Sustainability briefing | Governance & Trade Risk, Business Ethics & Human Rights |

UK Government responds to transparency in supply chains consultation

Overview

On 22 September 2020, the UK Government published its response to the Transparency in Supply Chains Consultation.

Key proposals include making reporting against the areas contained under Section 54(5) mandatory, introducing a single reporting deadline and considering further enforcement options for non-compliance. These proposals highlight the UK Government's stated commitment to "an ambitious package of measures to strengthen and future-proof the Modern Slavery Act’s transparency legislation".

"It’s not enough for government and businesses to simply say they don’t tolerate modern slavery. As we take stock of both the challenges faced and achievements made, we must match our words with actions."

Boris Johnson, Prime Minister

Overview

Background

Under Section 54 of the Modern Slavery Act ("MSA"), certain businesses are required to publish an annual MSA statement setting out the steps they take to prevent modern slavery in their business and their supply chains.

See our article on MSA Reporting During the COVID-19 period for further detail on the current reporting requirements and an overview of relevant Government guidance.

 

The Consultation

On 10 July 2019, the Government launched a consultation on Transparency in Supply Chains (the "Consultation") to seek views on proposed measures to strengthen transparency in supply chains reporting. Responses were gathered from a wide variety of organisations, including businesses, charities and public sector organisations, as well as from consumers, investors, NGOs, worker groups and other interested parties.

The Consultation included proposals on:

  • strengthening the content of modern slavery statements;
  • improving the transparency and enforcement of non-compliance; and
  • the extension of the modern slavery reporting requirements to the public sector.

On 22 September 2020, the Government published its response to the Consultation (the "Response"), which highlights how the crisis has brought attention to the hidden risks in global and local supply chains and the Government's commitment to "an ambitious package of measures to strengthen and future-proof the Modern Slavery Act’s transparency legislation". The Response also places these proposed changes within the wider context of the COVID-19 pandemic, flagging the negative impact of cancelled orders of goods and the deeply concerning allegations of exploitation in Leicester’s garment industry.

See our recent article on UK investigations into Modern Slavery and Supply Chain Exploitation for further detail and commentary on the recent Leicester manufacturing industry allegations.

The Government's key proposals are set out below.

Proposed Changes

Mandatory Reporting

The Government will make reporting against each of the six areas listed in Section 54(5) 2015 MSA mandatory. By way of refresher, these areas include reporting on an organisation's business structure and supply chains, related policies and due diligence processes, risk assessment, effectiveness and training.

If organisations have taken no steps within an area, they must state this clearly. They will also be encouraged to provide a reason for this. This requirement will necessitate legislative change to the MSA which the Government has stated will be introduced "when parliamentary time allows". For the time being reporting on these areas will remain optional, however the Home Office has stated that it will publish updated transparency in supply chains guidance to help organisations prepare for these changes.

Single Reporting Deadline

The Government intends to make legislative changes to introduce a single reporting deadline upon which all organisations must publish their MSA statement each year. Rather than basing the deadline on their relevant financial year end (which is the current requirement), organisations will be required to report on the same 12-month period (April to March) and will then have six months to prepare their MSA statement for the single reporting deadline of 30 September.

General Compliance

The Government has also stated that it will amend legislation to make the current requirements "clearer and increase accountability". Organisations are currently required to publish statements that are approved by the Board and signed by a Director, but it is often unclear from the statement whether these approvals have been obtained. The Government plans on amending the MSA to require MSA statements to state the date of Board (or equivalent) approval and Director (or equivalent) sign off.

Group MSA statements prepared on behalf of multiple entities will also be required to explicitly state which organisations are covered by such statements once these legislative changes have been made.

Online Government Registry

The Government has stated that it is currently developing an online registry for MSA statements and organisations will be encouraged to publish their MSA statements onto this platform as soon as it is launched (in addition to continuing to post such statements on their websites).

Enforcement

The Consultation highlighted the need for greater enforcement of the current reporting requirements under the MSA. However, specific views on the nature and level of civil penalties were mixed. In response, the Government has stated that it will consider enforcement options in line with the development of the single enforcement body for employment rights that the Department for Business, Energy & Industrial Strategy consulted on in 2019 and will issue a further update in due course.

Public Sector Organisations

Section 54 of the MSA will also be extended to public bodies with a budget threshold of £36 million or more, following the support to extend MSA reporting to public bodies by 98% of respondents to the Consultation. The Government will produce guidance to help establish which public bodies would be captured by this requirement. As with other measures requiring legislative change, the Response states that this will be introduced "when parliamentary time allows".

Key Takeaways

Although the changes described above will not take immediate effect, the direction of travel of the proposals and legislation in this area is now clear; organisations should act now to ensure that they have the right systems in place to be ready to implement the changes required. The Prime Minister has set a clear challenge for businesses in this area, stating in his forward that: "It’s not enough for government and businesses to simply say they don’t tolerate modern slavery. As we take stock of both the challenges faced and achievements made, we must match our words with actions."

For further assistance or queries relating to your MSA statement and related procedures, please do not hesitate to contact us using the details below.

Key Contacts

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