chains legislation does not currently set out exactly what a statement should cover. Section 54(5) states that it "may" include information about:

  • 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; and
  • the training about slavery and human trafficking available to its staff.

The content of a statement is therefore currently governed by guidelines only, rather than statutory requirements. The consultation asks whether it should be compulsory to include the above areas in a statement.

The existing guidance on what employers should cover in their reports is not effective in ensuring consistency and comparability between different organisations' reports. Most employers do not include all the suggested areas, listed above, in their reports. For example, a 2018 report from the Business and Human Rights Resource Centre, FTSE 100 and the UK Modern Slavery Act: From disclosure to action, found that around 35% of FTSE 100 companies provided little or no information on the effectiveness of the steps they have taken to address slavery and human trafficking.

Three years on, most companies still publish generic statements committing to fight modern slavery, without explaining how. Sadly, only a handful of leading companies have demonstrated a genuine effort in their reporting to identify and mitigate risks.

Business and Human Rights Resource Centre, 2018

While some employers publish comprehensive reports on their policies and activities, there is currently substantial scope for individual organisations to decide what to focus on and what to leave out. Mandating the areas to be covered would make it more difficult, although not impossible, for employers to avoid addressing the more challenging areas for their business.

A single annual reporting deadline

Employers can currently choose when to publish their statements, provided that they publish one each year. Government guidance is that statements should be published "at most, within six months of the organisation's financial year end", but this guidance does not have legal force.

The Government proposes to change this so that there will be a single deadline for publishing each year. The consultation document describes this as a "deadline on which all organisations must publish their statement each year", suggesting that all employers would be required to publish the statement on the same day, rather than it being a deadline by which publication is required. If this were the case, it may well cause administrative difficulties for many employers. A deadline operating in the same way as for other reporting duties appears more likely; for example, the gender pay gap reporting duty (for private sector employers) requires publication on or before 4 April each year.

The rationale behind a single annual reporting duty is that it will make it easier to compare the action being taken by different organisations, and to monitor compliance. The Government also says that it will enable the Home Office to offer more timely support to organisations with a duty to report.

A central online registry

The Government has already committed to creating a central online registry for the publication of modern slavery statements and has said that it will make it mandatory for organisations to publish their statement on the registry.

This could work in the same way as for the gender pay gap reporting duty, under which employers must publish their report through a portal on the GOV.UK website, as well as on their own website. All the data is then available in one place on the GOV.UK gender pay gap service, allowing the public to search for and compare reports.

FAQs

What duties do employers have under the "transparency in supply chains" provisions of the Modern Slavery Act 2015?

Which employers are required to publish a slavery and human trafficking statement?

What is the timescale for employers to prepare a slavery and human trafficking statement?

Extending the duty to large public-sector bodies

Currently, the duty to publish a modern slavery statement applies to organisations that carry on a business in the UK, supplying goods and services. This can cover public-sector bodies, if they carry out some commercial activities.

The consultation proposes extending the reporting duty to include all public-sector bodies with an annual budget of £36 million or more, including local authorities, NHS bodies, police forces and central government departments.

The Government has already committed to requiring ministerial government departments to publish their own individual annual modern slavery statements from 2020/2021.

Penalties for failing to publish a statement

The only way that the duty to publish a modern slavery statement can currently be enforced is for the Home Secretary to bring civil proceedings in the High Court for an injunction (or proceedings for specific performance of a statutory duty in Scotland) requiring an organisation to publish a statement. Given that an organisation can comply simply by stating that it has taken no steps to ensure there is no modern slavery in its supply chains and its own business, it seems unlikely that enforcement action would get to this stage.

The Government is proposing to introduce monetary penalties for non-compliance with the duty. A fine could be imposed if an organisation does not publish a compliant statement following initial warning letters. The consultation asks for views on the maximum level of any monetary penalty.

In a separate consultation, the Government is proposing to set up a single labour market enforcement agency to enforce employment rights. The consultation includes questions on whether the enforcement of the transparency in supply chains reporting duty should fall within the remit of this new body.

The impact of the proposals

The effectiveness of the transparency in supply chains legislation in preventing slavery and human trafficking relies heavily on the potential for reputational risk to organisations if they are seen to be complicit. Therefore, steps to make it easier for employees, customers, investors and NGOs to scrutinise and compare employers' actions in this area have the potential to increase the impact of the duty.

None of the proposals being consulted on make it compulsory to take any steps to prevent modern slavery and human trafficking. Neither do the proposals provide for investigation into whether the content of a statement is accurate. However, making it mandatory for organisations to report on certain areas, such as the effectiveness of their efforts, would be a step towards encouraging action.