Home Affairs Committee Modern Slavery Inquiry

Submission from the Business & Human Rights Resource Centre

7 September 2018Written submission from the Business Human Rights Resource Centre (MSA0056)

Business & Human Rights Resource Centre welcomes the opportunity to submit written evidence to the Committee’s Modern Slavery Inquiry. We acknowledge the UK Modern Slavery Act 2015 has raised awareness among key stakeholders and the wider public, but believe a stronger, more proactive approach to modern slavery in supply chains is required by Government and business. The insights in this submission are based on our organisation’s experience and expertise through operating the Modern Slavery Registry, tracking business compliance with the Act, undertaking in-depth analysis of reporting under the Act by FTSE 100 companies (FTSE 100 analysis), and our broader work on business and human rights issues, particularly on labour rights. We focus this submission on:

1. Impact of Section 54 of the 2015 Modern Slavery Act (the Act)
2. What success in tackling modern slavery looks like, both for government and for business
3. Priorities for the new Independent Anti-Slavery Commissioner
4. Recommendations

1. Impact of Section 54 of the Modern Slavery Act 2015
    

• High level of non-compliance with Section 54 of the Act
   

The UK Government estimates that 9,000-11,000 companies are required to publish a modern slavery statement pursuant to the Act. The Modern Slavery Registry (the Registry) tracks compliance with the reporting requirement and has identified several worrying trends: many companies are simply not publishing statements, those that do largely don’t comply with the minimum requirements and the overall quality of reporting is poor. The Registry holds statements for only half the Government estimate. We do not claim to hold every statement in the public domain, and it remains difficult to do so without a list of companies that are required to report (see below for more on this point. However, our numbers do indicate that thousands of companies that are required to report failed to do so. In addition, many companies have published a first-year statement but have not published a second or third-year statement as required under the Act. Some companies have rolled their statement over to the next financial year without updating it to reflect the steps that have been taken in the financial year to address modern slavery. This indicates that even companies which are complying, see the obligation to provide a statement as merely a tick box exercise.

Compliance with the minimum legal requirements of being approved by the board (or equivalent), signed by a director (or equivalent) and being clearly linked to from the homepage of the company’s website is also low.  By our assessment, which is informed by the guidance produced by the Home Office and conversations with the Modern Slavery Unit, 81% of the statements on the Registry do not meet these minimum requirements.

The reporting requirement was expected to increase transparency and accountability of business, but these trends indicate a clear lack of regard for the obligation to report under Section 54, particularly to publish an annual statement with updated information.

• Poor quality of reporting
   

Our FTSE 100 analysis indicates the Act is not leading to the transformational change in corporate behavior that the government hoped for. The FTSE 100 analysis is a useful litmus test of the overall quality of reporting by the 6,500 statements held on the Modern Slavery Registry, and by extension, the effectiveness of mandatory transparency legislation. While a small number of companies demonstrate meaningful action to identify and mitigate risks, the majority of companies publish generic statements that provided little to no meaningful information. While we have seen some improvements over time, we would expect to see clear progress by more companies three years into the Act. Furthermore, the companies that demonstrate the strongest performance in their reporting are those companies that have already been addressing human rights, labour rights and modern slavery in their supply chains prior to the Act. These tend to be consumer-facing companies that are already subject to wider scrutiny. However, many companies covered by the Act are not consumer-facing and have not addressed these issues before. Their reporting indicates they are not putting in the effort and resource to take meaningful action as was intended by the Act, rather they treat the Act as a compliance exercise.

• Mechanisms to monitor or enforce compliance with Section 54
   

The Government has said that it relies on civil society, investors and consumers to monitor and enforce compliance with the Act and help drive a race to the top. Our findings clearly indicate that this has so far been ineffective. The failure to include strong enforcement mechanisms has resulted in a weak response by the vast majority of companies.

The Government has not published a list of companies that are required to report under the Act, yet a list is vital to facilitate effective monitoring and to encourage compliance. A public list will enable the Government, companies, investors, civil society, consumers and the public at large to be aware of non-compliant companies. A public list will also incentivise companies to comply with the reporting requirement and drive higher compliance levels.  In the absence of public information about which entities are required to report, the impact of the Act is curtailed.

