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UK Report has found the FTSE 100 is struggling to comply with UK Modern Slavery Act reporting requirements

6 mins  20.10.2017

Almost half of FTSE100 companies do not meet the minimum reporting requirements set out by the UK Modern Slavery Act according to a UK Business and Human Rights Resource Centre Report:  First Year of FTSE 100 Reports Under the UK modern Slavery Act: Towards Elimination?  The report writers recommend more action is needed to incentivise compliance.  Australia is considering  importing similar provisions. 

The UK Business and Human Rights Resource Centre has released a report: First Year of FTSE 100 Reports Under the UK modern Slavery Act: Towards Elimination? which analyses actions taken to eradicate slavery as reported by FTSE 100 companies in compliance with reporting requirements under the Modern Slavery Act 2015 (the Act).  Section 54 of the Act requires every organisation with a global annual turnover of £36m or more which carries on a business (or part of a business) in the UK to produce a slavery and human trafficking statement setting out the steps it has taken that year to identify and eradicate modern slavery from its supply chain for each financial year.

Key Points

  • Overall, the report found that 43% of companies do not meet the minimum requirements set out by the Act (signed by director, approved by board and available on the company’s homepage) and that the majority of companies do not provide details on the complexity of their supply chains and risks they have identified.

  • The report also found that 'Only a handful of leading companies' were demonstrating rigorous action while the rest produced weak statements, indicating little action.   The report writers state that they expected companies, to have a 'better understanding of their risks and to be taking action to address them. However, there is still a wide gap that distinguishes a few leading companies from the laggards that make up the majority'.

Further detail

The report included the following findings (among others):

  • Almost half of companies failed to meet minimum reporting requirements: 43% of the companies failed to meet all three of the minimum requirements.

  • Compliance with each of the requirements was patchy: 28 company statements did not explicitly say they were approved by the Board (or equivalent); nine company statements were not signed by a director (or equivalent); and 16 companies did not have a link to the statement on the homepage of the company website.

  • Some companies provided no meaningful information: 50 companies provided no meaningful information on whether their actions were effective in addressing modern slavery risks. Companies that did provide information relied heavily on performance indicators and did not indicate whether the results of the data collected from these indicators evidenced their processes were effective.  

  • Highest performing companies: The highest performing companies according to the report are Marks & Spencer, Sainsbury, Unilever, British American Tobacco, Tesco and Vodafone.  The report writers note that these companies: explained the risks identified in their supply chain, including where the risk was identified (sector or location); reviewed existing policies and practices; and collaborated with experts and peers to learn best practice and implement these lessons into their own practices.

  • Weakest performance: The companies with statements that demonstrated weak performance identified in the report are Hargreaves Lansdown, Paddy Power Betfair, Pearson and Worldpay. The report writers note that the companies provided little or no information in any of the six reporting areas.

Recommendations

The report makes several recommendations for companies, investors and government including:

  • Companies should prioritise modern slavery as part of the strategic agenda of the company to promote awareness and practical action.

  • Investors should engage with companies on their actions to tackle modern slavery and reward companies that demonstrate due diligence to avoid slavery.

  • UK Government should improve monitoring and enforcement mechanisms to ensure companies that are required to report under the Act feel pressure to comply and are penalised for failing to do so.  The report also suggests that the government publish a list of companies required to produce statements under the Act and 'support open, free, and accessible information regarding company compliance' and incentivse compliance by making bids for public contracts dependent on companies demonstrating due diligence in their operations and their modern slavery statements.

The report writers comment: 'Holding companies to account is essential to driving up standards, a key step to eradicating modern slavery in supply chains. The status quo renders the Act redundant and allows for modern slavery to thrive - the actions of a small number of leading companies will not compensate for the poor performance by the majority'.

No penalty for non-compliance:  Commenting on the report findings The WSJ comments that failure to publish the transparency statement under the Modern Slavery Act 'doesn’t carry any financial penalty or specific sanctions, but the legislation counts on the watchful eyes of civil society groups and consumers to keep corporates on their best behavior'.  The article also published statements from a number of companies listed as weak performers in the report who affirmed their commitment the issue.  The WSJ added that the UK government has issued new guidance to clarify its expectations on the contents of the annual corporate statement and adds that the Home Secretary has convened the first 'Business against Slavery' forum at which executives reportedly discussed how to address the issue.

Australia: consultation on the proposed model for a Modern Slavery in Supply Chains Reporting Requirement – progress update

As previously reported in Governance News on 21 August, on 16 August the government released a proposed model for a Modern Slavery in Supply Chains Reporting Requirement for consultation. 

Proposed reporting requirement: The proposed reporting requirement will require large corporations and other entities operating in Australia (annual turnover in excess of $100m) to publish annual statements outlining their actions to address modern slavery in their operations and supply chains.   As with the UK reporting requirement, it's proposed that the statements will need to be approved at board level (signed by a director). The Consultation paper notes that the proposed reporting requirement would require companies to report against 'substantially the same' four criteria as set by the UK reporting requirement to ensure the business community does not need to comply with inconsistent regulation across jurisdictions.  The proposed criteria are:

  1. The entity’s structure, its operations and its supply chains.

  2. The modern slavery risks present in the entity’s operations and supply chains.

  3. The entity’s policies and process to address modern slavery in its operations and supply chains and their effectiveness (such as codes of conduct, supplier contract terms and training for staff).

  4. The entity’s due diligence processes relating to modern slavery in its operations and supply chains and their effectiveness.

The Consultation period closed on 20 October. 

As part of its inquiry the Foreign Affairs and Aid Sub-Committee of the Australian Parliament’s Joint Standing Committee on Foreign Affairs, Defence and Trade held public hearings.  These included meeting with UK representatives of the UK Gangmasters and Labour Abuse Authority (GLAA) and with a meeting with representatives of the Department of Foreign Affairs and Trade.   The purpose, was reportedly to investigate what lessons could be learned from the UK experience as well as to further the investigation of whether UK provisions should be enacted. 

[Sources: Modern Slavery Act 2015 UK; First Year of FTSE 100 Reports Under the UK modern Slavery Act: Towards Elimination?; Press Release: FTSE 100 failing to lead on eliminating modern slavery from supply chains?  17/10/2017; House of Representatives Media Release 19/10/2017; 17/10/2017; [registration required] The WSJ 16/10/2017; Attorney General's Department: Consultation: Modern Slavery in Supply chains reporting requirement – public consultation: discussion paper; Joint standing committee on foreign affairs, defence and trade: Inquiry into establishing a Modern Slavery Act in Australia; Committee terms of reference; Joint Standing Committee Interim Report 

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