UK Government updates guidance on modern slavery and supply chain transparency

The updated guidance expands significantly on the previous version of the guidance issued in 2017. Compliance with the guidance is not mandatory and it does not change or affect the mandatory requirements of the Act. It will, however, provide businesses with clearer advice and expectations on how to address and report on modern slavery risks. The expectations set by the guidance are relatively demanding and few organisation currently meet them in practice. The guidance will also be helpful to organisations that are subject to similar corporate reporting requirements in other jurisdictions (particularly California, Australia and Canada) or those organisations that report voluntarily on human rights and supply chain issues. 

UK Modern Slavery Act

By way of background, under the Modern Slavery Act an organisation is required to publish a modern slavery statement if it meets the following criteria:

1. supplies goods or services (whether inside or outside of the UK); 
2. carries on its business or any part of its business in the UK; and
3. has an annual global turnover of at least £36m (including turnover of any subsidiary but excluding any trade discounts, VAT and any other sales tax).

A large number of business (including many based outside the UK) are required to report (the official UK Government registry of statements includes statements from over 12,000 organisations). Other than requiring a statement to set out the steps an organisations has taken (if any) to prevent modern slavery and trafficking in its business and supply chains, the Act does not prescribe the content of a statement but says that it may cover the following topics: 

1. organisational structure, business and supply chains;
2. policies in relation to slavery and human trafficking;
3. due diligence processes in its business and supply chains;
4. parts of the business and supply chains where there is a risk of modern slavery, and the steps taken to assess and manage that risk;
5. effectiveness in ensuring that modern slavery is not taking place in the business or supply chains measured against appropriate performance indicators; and
6. staff training on modern slavery.

In practice, many reporting organisations choose to report on these topics and structure their reports accordingly. The updated guidance is also structured around these topics. 

Suggested disclosures

For each of the six reporting topics mentioned above, the guidance sets out recommended level 1 and level 2 disclosures. Organisations drafting modern slavery statements for the first time may wish to focus on level 1 disclosures, whilst organisations that are more familiar with the reporting requirements are encouraged to include level 2 disclosures to demonstrate continuous. In practice, very few current statements include all or even most level 1 disclosures. Throughout the guidance there are new signposts to relevant parts of the UN Guiding Principles on Business and Human Rights and the OECD Due Diligence Guidance. Some of the more significant and demanding level 1 and level 2 disclosures are listed below: 

Organisational structure, business and supply chains

Level 1

• Provide an overview of the supply chain structure including countries the supply chains operate in and how goods and/or services are sourced/produced/assembled/distributed. 
• Explain what the organisation does not know in relation to its supply chains (for example, if an organisation has not been able to map tiers below tier 1 ie direct suppliers). 
• Provide a high-level profile of direct and indirect suppliers (eg subcontractors) including location, industry. 
• Explain how knowledge of supply chains has changed from the previous statement and outline plans to improve knowledge further. 

Level 2

• Provide a detailed map of the organisation’s structures and relationships with suppliers and subcontractors. 
• Provide an overview of the labour supply chain structure including (a) how workers are recruited at different stages in the supply chains, (b) source and transit countries of migrant workers, and (c) the involvement of agents, brokers and other intermediaries. 
• Provide a high-level profile of indirect suppliers (eg subcontractors), ideally mapping down to the lowest tier of the supply chain (eg raw materials). 

Policies

Level 1

• Provide a summary of the organisation’s internal operating policies relevant to modern slavery, and how these link to international standards such as the UN Guiding Principles. 
• List which stakeholders the organisation has engaged with to develop and implement modern slavery policies. 

Level 2

• Provide the organisation’s communication strategy and evidence how all relevant policies are communicated and enforced. 
• Provide high level detail on relevant supplier’s policies and practices and how these have been assessed. 
• Provide evidence of improvements to purchasing policy with suppliers (eg independent, third-party data collected from suppliers). 