A Government-run central registry of statements would greatly help to improve compliance. We support the joint-statement published by the former Independent Anti-Slavery Commissioner, of which we are signatory. A Government registry will provide a clear, designated location for businesses to file modern slavery statements and will send a clear signal to the private sector that Section 54 is a mandatory legal requirement. Also, it will enable other stakeholders – such as investors, consumers, non-governmental organisations, trade unions and contracting companies or local authorities –to quickly and easily identify whether a particular company has complied with the Act and to assess what substantive action they are taking to protect their business from slavery.

The Gender Pay Gap reporting regime provides a useful example. Prior to the reporting deadline for companies, the Equality and Human Rights Commission went to great lengths to raise awareness of the reporting requirement, that compliance was being monitored, and that the enforcement mechanism (which includes a potential hefty fine) would be carried out against non-compliant companies. The Government also established a registry where companies are required to submit their reports. In this example, the Government took a much more proactive role and as result, there has been a much higher compliance rate than the Act.

2. What success in tackling modern slavery looks like
    

• Mandatory human rights due diligence & reporting
   

Under the Act, companies may choose what to include in their reporting and what to leave out. There is no incentive for companies to proactively identify risks or disclose those findings, and this is reflected in modern slavery reporting. Most statements published by companies are silent on the issue of risks or state that the company has not identified any risks. It is unclear if companies do not have effective mechanisms in place to identify risks or whether companies choosing not to disclose risks they have identified for fear of reputational or legal consequence.

The Government should require companies to undertake human rights due diligence. As we proposed in a recent report, this would place a legal obligation on companies to undertake human rights due diligence and report on this process and communicate the results, which would be in line with the UN Guiding Principles on Business and Human Rights.

The Government should also require companies to include information on a set of clearly defined reporting criteria, including their human rights due diligence process, rather than suggesting they include such information. These requirements would preclude companies from reporting they had taken no steps to address modern slavery, as is currently allowed under the Act. It would also help level the playing field by requiring all companies to report against the same set of standards.

Our FTSE 100 analysis supports this proposal. The companies that perform best in the analysis are those whose reporting demonstrates they have undertaken human rights due diligence. They have better visibility over supply chains, more comprehensive monitoring and assessment of suppliers, and a clear understanding of risks. However, these tend to be consumer-facing companies that are subject to broader, public scrutiny. Most companies that are required to report under the Act will not be subject to such pressure, and therefore, may not put in the same effort unless legally required to.

• Public contracts and bodies
   

The Government could help to eliminate modern slavery in publicly procured goods and services by applying the reporting requirement into public procurement processes. First, companies that fail to comply with the reporting requirement or that publish weak statements would be prohibited from participating in public tender processes. This would provide a clear incentive for compliance. They could also preference companies with stronger statements providing a clear incentive for meaningful action rather than just compliance. Second, public bodies should be required to investigate their operations and supply chains and publish an annual modern slavery statement, as we have seen many NHS trusts and local councils dp. This would also allow the Government to show leadership at the national and local levels and help set an example for companies to follow.

3. Priorities for the new Independent Anti-Slavery Commissioner
    

We applaud the former Commissioner’s engagement with companies and focusing his efforts on companies that were non-compliant with the Act. We encourage the new Commissioner to increase his/her level of engagement with companies and to expand the scope of such engagement beyond the FTSE 250, particularly small to medium-sized companies. To support the Commissioner’s office in these efforts, the Government should provide sufficient resources to build a Labour Market and Private Sector team to take on this expanded role.

The Government should also ensure the Commissioner’s role remains so that s/he can carry out his/her remit without undue influence and interference, or political considerations. We noted with concern that in his resignation letter, Kevin Hyland said his independence from the Home Office had been perceived as ‘discretionary’ rather than legally bestowed and urged that his appointed successor be granted the necessary autonomy.

Recommendations for the UK Government

1. Publish a list of all companies covered by S.54 of the Modern Slavery Act
    
2. Establish or authorise a single, independent and freely accessible central registry on which all companies are required to submit their annual modern slavery statements.

3. Require (rather than suggest) that companies include information on a set of reporting criteria

4. Institute mandatory requirements for companies to conduct human rights due diligence.
    
5. Extend the requirements of Section 54 to all public bodies and government departments with an annual turnover of £36m or above; the public sector should be demonstrating leading practice in addressing modern slavery.
    
6. Prohibit companies that are not compliant with the Act from bidding on public contracts.

7. Commission an independent review of the effectiveness of Section 54 of the Act.
    

Increase the resources of the Office of the Independent Anti-Slavery Commissioner and safeguard the independence of the office.

September 2018