One small benchmark for modern slavery reporting, one larger lesson for sustainability reporting

At the end of November 2023, the CCLA, an investment manager whose stated purpose is to help its clients maximise their impact on society by harnessing the power of investment markets, published its first benchmark on modern slavery. 

The benchmark is based on assessment of the 100 largest UK-listed companies (by market capitalisation as of June 2023) reporting under section 54 of the Modern Slavery Act 2015. Although a UK regime, the benchmark is relevant more globally as companies subject to the reporting requirement often have global operations and supply chains. The benchmark itself assessed the companies’ statements (with some review of associated public disclosures e.g., annual ESG reports and human rights policies) on the degree to which they: (i) conformed with the requirements of section 54; (ii) disclosed information outlined in the accompanying Home Office Guidance on Modern Slavery; and (iii) provided disclosures on how they “Find”, “Fix” and “Prevent” modern slavery. 

CCLA benchmark’s findings

The CCLA benchmark had a number of findings and made various recommendations, for companies, investors and policymakers. 

One of the main findings made by the benchmark was that there was a focus on policy over practice. This was based on the findings that:

• 100% of the companies assessed had policies relating to modern slavery but only 26% reported finding modern slavery in their supply chain;
• 44% disclosed they had policies relating to responsible procurement practice but only 14% disclosed examples of those practices;
• 31% disclosed the steps they take to end ongoing risks but only 9 reported on the outcomes of remedy processes in place and only 1 evidenced that the remediation provided was satisfactory to the victims. 

The benchmark’s recommendations for companies on the back of these findings focused on:

• putting in place strong governance, including board-level responsibility and committee structures and involvement of stakeholder engagement;
• conducting and disclosing detailed risk assessments – of both supply chains (beyond Tier 1) and own operations;
• disclosing more detail on suspected instances of modern slavery and how these have been addressed in practice (including outcomes); and
• adopting and disclosing details of responsible procurement practices that enable suppliers to uphold the standards imposed by buyers. 

Broader key takeaways 

At a time of increased demand for and focus on sustainability disclosures, we think the benchmark provides some wider key takeaways for those grappling with ESG reporting more generally and beyond the interesting findings of the report itself. 

• Consider indirect effect: As lawyers, we have spent a large amount of time over recent years advising on scoping as ESG reporting has been increasingly mainstreamed by the introduction of legal requirements. We have also always advised companies to bear in mind the wider sustainability landscape, including stakeholder expectations. The CCLA report is a good example of action being driven by stakeholders – and so even where you find yourself out of scope of a regime, ask yourself, will my stakeholders still expect me disclose (even if you do so voluntarily)? 
• From policy to practice: Of the 62 points available under the CCLA’s benchmark’s scoring methodology, only 6 are awarded for compliance with section 54 of the Modern Slavery Act 2015, while 23 points (the largest individual category) were available for “Finding modern slavery”. The weighting towards the inclusion of disclosures about the practical implementation of policies and processes reflects the broader shift in sustainability (particularly climate) reporting from goals and targets to plans to achieve them. Stakeholders will not accept a tick-box approach to compliance – they want to understand the picture on the ground. 
• Transparency over perfection: The “Fix it” and “Prevent it” scoring categories were equally down-weighted (each scoring 8) compared to the “Find it”. We think this recognises the difficulty companies face addressing these tough issues and the fact that stakeholders do not expect perfection. Companies should be looking to disclose on their policies and processes in practice, being balanced and transparent about the challenges faced in their implementation – and how they are seeking to address those. This does not always sit easily with companies (particularly Legal teams), but failure to disclose will increasingly result in adverse impact. 

As we come towards another annual reporting season, sustainability reporting is here to stay. Whether or not you are a company required to prepare a modern slavery statement, the CCLA report is worth a read to understand the stakeholder perspective of sustainability reporting. 

Modern slavery statements

And if you are a company required to prepare a modern slavery statement under the Modern Slavery Act 2015, be aware that the CCLA:

• has recommended investors use the CCLA framework to help with engagement – and so it is possible other investors or stakeholders may decide to incorporate it into requests to, and engagement with, investees;
• will (and encourages other investors to) vote against the financial statement and annual report of companies which underperform in the benchmark (i.e., are categorised as “barely achieving compliance”) and do not engage with the CCLA as investors (i.e., non-engagement is not an option); and
• will conduct the benchmark annually – meaning that it is likely to be used as a platform for continuous improvement, not just by the CCLA but potentially also by others, who the CCLA call on to join collaborative investor engagement programmes. 

For more information on the UK Modern Slavery Act and our other human rights materials including on the EU CSDDD, see: 

• Unpacking the UK Modern Slavery Act 2015 eight years on;
• Business & human rights page.