Following recent US regulations aimed at addressing forced labour issues in China, the UK government has published a series of proposed amendments to strengthen and expand the transparency in supply chains provisions of the Modern Slavery Act 2015 (“MSA”). With the enactment of the MSA, the United Kingdom was the first country to require large businesses to publicly report the steps they were taking to prevent modern slavery in their operations – specifically, their supply chains.
The current transparency in supply chains provisions of the MSA require commercial organisations that carry on all or part of a business in the United Kingdom and have a total annual turnover of £36 million or more to report on the steps that they have taken during the financial year to ensure that slavery and human trafficking are not taking place in their business or supply chains.
The proposed amendments, if adopted, would beef up that reporting requirement by requiring subject commercial organisations’ modern slavery statements to include provisions on certain key topics, including due diligence and risk assessment measures to encourage openness about the steps those commercial organisations are taking to operate responsibly.
In another world first, the proposed amendments seek to impose the same reporting requirements on public bodies that have budgets of £36 million or more. This proposed amendment underlines the UK government’s commitment to using the UK public sector’s £250 billion spending power to make sure that public bodies, like private businesses, operate responsibly. In a statement about the amendments, Safeguarding Minister Victoria Atkins said, “[w]e expect businesses and public bodies to be open about their risks, including where they have found instances of exploitation and to demonstrate how they are taking targeted and sustained action to tackle modern slavery.”
All covered organisations will be required to publish their modern slavery statements on a new digital government reporting service that will be launched in early 2021. This new platform is designed to improve the transparency of steps businesses and public bodies are taking to combat modern slavery. By making this information publicly available, the UK government’s goal is to empower consumers and investors to hold organisations accountable for how they’re addressing modern slavery risks.
The proposed amendments to the MSA were published as part of the UK government’s response to a consultation on transparency in supply chains, which received over 700 responses from industry, public bodies, investors, consumers, and civil society groups. The UK government also has committed to creating a single enforcement body for employment rights that protects vulnerable workers and maintains a level playing field for law-abiding employers, as well as mulling over civil penalty options for violations of the MSA.
Many of the amendments proposed by the UK government will require legislative changes to be made to the transparency in supply chains provisions of the MSA. While the UK government has committed to making these changes “when parliamentary time allows,” no specific legislative timetable has been set. Given the current congestion in the legislative timetable due to Brexit, it is unclear when the proposed amendments are likely to become law.
Brexit also makes it unlikely that a legislative proposal currently being developed by the European Commission to require EU companies to conduct mandatory human rights and environmental due diligence on their operations and global supply chains will apply to UK-based companies (unless the UK government agrees otherwise). We discussed this development in greater detail in a previous Client Alert. Although the UK government’s proposed amendments to the transparency in supply chains provisions of the MSA ultimately may share similarities with the legislation being developed by the European Commission, it does not appear that the UK currently intends to remain exactly aligned with EU law in this area.
The UK’s continuing efforts to root out and eradicate modern slavery – including the increased threat of harsher public scrutiny and civil penalties – show that organisations subject to the transparency in supply chains provisions of the MSA need to dedicate serious thought and resources to these issues. Most obviously, companies operating in, sourcing from, or expanding into countries with high modern slavery risks will need to adequately vet their vendors and suppliers in those locations. But beyond that, investors also will need to be familiar with and on the look out for these issues when deciding whether to invest in large companies located or operating in the UK. Luckily, the increasing awareness of and public resources available on this issue, including the UK government’s soon-to-be-launched digital platform, should help businesses and investors develop and implement appropriate modern slavery risk management strategies.