Modern Slavery Act: an emerging picture of non-compliance

A new report from the Office of the Independent Anti-Slavery Commissioner and the University of Nottingham’s Rights Lab says that less than a fifth of U.K. agricultural companies comply with the Modern Slavery Act.

Section 54—“Agriculture and Modern Slavery Act Reporting: Poor Performance Despite High Risks”—of the Modern Slavery Act requires agricultural businesses with a turnover of £36 million (U.S. $45 million) or more to publish an annual modern slavery statement that explains what steps, if any, they are taking to address modern slavery within their operations and supply chains. Statements must also be signed by a director, approved by the board, and linked from the company’s website.

According to the report, by June 2017, just over a year after the Act’s requirements came in to force, only 50 percent of covered agricultural companies had produced a modern slavery statement, and only 38 percent of these statements complied with all three requirements. This gives an overall compliance rate for the sector of just 19 percent. The report adds that “the content quality across the statements was low” and it remains so. By June 2018, 67 percent of agricultural companies had produced a statement, but many of these were from 2017 and therefore out of date, giving a figure of only 44 percent with an up-to-date statement. There has also been little improvement in terms of the quality of statements. The report notes that “new engagers have not learned from the response of the earlier adopters, producing below-average quality statements.” Only a quarter of companies had revisited their statements after a year, and “only 9 percent of companies increased the quality of their statements.” Where companies did improve their 2017 statements it was generally because they had revised their statements a year later.

"This report effectively highlights that there is much more for many U.K. agricultural businesses still to do in their Modern Slavery Act reporting requirements. This low level of compliance is by no means exclusive to agriculture but indicative of a much wider issue. Increased awareness and incentive to comply is needed across the board in all U.K. industry sectors. Stronger Together recently signed a joint statement led by the Independent Anti-Slavery Commissioner calling for the U.K. Government to establish a central and public database for MSA statements. This would be one key step in helping to drive compliance and a race to the top, increasing recognition and visibility for those who are leading, and those who are lagging."
David Camp, Founder, Stronger Together

The report describes these findings as “concerning,” especially as the agricultural sector is a high-risk sector. The results also support the Independent Anti-Slavery Commissioner’s conclusion earlier in 2018 that “modern slavery statements were patchy in quality, with some companies failing to produce them at all and others demonstrating little meaningful engagement with the issues.” The report concludes that: “the poor quality of many statements indicates two issues: firstly, a lack of a sense of obligation to adhere to the Act’s requirements in Section 54, which points to the need for greater government enforcement of this provision, and secondly, a tactical response to the Act and the issue of modern slavery, demonstrated through non-substantive responses, a box-ticking attitude and minimal compliance.”

It’s not just the agricultural sector that appears to be in poor compliance, the Independent Anti-slavery Commissioner has been releasing statements pretty regularly about companies that are out of compliance with the Modern Slavery Act, both specifically—it has written letters to a number of FTSE 100 companies that are out of compliance with the law—and by industry.

NGO Stronger Together said that one of the many issues it has observed is a continuing lack of awareness. There are companies that can be described as at the forefront of awareness, which have their risks and actions well documented and well reported. But it has heard anecdotally from some of these businesses that many of their competitors do not understand what encompasses modern slavery.

Such a lack of awareness within companies about the nature and existence of modern slavery would seem to require a willful ignoring of current events and newsfeeds. But, even so, surely the requirements of the Act are relatively straightforward in terms of making a statement about what the risks are, saying what steps have been taken and how these risks are being mitigated. Having the board sign off on the statement and posting it to the company’s webpage would seem to be administrative issues, nevertheless, the report notes that it was extremely difficult to find those statements that have been made even though they have been posted to a company’s Website. In some cases, a simple search of the website does not reveal the whereabouts of a statement that had otherwise been published. If there is a lack of understanding as to what modern slavery comprises, then it is not surprising that many companies find it difficult to make the statements required by the Act. But resources published by such bodies as Stronger2gether should make compliance much easier.

