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A third of UK firms failing to publish modern slavery statements

Over a third of UK businesses are ignoring their obligation to tackle modern slavery, according to the Chartered Institute of Procurement and Supply (CIPS).

The CIPS survey found that 34% of businesses required to publish a modern slavery statement have failed to do so. It also revealed that 37% of businesses’ supply chain professionals, who are required to deliver the statement, have not read the government guidance.

Cath Hill, CIPS director, said: “The results of our survey are shocking. Legislation that was designed to be world leading has fallen at the first hurdle: compliance.”

What are the requirements?

The Modern Slavery Act which came in to force in 2015, requires companies and partnerships supplying goods or services with global turnovers of £36 million and above, to report annually on policies, training, processes and the effectiveness of measures taken during the financial year to combat slavery and trafficking within operations and supply chains. Conversely, if no action has been taken, the company must state that no such steps have occurred.

This has to be done in an annual statement and made accessible on the organisation’s homepage. The Act applies irrespective of where an organisation is incorporated or headquartered. If a foreign organisation carries on a business or part of a business in the UK and meets the £36 million turnover threshold, it is likely that the Modern Slavery Act 2015 will apply.

Who is complying?

The CIPS found that UK businesses have fared better than international firms operating in the UK, with 71% compliance compared with only 40% from internationally-based businesses. The study also found that more UK supply chain managers have found slavery in their supply chains since the act, up from 6% to 10%.

Hill added: “While awareness of modern slavery is becoming more widespread, we need to ensure that outrage turns into action. Those working in the procurement and supply chain profession have told us that without stricter policies and harsher punishments for those who are not compliant with the act, little will change.”

Rather more worrying, however, is that there remains one third of businesses required by law to complete a ‘modern slavery statement’ who have failed to do so. This figure therefore remains high.

What are the consequences?

Companies that have good modern slavery statements can use it as an opportunity to emphasise their zero-tolerance approach on violations of anti-human trafficking and anti-modern slavery laws, which remains a major worldwide problem. Whilst only 10% of firms have found evidence of slavery in their supply chains according to the Chartered Institute of Procurement and Supply, the issue remains a live one. It is hoped that this number will continue to reduce.

Whilst there are no financial penalties for failing to complete the statement, it can have damaging effects on businesses who do not comply. Many tenders require evidence that businesses are taking this seriously and have such a statement, and it can be a PR disaster not to have one or to have one and not to adhere to it.

In addition, it is likely that pressure groups will target organisations in vulnerable sectors and subject them to reputational campaigns to force annual disclosure. Indeed we have seen this in the past with low-priced clothing stores targeted around their supply chains and forcing a change in this as a result of public pressure.

This has also happened in other areas where campaigns have been targeted at companies failing to pay, for example, the National Living Wage or for alleged abuse of matters such as zero hours contracts, etc. This can then in turn have a knock-on effect on the finances, and in some cases (irreparably) damage reputations.

It is therefore increasingly important for in-house counsel and business leaders to reassess their position and begin to consider the steps they must take in order to produce good modern slavery statements and, ultimately, demonstrate that they are taking the matter seriously, complying with the guidance and beginning to address any slavery related issues within their business and supply chains.

Sybille Steiner - Partner

Published: 13 October 2017

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