More ‘S’ in ESG: Proposals to amend modern slavery statements

The UK Government announced, on 22 September 2020, that 'when Parliamentary time permits' it will introduce 'an ambitious package of measures to strengthen and future-proof the Modern Slavery Act's transparency legislation'.

These changes will impact organisations that must prepare a modern slavery statement (under section 54 of the Modern Slavery Act 2015) - namely commercial organisations that supply goods or services, carry on business in the UK and (together with their subsidiaries) meet the annual turnover threshold of £36m or more. They will also impact public sector supply chains as the Government will extend s.54 to public bodies with a budget threshold of £36m or more.

This is the Government's response to its consultation in July 2019. See The Modern Slavery Act 2015 for more information on s.54 modern slavery statements.

Our view

The timing depends on new legislation but could apply to the year beginning 1 April 2021. In the meantime, once the government has published its updated guidance, we expect more organisations voluntarily to adopt more of the areas that will become mandatory.

The single reporting date and, we expect, a common reporting format on the government-run reporting service, follows the same approach as for the gender pay and payment practices reporting and should enable (as it is intended to) ready comparisons between organisations and across sectors.

Quoted companies must already include, in their strategic report, information about human rights issues and any policy and its effectiveness. The proposed mandatory areas raise the bar for other organisations.

Proposed changes

The changes will include:

• content of s.54 statement: mandating the areas that these statements must cover, including at least the current six voluntary aspects. If no steps have been taken within an area this must be clearly stated and organisations will be encouraged to provide a reason for this.

  The current voluntary aspects are: the organisation's structure, its business and its supply chains;  its policies in relation to slavery and human trafficking; its due diligence processes for slavery and human trafficking in its business and supply chains; the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps taken to assess and manage that risk; its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against any performance indicators as considered appropriate; and training about slavery and human trafficking available to its staff;

• publication of s.54 statement: the statements will have to be published on a new Government-run reporting service. Organisations will be encouraged to publish their statements on this new service as soon as it has been launched;

• single reporting deadline: introducing a 12-month reporting period of 1 April to 31 March. Organisations will then have six months to prepare their statement on activity in that period, with a single reporting deadline of 30 September;

• board approval: organisations will have to show that they have complied with the requirements by stating the date of board (or equivalent) approval and director (or equivalent) sign off; and

• group statements: requiring group statements to name the entities covered.

Greater consistency in the content of s54 statements and the standardisation of the reporting period and deadline is intended to create greater transparency and enable easier comparison between statements.

Pending legislation

In the meantime, the Government will:

• publish updated guidance in 2020, including best practice approaches to reporting against the proposed new mandatory areas. The guidance will highlight the importance of transparency, risk-based action and industry level collaboration to address shared challenges; and 

• consider increasing the enforcement sanctions in line with the development of a new single enforcement body for employment rights and will issue a further update in due course.