Almost half of FTSE 100 firms fail to comply with the UK Modern Slavery Act

LexisNexis Legal & Professional, Business Insight Solutions, 30 November 2016

This feature length article highlights findings from three new reports, showing the progress by companies complying with the UK Modern Slavery Act. With almost half of FTSE companies currently not complying, and 77% of companies that participated in a recent research study agreeing there is a likelihood of modern slavery occurring in their supply chains - there is still much to do.

The Transparency in Supply Chains clause of the UK Modern Slavery Act has moved modern slavery up the agenda of companies both in the UK and across the world. The Act came into force on 29th October 2015. It requires commercial organisations operating in the UK, with an annual turnover of £36 million or more, to prepare an annual statement on the steps the company has taken, if any, to ensure slavery and human trafficking is not happening in its own business and supply chains.

Almost half of FTSE 100 companies do not comply

Some companies are showing leadership regarding deterring and disrupting modern slavery, but others have a long way to go as the analysis of company statements under the UK Modern Slavery Act by the Business and Human Rights Resource Centre (BHRRC) in "FTSE 100 at the starting line" shows.

The report states that only 56% (15 of the 27 analysed) company statements fully and explicitly comply with the minimum requirements of the Act. One statement did not meet any of the minimum requirements, which are:

  • the statement must be approved at top level in the business (i.e. by the board of directors or equivalent management body);
  • the statement must be signed by a director (or equivalent); and
  • a link to the statement must be published on an organisation's website with a link in a prominent place on the homepage.

Regarding the content of the FTSE100 statements, BHRRC found that:

  • the highest performing companies (M&S and SABMiller) provided details on their risks, detail instances of modern slavery and explain how these have been addressed;
  • most companies provide very little information on the structure and complexity of their supply chains;
  • even less information is available on specific risks (type/sector/location) in the supply chain;
  • efforts to measure the company's effectiveness in ensuring that slavery and human trafficking is not taking place in business or supply chains was the lowest scoring category. 56% of companies provided no meaningful information on how they measure their effectiveness at combatting slavery and only 7% reported developing KPIs.

Phil Bloomer, executive director of Business & Human Rights Resource Centre said:

"This is the first year of reporting, so no-one expects perfection. But it's disappointing how small the leadership group is. These leading companies deserve credit: they demonstrate the commercial viability of assessing risk, taking robust action and ensuring remedy. Their care also highlights the poor performance and reporting which seems endemic in the larger group. No company wants the scourge of slavery in its operations and supply chains, so why are too many well-resourced FTSE 100 companies apparently doing so little? There are no excuses for inaction on slavery. We hope the next group of FTSE 100 companies to report will leap-frog these, and emulate the better practice of the leaders."

Words, but no action

At the end of October, Ergon Associates and Historic Futures also published a report on the impact of the Modern Slavery Act in its first year. In "Has the Modern Slavery Act had an impact on your business?" they report on the findings from the 34 company responses to their survey from a range of UK and internationally headquartered companies of varied size and sector. Their key findings were:

  • regarding understanding and awareness of modern slavery issues, the Act has catalysed internal dialogue, including at director level;
  • in relation to planning and engagement, the Act has led to an increased focus on policy development, risk assessment and monitoring of modern slavery. However, less than 50% of the respondents to the survey have been able to move to taking more definitive action to address their identified risks;
  • in terms of data collection and measurement - information about supply chains and supply chain risk is currently collected in an ad hoc way;
  • most companies have yet to put in place mitigation and remedial action plans related to modern slavery.

Brave businesses

77% of companies participating in recent research by the Ethical Trading Initiative and Hult International Business School think there is a likelihood of modern slavery occurring in their supply chains, as reported in "Corporate leadership on modern slavery". The research was carried out amongst 71 prominent brands and retailers perceived as leaders regarding ethical trade and tackling modern slavery.

Apart from the indication of the scale of the issue, this shows a shift in business behaviour. Only a few years ago many companies would not speak about modern slavery, let alone about it occurring in their supply chains. Now, more and more companies are brave enough to have the conversation. The report gives insight into how they have turned the conversations into actions.

Quintin Lake, co-author of the report and Research Fellow at the Ashridge Centre for Business and Sustainability at Hult International Business School said, "We wanted to know what 'good' looks like for companies seeking to address modern slavery, to help those who are just starting to look at the issues to make faster progress. Though there is much more work to do, it is encouraging to see the steps leading businesses are taking."

The fact that three reports were published by a range of stakeholders including an academic institution, an alliance of companies, trade unions and voluntary organisations, consultancy businesses and a non-profit organisation following the first UK Modern Slavery Act anniversary, analysing company's efforts with regard to tackling modern slavery, shows that business' performance is the public eye.

It makes it clear that the Modern Slavery Act has already made a real impact. But also, that the Modern Slavery Act is a tool in the box; change won't come from writing statements but from the robust action plans which should be behind the statements.