Modern Slavery transparency requirements - Government publishes updated guidance

United Kingdom

Recent statistics indicate that only 50% of organisations required to publish a statement in accordance with section 54 of the Modern Slavery Act have done so, and many of the published statements are deficient. Businesses that have so far adopted a minimum compliance approach, and have failed to pay sufficient attention to tackling modern slavery should be under no illusion that the current focus on modern slavery and human trafficking will diminish.

The issue is gaining prominence on the national as well as global stage, forming part of recent discussions of global leaders at the Bali Process Government and Business Forum. Australia has now undertaken two parliamentary inquiries into adopting a Modern Slavery Act, and time has been allocated to discuss modern slavery at the Commonwealth Heads of Government meeting in London in 2018.

The UK led the way with the introduction in 2015 of the Modern Slavery Act, which was introduced both to tackle the issue and to consolidate a number of previous offences relating to trafficking and slavery. The provisions of the Act also required the creation of an Independent Anti-Slavery Commissioner, currently Kevin Hyland.

A key element of the Act and the Commissioner’s role is private sector engagement with the issue. Section 54 of the Act requires certain large commercial organisations to publish a slavery and human trafficking statement at the end of each financial year. The statement must either state what steps the organisation has taken during the last financial year to ensure that slavery and human trafficking is not taking place anywhere in its business and supply chains or that no such steps have been taken. Further information on which commercial organisations are caught by section 54 and the requirements of section 54 can be found in our earlier law-nows, click herehere to access. You can also listen to our recent webinar on this topic which can be accessed .

Key criticisms of section 54 is the lack of monitoring of compliance and enforcement action by the Government. The Act does provide that the Government can compel a commercial organisation that has failed to publish a statement to do so by obtaining an injunction but at present the Government does not even monitor compliance. Instead, the policing of the section 54 is taking place by not-for-profit organisations such as the Human Rights and Business Resource CentreTISC and who are keeping their own registers as well as press and public scrutiny. The key risk for organisations who don’t comply is therefore reputation and brand damage.

On 4 October the UK Government published updated guidance on section 54 which can be found here. The amendments indicate that the Government is seeking to enhance the way in which organisations comply with section 54, and to improve the quality of information contained in slavery and human trafficking statements. Notably, the guidance now encourages organisations who fall below the turnover threshold to be caught by section 54 to voluntarily publish a statement. It also states that an organisation ‘should aim’ to include certain information in its statement (whereas the Act and previous guidance merely suggested that certain information ‘may’ be included) and to publish the statement ‘at most’ six months after their financial year end (whereas the previous guidance stated that ideally the statement should be published within such period).

The guidance also highlights the scrutiny that such statements will receive from the public, investors, media and other external parties and emphasises the expectation that the statements will show a year-on-year progress on how an organisation is tackling the risks and incidence of slavery and human trafficking in its business and supply chains. The quality of content in statements has been notably variable since section 54 came into force, and organisations now faced with producing their second statement face the additional challenge of demonstrating how their efforts in this area have developed. In its guidance the Government recommends that organisations keep historic statements available on-line so stakeholders can monitor the progress of the organisations over time.

It is clear the Government is making efforts, albeit with a light touch, to encourage the level and quality of compliance with section 54. This reflects the Government’s commitment to this subject, but many query whether it goes far enough. Currently working its way through the House of Lords is a private members bill introduced by Baroness Young; the Modern Slavery (Transparency in Supply Chains) Bill 2017. The Act seeks to implement a firmer approach to compliance with section 54 through a number of new obligations including; making it mandatory for a statement to contain certain information, placing an obligation on the Government to publish a list of those commercial obligations that have complied with section 54 (and by doing so draw attention to those that haven’t), require those that publish a ‘no steps’ statement to explain why, and change public procurement rules so that organisations that have not complied with section 54 cannot participate. An effective date for the bill is awaited.

Businesses should therefore take note that the focus on what organisations are doing in this area is only likely to increase, with negative consequences for those who do not engage with the issue ranging from negative press, damaged commercial relationships and potential exclusion from tender exercises. The Employment team at CMS has supported a number of clients in responding to the requirements of section 54, including advice on whether they are caught, complex group structures, effective due diligence, draft policy and statement wording, publication requirements and adapting commercial contract terms. Please contact a member of the team if you would like to discuss how we can help you.