On 22 September 2020, the UK Government published its long-awaited response to the ‘Transparency in Supply Chains Consultation’ which closed on 17 September 2019.
The response sets out the Government’s next steps to strengthen section 54 of the Modern Slavery Act 2015, which imposes various obligations on businesses to prevent modern slavery from occurring in their supply chains and organisations.
- Section 54 is extended to public bodies as well as commercial organisations
- A single reporting deadline will be introduced for the publishing of modern slavery statements
- Organisations must publish their modern slavery statements to a government-run reporting service, in a move to better monitor and enforce compliance
- Topics organisations must cover in their modern slavery statement will now be mandated
- The turnover/budget threshold of £36 million remains unchanged
- While there is no present commitment to impose civil penalties for non-compliance, this measure remains under consideration with an update to follow
The current law
In 2015, the UK became the first country in the world to require businesses to report on their progress to identify and address modern slavery risks in their operations and supply chains.
In short outline, the obligations (and current law as set out in section 54) on commercial organisations that carry on business in the UK and have a total turnover of £36 million or more are that they must publish an annual statement setting out the steps they are taking to prevent modern slavery in their operations and supply chains (a modern slavery statement). Smaller companies can voluntarily publish statements. Statements must be approved by the company board and signed by a director (or equivalent). Statements must be made available on the homepage of a company’s website. The statement should set out what steps the organisation has taken to ensure modern slavery is not taking place in their business or supply chains.
The Home Office published statutory guidance: Transparency in supply chains: a practical guide in 2015.
Under the current regime, there is no criminal enforcement. The Secretary of State may enforce a duty to prepare a modern slavery statement in civil proceedings by way of injunction and a company failing to comply with an injunction would be liable to an unlimited fine if held in contempt of court. The authors are not aware of any such applications by the Government to date to enforce compliance.
While welcomed as a positive step in the fight against modern slavery generally, the scope of section 54 has been met with widespread criticism by many commentators who have condemned the measures commercial organisations are subject to as weak and ineffectual.
The proposed reforms
No doubt in response to that criticism, the Transparency in Supply Chains Consultation was opened. Of the five key increased measures called for and that we expected to see, the Government has indicated in its response that four will be introduced. These are:
1. Introduction of a single reporting deadline for modern slavery statements
A shared reporting period of 1 April – 31 March will be introduced with a deadline of 30 September.
If a statement is for a group, then the entities covered will need to be explicitly named.
Statements will need to have more direct input by the Board and a Director as part of the approval and sign off process.
2. The Government will mandate that organisations publish their modern slavery statement on a government-run reporting service
This will enhance the Government’s ability to enforce compliance. The Government’s previous record on compliance is thought to be non-existent.
3. Mandating topics organisations must cover in their modern slavery statement
The Government will publish updated guidance for businesses and public sector organisations in 2020, including best practice approaches to reporting against the future required areas. The guidance will highlight the importance of transparency, risk-based action and industry-level collaboration to address shared challenges. The guidance will also encourage organisations to be open about their priority next steps for the coming year (although reporting on this will not be mandatory). Legislation will be amended, however, meaning that organisations will have to state clearly if they have not taken any steps within an area.
4. Extending scope to cover certain public organisations
In what is by far the biggest proposed change, the Government will extend the application of section 54 to public bodies.
A budget threshold of £36 million will be used to determine which public bodies will be required to report. This aligns with the legal requirements currently applicable to commercial organisations.
The Government reviewed the current threshold of £36m during the consultation, and this has been deemed appropriate. It was noted, however, that many of the organisations caught by this threshold have failed to meet the requirements, undermining the objectives of setting this threshold. Given the challenges with compliance among organisations currently caught by this threshold, the independent review advised that “Government should primarily focus on improving compliance, quality and enforcement of obligations at the current threshold.” The Government will therefore retain the threshold of £36 million and focus on improving compliance at this threshold.
The Government describes the proposed reforms an “an ambitious package of measures to strengthen and future-proof the Modern Slavery Act’s transparency legislation.” Some will disagree. So far as commercial organisations are concerned, not much has changed and there is no previous record of any enforcement action for non-compliance. The biggest change, of course, is for qualifying public sector organisations who are now caught by section 54.
Legislative change will be required to implement all of the proposed reforms. Given the current climate, it is uncertain when parliamentary time will allow for this.