Government proposes changes to modern slavery statements
30 September 2020
The government has set out proposed changes to the Modern Slavery Act which, when implemented, will strengthen current requirements. In this article we look at the impact of these proposals and what steps organisations can take now to prepare.
Organisations which do business in the UK and have a turnover in excess of £36m have been required to produce annual modern slavery statements since 2015. However, to date the legislative requirements and enforcement provisions have been very limited. The government has announced (cautious) plans to change this. It says it will introduce compulsory requirements as to the contents of modern slavery statements for the first time, and require that statements are published on a government-run reporting service by one universal deadline. It is also considering introducing civil penalties for non-compliance.
Background to the changes
A Home Office consultation on modern slavery statements ran from 9 July 2019 to 17 September 2019. It was carried out in response to an independent review of the Modern Slavery Act 2015 (“MSA”) undertaken by a group of parliamentarians, which found that while many organisations produce comprehensive modern slavery statements, others do not take their responsibilities seriously.
Proposed changes to modern slavery statement requirements
In response to the consultation and the review, in what it describes as an “ambitious package of measures to strengthen and future-proof” MSA requirements, the government says it will introduce legislation covering the areas set out below.
- The six reporting areas currently suggested in guidance will be mandatory. They are:
- the organisation’s structure, its business and its supply chains;
- the organisation’s policies in relation to slavery and human trafficking;
- the organisation’s due diligence processes in relation to slavery and human trafficking in its business and supply chains;
- the parts of the organisation’s 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;
- the organisation’s 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 and capacity-building about slavery and human trafficking available to staff.
If organisations have taken no steps within an area, they will need to state this clearly and will be encouraged to explain the reasons why.
The government says that some of these six reporting areas may be combined. It is also considering adding new reporting areas, for example: remediation, future plans, and details of any instances of modern slavery the organisation has identified. Further detail on this is awaited, along with updated guidance. The government states it will provide this in 2020.
- The Home Office is currently developing a new government-run reporting service.Organisations will be required to publish their statement on this, and will be encouraged to do so even before the legislative change makes this mandatory. The intent is to facilitate access to information to allow consumers to make ethical decisions and enable comparability between companies. We also anticipate that NGOs and the media will use this reporting service to access information more easily on how, whether and to what extent organisations’ statements are compliant.
- There will be a single reporting deadline of 30 September for all in-scope organisations once the new legislation is passed. Organisations will report on the period April to March, so will have six months to prepare their statement. At the moment the requirement is to publish a modern slavery statement no later than six months after the company’s financial year-end, so this will impact the timing for many companies.
- Public-sector companies in England and Wales (Scotland and Northern Ireland are considered separately) will now be required to produce modern slavery statements. At the moment they are not compelled to do so, though some do so voluntarily.
These new requirements will not come into force until the necessary legislation has been introduced, which the government states will take place “when parliamentary time allows”.
New enforcement action?
Notably, the government’s response does not confirm whether civil penalties for non-compliance will be introduced.
Although there was a broad consensus in the consultation that there is a need for greater enforcement, the government reports that views on the appropriate nature and level of civil penalties were mixed. For example, there were varying views on whether the amount of any financial penalty should be capped, although most agreed that fines should be calculated according to an organisation’s size or turnover.
The government says that it will issue a further update on civil penalties “in due course”, and that it is considering this in line with the development of a new Single Enforcement Body for employment rights.
What is staying the same?
The government will retain the £36million turnover threshold. Statements will still need to specify the date of Board (or equivalent) approval and Director (or equivalent) sign off, and to name the entities covered.
Practical next steps
There are some steps companies can take now to prepare for the upcoming legislative changes:
- Review current modern slavery statements to identify areas which will require further attention. If a company has taken no steps in a particular reporting area to date, start thinking about how to address this.
- Review current policies and processes to assess what changes will need to be made to comply with the new requirements, focusing in particular on ongoing mapping of supply chains, and due diligence undertaken in procuring suppliers and identifying concerns and risks in relation to bad practices occurring at any stage of supply chains.
- Keep an eye out for the government-run reporting service, as companies are encouraged to publish statements on this service even before legislation makes this mandatory.
- Begin to consider your position on the new areas the government may introduce, namely: remediation; future plans; disclosure of instances of modern slavery; whistleblowing mechanisms; and collaboration with external partners.
- Review modern slavery statements of comparable companies to get a better idea of what is considered industry norm / best practice so this can be used to shape organisational thinking.
Lewis Silkin’s Modern Slavery team can provide bespoke training on compliance, assist in preparing a fully compliant statement and advise on modern slavery due diligence and dealing with risks. For a more detailed summary of the position before these proposed changes, our Inbrief guide to the current modern slavery regime is available here.