This article was first published by Law360 on June 9, 2022.
On May 10, a new Modern Slavery Bill was announced by the U.K. government at the occasion of the Queen's Speech.1 The bill purports to increase the accountability of commercial and public organizations to tackle modern slavery in their supply chains.
Two weeks before the announcement, a Financial Reporting Council, or FRC, report on modern slavery reporting practices in the U.K. found that 1 in 10 organizations failed to comply with the Modern Slavery Act 2015's requirement to publish an annual modern slavery statement, while 1 in 3 organizations published a poor-quality statement.2
This article explores whether the new bill can have any meaningful impact on transparency from organizations and, ultimately, on the elimination of modern slavery in supply chains.
The Current Regime
The 2015 Act requires commercial organizations with a total turnover of £36 million ($45 million) or more, known as covered organizations, to publish an annual modern slavery statement.3
A commercial organization means a body corporate, wherever incorporated, or a partnership, wherever formed, which supplies goods or services, and carries on a business or part of a business in any part of the U.K.4
A modern slavery statement is a statement of the steps the organization has taken during the financial year to ensure that slavery and human trafficking does not take place in its supply chains or in any parts of its business, or a statement that the organization has taken no such steps.5
The act does not dictate the format or content of modern slavery statements. It provides that covered organizations "may" include in their statement information on six areas:6
- The organization's structure, its business and its supply chains;
- Its relevant policies;
- Its relevant due diligence processes;
- Those parts of its business and supply chains where there is a risk of modern slavery and the steps it has taken to assess and manage that risk;
- Its effectiveness in ensuring that modern slavery is not taking place in its business or supply chains; and
- The training about modern slavery available to its staff.7
The current regime relies on public scrutiny, including scrutiny by nongovernmental organizations and journalists, to motivate companies to be transparent about the steps they have taken to tackle modern slavery.
Covered organizations must publish their modern slavery statement on their website and include a link to the statement in a prominent place on the website's homepage.8
Organizations failing to comply with the requirements of the act currently face no sanctions, beyond the risk of damage to their reputation.
The Proposed Changes
The new bill crystallizes a series of measures announced by the U.K. government in the past two years. First, the bill will broaden the application of transparency requirements to cover public organizations.9
Second, it will mandate the reporting areas to be covered in modern slavery statements. In September 2020, the U.K. government announced that it would make the inclusion of the six areas of information listed in the 2015 act mandatory, when parliamentary time allowed.10
The announcement was made in response to a consultation on the transparency requirements and reporting process under the act, in which 80% of respondents were in favor of mandating the contents of statements.
It is unclear whether organizations will retain the option of stating that they have taken no steps to prevent modern slavery when this new content requirement comes into force. The requirement to describe due diligence processes and policies appears to presuppose that organizations have taken such steps. It may be that the Modern Slavery Bill will amend the act to remove that option.
Alternatively, organizations may have to outline their structure and modern slavery risks, but have the option of stating that they have taken no steps to address these risks, have no relevant policies or due diligence processes, and offer no relevant internal training. Of course, this point might be of limited practical relevance, as organizations that have taken no steps at all to address modern slavery in their supply chains may be less likely to comply with the transparency requirements of the 2015 act, as amended by the bill.
Third, the bill promises to strengthen the transparency requirements on covered organizations by introducing civil penalties for organizations that fail to comply. Plans to introduce penalties for noncompliance have been mentioned by the U.K. government on at least three occasions.
Civil penalties were first mentioned in September 2020 as part of the U.K. government's response to the transparency requirements consultation, as discussed previously.
In January 2021, in a statement to Parliament on human rights violations against the Uyghur community, the U.K. government also referred to plans to introduce fines for organizations that fail to comply with the 2015 act.11
In June 2021, in its response to a consultation on the establishment of a single enforcement body for employment rights, the U.K. government also stated that the body would have powers to impose fines on noncompliant organizations.12 These plans finally begin to materialize with the new bill.
The bill will also facilitate public scrutiny of modern slavery statements by requiring covered organizations to publish their statements on a government-run registry. An online modern slavery statement registry was launched by the U.K. government in March 2021. At this stage, around 7,000 statements have been added to the registry on a voluntary basis.
Finally, the bill will introduce various measures to tackle modern slavery crimes and better protect victims.
The Roots of Noncompliance
The new bill aims to "reduc[e] the prevalence of modern slavery in supply chains" by "building on the strong foundations" laid down by the MSA. Considering the FRC's findings on modern slavery reporting practices, however, one might wonder how strong these foundations really are.
There is little doubt that the measures envisioned by the bill will encourage a further degree of transparency from covered organizations. For instance, mandating areas for inclusion in modern slavery statements, and imposing civil penalties for noncompliance, will likely result in an increase in the number of organizations — currently less than half, according to the FRC — that provide information on their organizational structure and supply chains, and describe their relevant policies informatively.