Due diligence processes

Level 1

• Disclose when the organisation carried out the risk assessment and how often this is updated. 
• List and describe the highest priority modern slavery risk to workers in the organisation and its supply chains. 

Level 2

• Provide evidence that risk assessments are regularly reviewed and updated. 
• Disclose and describe the complete list of risks in the organisation’s modern slavery risk register that is regularly reviewed by the Board or equivalent. 
• Provide evidence of continuous direct engagement with workers/worker representatives to help identify risk. 
• Evaluate and disclose weaknesses in risk identification and assessment processes and outline plans to improve these, based on appropriate outcome-orientated targets and indicators. 

Modern slavery risks

Level 1

• Provide a summary of actions, programmes, and initiatives undertaken to cease and prevent modern slavery and mitigate specific modern slavery risks in the organisation’s operations and supply chains. 
• Describe incidents of modern slavery found across the organisation’s operations and supply chains, including the total number of incidents, and what steps were taken to remedy these. 
• Provide evidence of grievance mechanisms for workers or other ways in which they can report concerns and access remedy – in the core business, among subcontractors and in the supply chain. 
• Provide evidence that the organisation has considered whether the organisation’s business model and business-related key performance indicators may cause, contribute or directly result in modern slavery in its operations and supply chains. 

Level 2

• Provide in-depth detail on the actions taken to prevent and mitigate modern slavery in the organisation’s direct and in-direct supply chain eg through case studies. 
• Explain the results of any remediation processes undertaken in the organisation and its supply chains. 

Monitoring and evaluation

Level 1

• Set goals to ensure the organisation makes year-on-year progress in identifying, preventing and responding to modern slavery. 
• Provide outcome focussed Key Performance Indicators (KPIs) to measure progress towards goals, and disclose who in the organisation is responsible for setting and tracking them. (The guidance gives examples of KPIs that might be used eg percentage of tier 1 suppliers that have been audited.) 
• Disclose and provide supporting evidence for the outcomes of the organisation’s approach, and details of success stories. 
• Detail how the organisation works with internal and external stakeholders to ensure effective monitoring and evaluation. 

Level 2

• Provide evidence of goals which are tailored to sector-specific risks. 
• Demonstrate the organisation’s short-, medium- and long-term plan to achieve the desired goals. 
• Provide evidence of the organisation’s ongoing progress in relation to monitoring and evaluation, including how the organisation proactively keeps up with the latest research on what is effective, and explaining how this influences the organisation’s approach. 

Staff training

Level 1

• Provide an outline of the training delivered to internal and external stakeholders to support the organisation’s response to modern slavery. 
• Outline the materials used in the organisation’s training programme, for example, awareness-raising campaigns. 

Level 2

• Provide evidence of delivering a comprehensive training programme to support the organisation’s response to modern slavery. This includes frequency of training, detail on how training has been tailored to different roles/responsibilities, and attendees (including roles and responsibilities). 
• Provide evidence training packages have been developed with workers, NGOs, trade unions and, where appropriate, those with lived experience. 

Scope and enforcement

The updated guidance also addresses other matters (such as the formalities of approving and publishing a statement) but there is relatively little that is new. 

On the often difficult question of whether an organisation ‘carries on its business or any part of its business in the UK’ and so is subject to the reporting requirement, the updated guidance continues to say that this should be answered by “applying a common-sense approach”. However, it now adds that to “help you determine if you need to do this, consider whether your organisation (a) is registered at UK Companies House, (b) has UK offices, (c) provides service or support functions in the UK, (d) receives income in the UK, and (e) has other visible UK business presence, for example a website.” This confirms current practice and thinking on this question. 

Nothing in the guidance indicates any new or tougher approach on enforcement (in theory, the government can apply for an injunction to require a non-compliant organisation to publish a statement but no such action has yet been taken). 

Authored by Liam Naidoo and Kevin O'Connor.