The Modern Slavery Act turns four today. Is it working? And how can it be improved?
Today marks four years since the UK’s Modern Slavery Act made history, for the first time requiring companies with revenue above £36 million to report what they are doing to tackle modern slavery. But ahead of an Independent Review's final report in April, new research finds that the Act is still failing to live up to its promise.
The Modern Slavery Registry is a free, publicly available central registry of statements for over 10,000 companies. (You can explore the registry here.) The registry - run by Business & Human Rights Resource Centre in the absence of a government registry - finds that just 20 per cent of statements meet the Act’s minimum requirements; namely, having board approval, a director signature (or equivalent), and linking to the statement on the company’s website homepage.
The figures do not improve when scrutinised by sector: compliance with these requirements by banks is slightly higher than the overall average at 22 per cent, and hotels, restaurants and leisure companies come in at 23 per cent. For construction and engineering companies, compliance is at an appallingly low 13 per cent.
The problem is little better at the top of the economy. BHRRC analysis in November found 73 per cent of the FTSE 100 companies are failing to report sufficient measures to tackle modern slavery. And while the registry is not exhaustive (the Home Office estimates 18,000 companies are required to report under the Act) the figures indicate that thousands of companies have failed to report year after year.
In September, the registry (working with INSEAD business school in Singapore) contacted 6,200 companies that meet the reporting criteria under Section 54 of the Act. The purpose of this outreach was twofold: first, to identify and collect statements about companies not already on the registry, and thereby increase transparency; and second, to raise awareness among companies that compliance was being monitored.
More than 1,700 companies (28 per cent) have responded to date – a large number, though a minority of those contacted. But their responses were indicative of the need for government action to improve how the Act is implemented.
Nearly 700 of these companies responded by saying that they were covered by a ‘group’ modern slavery statement published under the name of a parent company. Yet these group statements did not name the subsidiary companies they were supposed to apply to, making it difficult to monitor these companies and see whether they are complying with the law.
On group reporting, Home Office guidance states:
“…[T]he parent may produce one statement that subsidiaries can use to meet this requirement (provided that the statement fully covers the steps that each of the organisations required to produce a statement have taken in the relevant financial year).”
Yet companies provided blanket statements that did not describe steps taken by each of the smaller companies. They were also signed by a director or approved by the board of the parent company, rather than anyone from the smaller entities.
There were other issues. More than 100 of the companies that responded said they were non-trading holding companies, and were therefore not required to report under the Modern Slavery Act. Yet a small number of non-trading holding companies said that they were covered by group statements. This discrepancy reflects the lack of clarity in the Act on non-trading holding companies.
Further, almost 30 companies responded with an internal policy on modern slavery, rather than a statement in line with the Act’s reporting criteria. This has also happened with the registry, with companies trying to submit modern slavery policies rather than statements. This is alarming in that it signals that companies do not understand on a basic level what is required of them under Section 54.
A description of relevant corporate policies is one of the reporting areas suggested by the legislation. But the law also clearly states that companies are required to produce public statements describing the actions (or lack of actions) taken in the previous financial year, on six suggested reporting areas: business structure and supply chains, policies, due diligence, risk assessment, effectiveness and training. A modern slavery policy is not an adequate substitute, and does not on its own mean compliance with the Act.
Beyond this, more than 50 companies responded that they had no company website on which to publish a modern slavery statement. And around 50 sent in statements from previous years (2015 or 2016). Another 40 companies said they were no longer operating, or were part of a new group of companies, while more than 100 claimed they did not meet the £36 million revenue threshold in the last financial year.
Three years of operating the registry have provided valuable insights into how companies are failing to comply with the both the letter and spirit of the law. The research described above confirmed that the UK government must take steps to strengthen the Act.
The following recommendations would introduce strong enforcement mechanisms, clarify vague reporting requirements, and eliminate the ability of companies to self-regulate. They align with those included in the Independent Review interim report:
- Publish a list of companies required to report in order to effectively monitor compliance with Section 54;
- Provide clear, consistent reporting requirements for companies. Responses show that there are companies that believe they have complied with the law, but are in fact non-compliant, such as those that submitted modern slavery policies rather than statements, or submitted out-of-date statements;
- Use the enforcement mechanism provided for in Section 54(11) of the Act to pursue non-compliant companies, as the evidence suggests thousands of companies have failed to report since the Act came into force; and
- Delegate monitoring powers to the Independent Anti-Slavery Commissioner.
By undertaking these recommendations, the UK government would address the obvious weaknesses in the Act and maintain its position as a leader in eradicating modern slavery.