However, the bill does not address what is arguably the fundamental limitation of the 2015 act. The act does not impose any obligation on organizations to have an anti- modern slavery strategy; it merely requires them to publish a statement of the steps they have taken, if any, to prevent modern slavery in their business.
Faced with this requirement, some organizations may not have an incentive to pay attention to their anti-modern slavery strategy until the close of the financial year, shortly before their annual modern slavery statement is due to be approved by the board and published. They may look back to consider what, if anything, they have done to prevent modern slavery in their business, and precipitously prepare a statement.
Other companies may consider that they have not done anything new in the past year to prevent modern slavery, and may simply update the date on their previous statement before republishing it.
Accordingly, the FRC found that "the vast majority of modern slavery statements were wholly backward-looking, with only a minority clearly identifying…a long-term strategy," as organizations opted "for a reactive, rather than proactive, approach to addressing modern slavery risks."13
These organizations are compliant with the 2015 act. Their statements may be "fragmented, lacking a clear focus and narrative, or…unduly complicated,"14 but they respect the only obligation under the act, that is, to publish a statement.
An Alternative Model
To meaningfully reform the 2015 act, the U.K. government may take inspiration from the French model.15 France's law relating to the duty of vigilance, known as the LDV,16 requires companies directly or indirectly employing, for over two years, at least 5,000 employees in France or at least 10,000 employees in France and abroad, to develop and implement an effective vigilance plan.17
This duty of vigilance encompasses broad categories of human and environmental harm, including slavery, human trafficking and other violations of human and workers' rights.
A vigilance plan must include reasonable measures to prevent such harm arising — directly or indirectly — from the operations of the company, its subsidiaries, its subcontractors, or its suppliers.
The LDV mandates not only the information to be covered in vigilance plans, such as supply chain risks, actions taken to assess and mitigate those risks and mechanisms to monitor the effectiveness of those actions, but also the way in which these plans should be prepared, e.g., in collaboration with stakeholders. Vigilance plans must be published in the companies' annual reports.
The LDV relies on "persons with a legitimate interest," such as NGOs and trade unions, as well as civil courts, to enforce vigilance obligations. Any such person may put that company on formal notice to comply with its obligations. If the company fails to do so within three months of receiving the notice, a court may, upon application by a person with a legitimate interest, enjoin the company to comply, if appropriate with conditional financial sanctions.
The court may also order a company to pay compensation for the harm that compliance could have prevented.18 Companies that fail to comply with the LDV, and whose operations involve forced labor in their supply chains, could therefore be ordered to make large compensation payments.
To date, at least eight companies have been sued or put on formal notice under the LDV. Of those eight companies, two have received formal notices in relation to risks of violations of workers' rights.19
The changes envisioned by the new bill will no doubt encourage organizations to be more transparent about the modern slavery risks that they face, and the steps they have taken to address these risks.
However, the quality of their modern slavery statements, and the effectiveness of the U.K.'s response to modern slavery more generally, is unlikely to meaningfully improve until organizations are required to adopt an adequate anti-modern slavery strategy.
Such a requirement should be supported by comprehensive guidance from the U.K. government and bolstered by sanctions for noncompliance.
1 Queen's Speech 2022: background briefing notes, pages 83-84.
2 Modern Slavery Reporting Practices in the UK: Evidence from Modern Slavery Statements and Annual Reports, FRC, Lancaster University, and Independent Anti- Slavery Commissioner, April 2022.
3 MSA, Section 54(1), Section 54(2)(b).
4 MSA, Section 54(12).
5 MSA, Section 54(4).
6 MSA, Section 54(5).
7 The U.K. Government's Practical Guide to Transparency in Supply Chains states that organizations should "aim to include" these areas in their statements. Annex E of the Practical Guide outlines the information that organizations could include in relation to each of these areas.
8 MSA, Section 54(7).
9 A previous announcement indicates that the requirement will apply to public organizations with a budget of £36 million or more. See https://www.gov.uk/government/news/new-tough-measures-to-tackle-modern-slavery-in-supply-chains.
14 Modern Slavery Reporting Practices in the UK: Evidence from Modern Slavery Statements and Annual Reports, FRC, Lancaster University, and Independent Anti- Slavery Commissioner, April 2022, page 3.
15 Note that a similar Corporate Due Diligence Act, which requires covered companies to assess the human rights and environmental risks in their supply chains, establish suitable risk management tools, and take appropriate remedial action, is due to come into force in Germany in January 2023.
16 oi n° 2017-399 relative au devoir de vigilance des sociétés mères et des entreprises donneuses d'ordre.
17 LDV Art. 1, inserting this duty in Art. L. 225-102-4 of France's Trade and Industry Code.
18 LDV Art. 2, or France's Trade and Industry Code Art. L. 225-102-5.