Modern Slavery Act Statements: tougher rules are coming
Four years on from the introduction of the Modern Slavery Act, the Government's view is that some organisations are failing to take their responsibilities seriously. Accordingly, it intends to strengthen the requirement to publish an annual supply chain transparency statement and is seeking views on its specific proposals. In this article, we look at the key changes that are on their way.
Number one: mandatory reporting on some topics
Currently, businesses are encouraged (but not required) to report on six topics (the organisation's structure and supply chains, its policies, its due diligence processes, any particular areas of risk, the effectiveness of measures it has taken and staff training).
The Government wishes to understand the approach that businesses currently take, and to obtain views on which of these areas (or any additional areas) should become mandatory reporting topics.
Number two: mandatory publication on a centralised Government registry
Currently, businesses are only required to publish statements on their own websites, though there are registries operated by well-respected independent bodies (for example, the Modern Slavery Registry from the Business and Human Rights Resource Centre).
Number three: one reporting deadline for all businesses
Currently, the Government advises businesses to publish statements within six months of the end of their financial year. This change would require all businesses to report at the same time, with the aim of facilitating better scrutiny and engagement.
Number four: stronger enforcement tools
The Government is considering introducing monetary penalties for failure to report, which is likely to be variable and capped at a maximum sum (the exact amount yet to be decided). Any penalty scheme would not come into force until at least one year after the other changes.
Number five: public sector bodies must also publish a statement
The Government proposes to extend the obligation to publish a supply chain transparency statement to public sector bodies that have a budget of £36m or more.
Crucially, the Government has also stated that any changes to the current law would be phased to enable affected organisations to prepare. The consultation can be found here.
The closing date for responses to the consultation is 17 September. In particular, views are sought on the impact of transparency on consumer and investor engagement, the cost and resource implications of transparency reporting, and how current and proposed measures can drive compliance, engagement and action.
Addleshaw Goddard Comment:
Businesses that already take the time (and have the resources) to publish considered, insightful statements are unlikely to experience much real change as a result of the Government's proposals (though the change in reporting date may require a change in internal processes).
The issue of which areas should be subject to mandatory reporting is the one most likely to prompt comment and debate. On the one hand, campaigners may argue that the Government's proposed changes don't go far enough: there would still be no obligation to meet any particular standard. On the other hand, many businesses may find it challenging to cover some of the proposed areas, arguing that this would require significant additional resource.
In particular, a requirement to report on the level of risk in specific parts of the business or supply chain will require some form of risk assessment. That said, this does not necessarily need to be a costly exercise. It is possible to carry out a high-level risk assessment based on territory risk and sector risk using publicly-available sources.
Businesses may also find it challenging to report on the effectiveness of the measures they have taken. In fact, figures quoted by the Home Office show that, currently, most reporting businesses fail to address this area at all, and a lot of uncertainty still remains. In any event, further guidance from the Government will be needed.
Please get in touch with our Commercial team to discuss this or any other aspect of managing your supply chains.