Unpacking the UK Modern Slavery Act 2015 eight years on

The business and human rights landscape has changed significantly since the introduction of the UK Modern Slavery Act in 2015 (MSA 2015), which at the time was a trailblazing piece of legislation.

Regimes governing business’ human rights impacts have multiplied globally with the EU in particular leading the way with the Corporate Sustainability Due Diligence Directive (CSDDD or CS3D) proposal currently being negotiated, and several member states having already introduced (or are working on) their own regimes, such France, Germany, and the Netherlands (see our guide to key supply chain due diligence regimes across the globe). 

The rise in human rights-related legislation mirrors the increase in stakeholder and regulatory scrutiny of this area. In particular, we have seen this lead to a renewed focus on one of the first kids on the block - the UK's MSA 2015. 

In this blog post, we unpack the requirements of the MSA 2015 and analyse reporting expectations going forwards.

Who does the MSA 2015 apply to?

The MSA 2015 applies to organisations that:

• are a ‘body corporate’ or partnership (wherever incorporated/formed);
• carry on (part of) a business in any part of the UK;
• supply goods and services; and
• have an annual turnover of £36 million or more, with annual turnover calculated as the turnover of the specific entity and its subsidiary undertakings.

Key to note in the above is that the Act captures overseas organisations with a presence in the UK. However, there is little in the way of clear guidance on the application of limb (ii), which requires analysis on a case-by-case basis.

The compliance requirements

The formal compliance requirements under the MSA 2015 are relatively light. 

Those in scope are required to:

• publish a slavery and human trafficking statement (an MSA Statement) for each financial year (within six months of the end of the relevant financial year);
• have the MSA Statement approved by the board of directors and signed by a director (for LLPs, be approved by the members and signed by a designated member); and
• publish the MSA Statement on their website with a prominent link on the homepage (or provide a copy of the MSA Statement upon request in writing if you have no website).

Where a parent and one or more subsidiaries are required to publish an MSA Statement, it is possible for the parent to report at a group level on behalf of all in-scope entities. Two points are worth noting in particular for group statements: (i) the MSA Statement should accurately reflect the policies and processes of each reporting entity; and (ii) all reporting entities must approve and sign the group statement.

An MSA Statement should detail the steps taken by the reporting entity in the relevant financial year to ensure slavery and human trafficking are not taking place in its own business or supply chain. The MSA 2015 provides suggested content to report (unlike the mandatory areas in the equivalent Australian regime), with more detailed guidance provided in the government guidance. 

The suggested reporting areas are:

• organisational structure, business, and supply chains;
• policies in relation to slavery and human trafficking;
• due diligence processes in the entities' business and supply chains;
• areas of slavery and human trafficking risk and how that risk is assessed and managed;
• effectiveness in ensuring slavery and human trafficking are not taking place, measured against appropriate performance indicators; and
• training.

There are currently no penalties for non-compliance. Instead, the MSA 2015 relies largely on public censure for enforcement, with the main considerations for organisations coming from a reputational and public scrutiny standpoint.

Reporting expectations

Notwithstanding the relatively light compliance requirements and lack of financial penalties, the heightened stakeholder and regulator interest in the area is driving increased expectations about the MSA Statement. 

We have previously reported (here and here) on feedback from the Financial Reporting Council (FRC) and the Independent Anti-Slavery Commissioner (IASC) that were highly critical of the level of MSA Statements and wider related reporting. Although slightly dated now (the IASC report being two years old), these points remain relevant to current practice. See below for some key themes clients should bear in mind.

Real world application

The FRC criticised MSA Statements for being largely descriptive and lacking detail on how policies and processes are implemented in practice, specifically calling out the frequent use of boilerplate language. 

Reporting organisations should aim to give an understanding of how their policies and processes are enacted throughout their business, supply chain and on the ground. We find an effective way to do this is through the use of case studies.

Ongoing due diligence

Another common criticism is the lack of information on the monitoring of suppliers after onboarding due diligence. 

MSA Statements should include information on such ongoing monitoring, especially where dealing with high-risk geographies or sectors, and should go on to explain how the in-scope organisation manages identified actual and potential risks in practice (e.g. through periodic questionnaires, audits, supplier engagement, etc).

Effectiveness

The most under-reported area under the MSA 2015 is effectiveness and KPIs. 

This ties into the ‘real world application’ point above and the use of case studies can again be helpful. 

On KPIs, there is a push from stakeholders to move away from basic indicators (such as hours of training or number of audits conducted) and to focus instead on those which show positive performance and which are used in organisational decision-making in this space (such as the proportion of suppliers subject to human rights due diligence and the proportion of suppliers that have acknowledged the code of conduct). 

Modern slavery and the financial sector

A specific criticism raised by the IASC was in relation to a lack of awareness within the financial sector around the risk of modern slavery. 

In addition to assessing modern slavery risk in relation to suppliers, financial sector organisations should also look at modern slavery risk in their investees companies and their customers. 

This comes as part of the principle that businesses can be linked to impacts throughout their value chain and financial institutions in particular (which can drive real economy change through financial allocation) are being expected to consider this responsibility and their unique leverage, which should be borne out in their reporting.

Reporting going forwards

There is a lot for businesses to keep an eye on in the modern slavery (and wider business and human rights) space.

The MSA 2015 itself is long overdue an overhaul, but we continue to await the Modern Slavery Bill promised in the 2022 Queen’s Speech (see our previous blog post). 

Other reporting regimes have overtaken the MSA 2015, with a large number of clients now reporting jointly under both the MSA 2015 and the Australian regime, which imposes stricter standards and has more (and more recent) guidance. For more information on the Australian regime, see this blog post: Recommendations for reform of Australia's Modern Slavery Act and the ESG Legal Outlook 2023 – Australia, which were both jointly published with Allens.   

More broadly, the UK government has explicitly confirmed that it does not intend to replicate the EU’s Corporate Sustainability Due Diligence Directive (see our previous blog post), putting it at odds with the wider European approach. 

However, with regulators, investors and consumers alike demanding greater transparency, and enforcement agencies finding new ways to hold businesses to account for human rights impacts (see our previous blog post), businesses are right to be refocusing on the MSA 2015 and (re)considering their approach to human rights risk management more generally.  

For more information on business and human rights including the CSDDD and how to approach human rights due diligence in practice, see the Linklaters materials.