The proposed new Modern Slavery Bill: a step change for corporate reporting

What can companies expect?

In the Queen's Speech the UK government announced a new Modern Slavery Bill intended to increase the accountability of companies' efforts to drive modern slavery out of their supply chains. The devil will be in the yet to be published detail but government announcements since 2020 provide some clues. A step change in reporting how the risk of modern slavery is being managed is coming.

The current Modern Slavery Act 2015 (MSA) requires a company with turnover above £36m to publish an annual modern slavery statement setting out the steps that the organisation has taken to ensure that slavery and human trafficking are not taking place in its supply chain. Or to say that it has taken no such steps. There is no meaningful sanction in the MSA for not producing a statement.

The form of the statement is not prescribed by the MSA but "may" include information about the following 6 areas:

1. The company structure, its business and its supply chains.
2. Its modern slavery policies.
3. Its modern slavery due diligence processes.
4. The parts of its business and supply chains where there is a risk of modern slavery and the steps it has taken to assess and manage that risk.
5. Its effectiveness in ensuring that modern slavery is not taking place in its business or supply chains measured against appropriate performance indicators
6. The training about modern slavery available to its staff.

In September 2020 the government announced it would require mandatory inclusion of these 6 elements in future modern slavery statements. In January 2021 it announced it would introduce fines for companies that failed to comply. It is anticipated that it will also be compulsory to submit statements to the government registry of modern slavery statements (currently voluntary).

As stakeholder scrutiny of ESG credentials increases, companies can also anticipate there will be increased external critical analysis of statements, and their veracity, when the requirements come into force.

What can companies do?

More than they currently are doing according to a recently published Financial Reporting Council (FRC) review of corporate governance reporting in 2021. News I Financial Reporting Council (frc.org.uk)

This report identified that "many companies are still providing limited and often superficial commentary on this key business risk". 1 in 10 provided no statement and of those that did, most were "fragmented, lacked a clear focus and narrative, and often contained boilerplate language". Only a quarter disclosed Key Performance Indicators.

Prudent companies will start to prepare now for more detailed future reporting requirements by preparing draft statements as if the suggested contents in the current legislation were mandatory. This will enable companies to identify any gaps in risk analysis, supply chain transparency, supply chain management and training which can then be addressed before the legislation is implemented.

If we can help with how to approach this, please get in touch.