Stonger Together pointed to one of the issues that encourages better compliance, which is that those companies with a strong sense of brand also have a strong sense of reputational risk and they face the public in commercial transactions every day, so they are very aware of the dangers of being exposed by the discovery of modern slavery in their supply chains. This means that ‘branded’ sectors, like the fashion industry or large retailers, are familiar with the risks and are managing it carefully. But, it adds, there are lots of other industries it works with, such as the construction industry, for example, that are much more out of public sight, and therefore not receiving the same kind of public pressure. Stronger2gether is one of the many organisations that added its signature to the U.K. Independent Anti-slavery Commissioner letter calling for a central database of modern slavery statements. If this register were in place, it would make it very clear which companies had made a statement, what it was, and what quality the statement was, and which were out of compliance. Unfortunately, there is no compulsory requirement to comply with the Act and there is no penalty for non-compliance. Without either a carrot or a stick, compliance is unlikely to improve in the near future.

Key findings

Only 50 percent of agricultural companies that fall within scope of the Modern Slavery Act’s corporate reporting requirement had published a modern slavery statement one year after the requirements came into force.
Only 38 percent of these statements were compliant with the requirements of the law, meaning overall only 19 percent of the agricultural sector is abiding by the terms of the Modern Slavery Act.
The quality of content in agricultural companies’ modern slavery statements was low (scoring an average of 12.9 out of 30) and there was little improvement from 2017 to 2018.
Poor statements showed a tick-box approach, providing only generic comments about zero tolerance to modern slavery with no indication of actions taken to address the issue.
40 percent of companies did not describe any form of risk appraisal nor did they identify areas of high risk.
Nearly 80 percent of statements included nothing regarding the effectiveness of their steps taken to address slavery, despite government guidance advising this.
42 percent of statements gave little or no information about any training put in place.
The agricultural sector’s low compliance rate is found to be in line with that of other high risk sectors (food processing and packaging; mining; hotels), suggesting poor compliance rates are the norm.
This compares with much higher rates of compliance for the new Gender Pay Gap reporting rules (87 percent on day one in the first year of reporting).

The report mentions other sectors which are low on compliance: food processing and packaging, mining, and hotels, which are also high-risk sectors. One element that may make progress on compliance in the construction sector, for example, another high-risk sector, better than in some other industries is that the industry body, the Chartered Institute of Building, is creating a climate of compliance by working with groups like Stronger Together to create training and resources for compliance officers so that they can come into compliance with the Act.

Stronger Together also noted that there was a growing concern over modern slavery within the travel industry, and that it was working some companies on the issue and seeing some improvement. It noted that these two key elements, awareness and compliance, go hand-in-hand.

It is tempting to ask what was the point of enacting the Modern Slavery Act if there is no requirement to comply. Undoubtedly it was a revolutionary piece of legislation, progressing the anti-slavery agenda and focusing, at the minimum, on raising awareness. It has inspired similar legislation in France, the Netherlands and Australia. Indeed, it was the U.K. law that was the model for the recent Australian legislation, which looked at what was working and what wasn’t working under the British law. While this did inspire the creation of a public register where companies were required to post their compliance statements from the start, the Australian law also has no penalty for non-compliance. In a move that signals awareness of the lack of compliance, the U.K. government has just announced a review of the Modern Slavery Act. While the announcement does not go into details as to potential actions, it does say that a: “key focus of the review will be looking at what more can be done to strengthen this legislation and minimise the risk that the goods and services available in the UK are produced through forced labour and slavery.”

While it might be incorrect to suggest that compliance with the Act appears to be too onerous for many companies, if companies do not have a proper understanding of what modern slavery is, then being able to describe the risks they might face does become extremely difficult. Nevertheless, compliance simply means a statement that is signed by a director, approved by the board and linked from a homepage. The failure to report would seem to be a failure to believe the risks are relevant, that they, in fact, exist, coupled failure to know where to start and a lack of resources. 

While there is no penalty for failing to comply, the legislation does provide for the government to take out an injunction against a company failing to comply. The government has not, however, resorted to this and has, as one commentator put it, “repeatedly demonstrated unwillingness to do so.” At the moment it would seem that it prefers the carrot to the stick. There can also be other, non-legal consequences. For example, companies higher up the supply chain which are more aware of the issue may not want to work with suppliers that are out of compliance. In addition, those with responsibility to award government contracts are checking the compliance of companies bidding for work, so there may also be commercial consequences.

Without the threat of penalties, however, it would seem that the statement of the sponsor of the Australian bill that: “Over time, we believe this bill will foster a ‘race to the top’ culture that will ensure Australia is a regional and world leader in tackling modern slavery in supply chains” might seem overly optimistic.