UK firms to face tougher new rules on modern slavery reporting

Under new proposals announced by the UK Government, businesses required to complete modern slavery statements will face mandatory reporting rules and harsher penalties for compliance failures. In addition, the Government has also extended Section 54 of the Modern Slavery Act to cover public bodies with a budget threshold above £36m, bringing public sector organisations in line with their private sector counter parts.

The moves follow an internal review of the Modern Slavery Act 2015 and a consultation with businesses, public bodies, investors and civil society on possible changes for modern slavery reporting.

Mandatory reporting requirements

In response to criticism that the Act lacked teeth and effectiveness, the Government has committed to mandating the principle areas that must be covered by modern slavery statements, effectively turning the previous guidance into a requirement. Crucially, this will mean that companies and organisations reporting under Section 54 must now include the following in their modern slavery statements:

  • The structure and nature of the organisation;
  • Internal policies in place regarding slavery and human trafficking;
  • Due diligence processes currently in place;
  • How particular areas of risk in the business and supply chains are identified and the steps that are taken to mitigate these risks;
  • The organisation’s effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, which can be measured against any performance indicators as the organisation considers appropriate;
  • The training and resources available to staff in the organisation regarding slavery and human trafficking.

This is a significant change which will require organisations to consider, evaluate and analyse each of these areas carefully and demonstrate improvement over time.

Enhanced governance requirements

There are also proposals to strengthen the governance requirements. In future, the date of board approval must be included on the statement and the signing director must sit on the board.

Digital modern slavery reporting portal

To improve transparency still further, the Government is planning to launch a digital portal where companies will be required to publish their modern slavery statements.  A single reporting deadline of September 30 will be set, and all organisations will report on the same 12-month period from April to March, effectively giving companies six months to prepare their statements.

These moves will radically improve transparency, making it far easier for investors, regulators and civil society to hold businesses to account.  A new enforcement body is also anticipated with the potential to introduce civil penalties for non-compliance with Section 54.

While some organisations endeavoured to follow government guidelines on modern slavery statements too many statements have been found to be poor. An analysis of modern slavery statements by the Business & Human Rights Resource Centre in November 2018 found that 73 per cent of FTSE 100 companies were failing to report sufficient measures to demonstrate effectiveness in preventing modern slavery. The planned changes should raise the bar on modern slavery reporting and help ensure that best practice to eradicate slavery and trafficking becomes firmly embedded. The move also reflects the changes internationally in human rights legislation which are increasingly mandating companies to conduct human rights due diligence throughout their operations.

Practical next steps for modern slavery reporting

While this will not come into force until the necessary legislation is passed, there are steps that companies can be taking now to prepare:

  • Review your current statement against the mandatory requirements to identify the gaps and plan how these can be addressed.
  • Carry out a review of modern statements to identify what would be considered best practice and how this might be adopted internally.
  • Carry out a gap analysis of existing policies and procedures to identify any areas for improvement in your company’s governance and management of human rights and modern slavery and to assess whether they are fit for purpose or require strengthening to meet the forthcoming demands.
  • Implement the necessary mitigating measures and update your statement accordingly to ensure it reflects the company’s processes.
  • Monitor developments, in particular the launch of the reporting portal as companies are encouraged to use this before it becomes mandatory.

GoodCorporation works with companies to help assess human rights impacts throughout their operations and business relationships, identify salient human rights issues, and develop robust due diligence programmes. Contact us to for more information.