UK Modern Slavery Act 2015: Changes on the horizon

On 22 September 2020, the UK Government published its response to the consultation on transparency in supply chains. With changes now upcoming on content, scope, publication and enforcement, we set out the key points businesses need to know.

Consultation background

Long before anyone had heard of Covid-19 and grown quite so familiar with their own four walls, in July 2019 the UK Government launched a public consultation on section 54 of the Modern Slavery Act 2015 (the “Act”). The consultation came in response to gaps in the reporting regime highlighted by an Independent Review earlier that year (see our client briefing). The consultation, which closed in September 2019, has now been responded to by the Government, who have set out some key changes for the regime going forwards (see the Consultation Paper and Government Response).

Scope

Following a nearly unanimous response, public bodies with a budget threshold of £36 million (on parity with in-scope commercial organisations) will now also be required to publish statements on the steps they are taking to combat modern slavery and human trafficking in their organisation and supply chains.

Content

Taking a lead from the Australian Modern Slavery Act, the areas of content suggested for inclusion in any statement published pursuant to the Act will become mandatory.

This means in-scope entities will in future be obliged to report on their:

• organisation and supply chains;
• policies in relation to slavery and trafficking;
• due diligence processes in their business and supply chains;
• assessment and management of risk of slavery and human trafficking;
• effectiveness in ensuring slavery and human trafficking are not taking place (including KPIs); and
• training available to staff on slavery and human trafficking.

These areas may also be added to, with potential new areas including future plans, instances of modern slavery identified and collaboration with external partners.

Remediation was also suggested by respondents, to which the Government, in a move which will come as a surprise to some, commented that this should already be covered by the section on due diligence.

It will still be open for companies not to cover a particular topic area in their modern slavery statement, but they will now be required to explain why. Updated Government guidance, including best practice on reporting against future required areas, has been promised by the end of 2020.

Further, albeit relatively minor, changes to note include a requirement that the modern slavery statement state the date it was approved by the Board and signed-off by a director (or equivalent). Group statements will also be required to name the entities covered.

Publication

While those organisations covered by the Act have, to date, published their modern slavery statements on their websites, they will now need to publish their statement on a Government-run reporting service. What this will look like is subject to ongoing research, but any design capabilities will, given the responses to the consultation, be developed with comparability and transparency in mind. This will allow investors, NGOs and others to scrutinise, benchmark and track the progress of statements in a much easier way than is currently possible.

Additionally, when companies report will change under the new regime. A single reporting deadline will be introduced, with statements required to be published by 30 September in respect of the period 1 April – 31 March. For most companies, this aligns with their financial year anyway, but will be a change for those with calendar financial years.

Enforcement

Last but certainly not least comes the difficult question of enforcement. Often described as a ‘toothless tiger’, the consultation had proposed new civil penalties for non-compliance with section 54. The nature and level of such penalties proved the most divisive issue, with no clear outcome.

As a result, enforcement is now subject to further consideration alongside the development of the Single Enforcement Body for employment rights. This body was also consulted on over the course of 2019 and the Government’s response is still outstanding. That consultation considers the development of a single labour market enforcement body to provide a coordinated enforcement offering across the range of employment laws to better support companies and help protect vulnerable workers.

Timing and next steps

The Government response rather vaguely suggests that the legislative changes required will be introduced “when parliamentary time allows”. This is likely to mean modern slavery statements due in respect of the current financial year will remain unaffected and the impact of the above will be seen for the first time when companies report in 2022.

However, the developments are a continuation of a wider direction of travel on corporate reporting. The focus on due diligence and human rights is mirrored at EU level with the proposed introduction of a law on mandatory human rights due diligence (see our blog post).

A bright light has been shone on these issues this year as global supply chains have suffered the ripple effects from the tidal wave that is Covid-19. Recent events globally, and closer to home in Leicester, have shown the consequences of getting human rights (in particular modern slavery) issues wrong.

Therefore, for all those organisations that are in-scope, it is important to keep a careful eye out for further news on these changes and start thinking now about what they will be able to say when the time comes.

For further background information on the Act, see our client briefings: The Modern Slavery Act 2015: Five years on and The UK Modern Slavery Act: Refresher.