One in ten companies do not provide modern slavery statements despite it being a legal requirement and, where companies are compliant, only a third of statements are considered clear and easy to read.
The Financial Reporting Council (FRC), in conjunction with the UK Anti-Slavery Commissioner and Lancaster University, has identified significant shortcomings in the quality of companies’ compliance with modern slavery reporting requirements.
Researchers looked at a sample of 100 major companies’ modern slavery statements and their strategic and governance reports. They found the majority of modern slavery statements reviewed were fragmented, lacked a clear focus and narrative, and often contained “boilerplate” content.
Section 54 of the Modern Slavery Act 2015 requires businesses with a turnover of £36 million or more to write an annual modern slavery and human trafficking statement, setting out the steps that they are taking to address the risk of slavery in their operations and supply chains.
Dame Sara Thornton, the Independent Anti-Slavery Commissioner, said: “With an estimated 16 million modern slavery victims working in the private sector globally, businesses carry significant material and reputational risk of modern slavery being found somewhere in their supply chains.
It is unacceptable that many companies did not produce a modern slavery statement and that modern slavery considerations appear to not be a mainstream concern for many boardrooms” – Sir Jon Thompson, FRC
“Modern slavery is perpetrated by organised criminals and cynical opportunists, however irresponsible commercial practices and poor governance can also create the conditions that allow exploitation to thrive. Companies have a responsibility to demonstrate the steps they are taking to minimise modern slavery risks and to show strong leadership in this area.”
The review into modern slavery statements compliance suggests that too many companies appear not to view human rights issues in their workforce and supply chain as a risk for their business, and that modern slavery issues are not a mainstream concern for many boardrooms.
Key performance indicators measuring the effectiveness of companies’ steps to minimise modern slavery risks were particularly poor in their modern slavery statements; only a quarter disclosed KPIs and a mere 12% said they had made informed decisions based on those KPIs.
Modern slavery statements compliance
FRC chief executive Sir Jon Thompson said: “High-quality reporting is vital to shining a light on how seriously businesses take social issues in their day-to-day operations.
“It is therefore unacceptable that many companies did not produce a modern slavery statement and that modern slavery considerations appear to not be a mainstream concern for many boardrooms. Looking ahead companies must clearly set out the actions they are taking to deal with modern day slavery in all aspects of their operations.”
In the annual reports of the 100 companies sampled, the FRC said the reporting on modern slavery issues was surprisingly minimal. Although the UK Corporate Governance Code does not include specific provision on modern slavery or human rights issues, a number of the its principles and provisions cover the board’s ability to assess and manage the company’s risks and to consider the interests of wider stakeholders in making key decisions.
Professor Steve Young, the lead researcher on the report from Lancaster University Management School, said: “Our review of corporate reporting practice suggests that these risks may be passing under the radar in some companies, while others seem to be adopting a compliance-oriented approach with processes and disclosures satisfying regulatory requirements rather than seeking to understand and address fundamental concerns.
“At the other end of the spectrum, however, we see a number of companies that are leading the way in terms of their thinking and transparency. We hope our evidence helps to promote best practice and illustrate the stakeholder benefits that are possible when boards prioritise the issue.”
Last year, the Home Office launched a central registry for modern slavery statements in a bid to improve transparency and invite scrutiny over what organisations are doing to prevent slavery in their supply chains.