Modern slavery statements – a reminder and proposals for reform

1 May 2019 | Applicable law: England and Wales

The government has released the final report from its independent review into the Modern Slavery Act 2015 (the 'Act'), which was commissioned after the UK Annual Report on Modern Slavery was published in October 2018.

The review focused on four areas: transparency in supply chains, the role of the Independent Anti-Slavery Commissioner, the Act's legal application, and the safeguarding of child victims of Modern Slavery.

This article focuses in particular on the transparency in supply chains provisions, covered by section 54 of the Act, can require some charities to publish a "slavery and human trafficking statement" and other relevant aspects of the Act.

Modern slavery statements – a reminder

The transparency in supply chains provisions apply to organisations that meet the following four criteria:

  • A commercial organisation – this is widely defined as a body corporate or partnership and means that charitable companies, charitable incorporated organisations and charitable community benefit societies are included (charitable trusts and charitable unincorporated associations are not included);

  • That is carrying on a business in the UK – this would be any commercial activity, irrespective of the purpose for which the profits are made (for example, selling donated goods to fundraise);

  • That supplies goods and services – this requirement is distinct from the requirement to carry on a business and the supply of goods and services may be the work the charity does to fulfil its charitable objects (for example, a disaster relief charity may supply food and healthcare);

  • And has a total turnover of not less than £36 million – this is the total income of the charity and its subsidiaries which is derived from any charitable activity associated with the provision of goods and services, including performance-related grants, funding for the provision of goods and services and income from fundraising events (income from pure donations, legacies and investments is not typically included).

A charity that fulfils these requirements must publish a modern slavery statement stating what steps it has taken during the financial year to address modern slavery risks in its supply chains. If no such steps have been taken, the statement must say that. The statement must be approved by the board of trustees, signed by a trustee, and published in a prominent position on the charity's website.

There are currently no criminal sanctions for failing to produce a statement and the most pressing concern for charities is likely to be the reputational damage they may face for failing to address issues of modern slavery. However, it is important to note that the Home Office can apply for an injunction to force an organisation to publish a statement and failure to comply can result in a potentially unlimited fine.

If charity trustees considers that section 54 does not apply to the charity, trustees should document their decision and reasoning carefully and consider taking other steps such as implementing a modern slavery policy or reviewing staff training and reporting requirements.

Issues with compliance

As noted in our previous coverage, the 2018 UK Annual Report on Modern Slavery, published October 2018, raised two concerns in relation to compliance with section 54:

  • Organisations within the scope of the legislation are not publishing the required statements; and
  • Many statements that have been published are of poor quality

Following the report, the Home Office wrote to 17,000 businesses informing them that they must either publish a statement or improve the quality of the statement they have published. We know that many charities who are not in fact caught by the Act did receive these letters.

The Home Office also updated its guidance document, "Transparency in supply chains: a practical guide", to require publication "at most within six months of the financial year end" and to encourage organisations to keep historic statements online.

Proposals for reform: the independent review of the Modern Slavery Act

The independent review published an interim report in January 2019 which was incorporated into May's final report and made a number of proposals to improve compliance with section 54. The review also addressed the concern that many organisations see the Modern Slavery Statement as a "tick-box" exercise and not a serious regulatory and governance obligation. The Review's proposals included:

  • Clarifying which organisations fall within the scope of section 54 – the government should publish a list of the organisations which it considers to meet the four criteria listed above, but this list should not be definitive and would not take away the responsibility of organisations to assess whether they fit the criteria themselves;
  • Improving the quality of statements – organisations should not be allowed to report that they have taken 'no steps' to address modern slavery and the six topics that organisations are currently advised to include in their statement should be mandatory;
  • Increasing the importance of modern slavery reporting – the statement should be included in companies' annual reports and a board member should be nominated to be accountable for producing the statement
  • Monitoring compliance – the government should create an online repository for statements and introduce a system of warnings, fines, court summons and director disqualifications for failure to publish a statement
  • Extending the requirements – the obligation to produce a statement should be extended to the public sector to include, for example, local authorities, NHS trusts and police forces (many of which have already voluntarily published Modern Slavery Statements).

The extent to which these proposals will be implemented remains to be seen.

In the meantime, if your charity has any concerns about complying with the Modern Slavery Act or would like assistance in relation to preparing a Modern Slavery Statement, please contact a member of the Charities team.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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