Modern Slavery Act 2015: UK select committee calls for urgent reforms

A House of Lords select committee has published a report evaluating the impact and effectiveness of the Modern Slavery Act (MSA) 2015 following the UK Parliament's request for a review.

The committee's report, "The Modern Slavery Act 2015: becoming world-leading again", published on 16 October is generally critical of the existing legislation, with the committee stating that the UK's response to modern slavery "has not kept up with the advances of other nations".

The House of Lords Select Committee on the Modern Slavery Act 2015 has highlighted areas where the UK has fallen behind in its approach to tackling modern slavery and offers a series of recommendations for improvement.

Modern Slavery Act 2015

The MSA aims to combat modern slavery and human trafficking by introducing measures intended to enhance the protection of victims and the prosecution of offenders. It imposes certain reporting requirements on businesses. Under section 54, businesses that supply goods or services, undertake business in the UK and turnover £36 million or more, must publish an annual “transparency in supply chain” (TISC) statement, detailing the steps they have taken to ensure modern slavery is not occurring in their business or supply chains. However, the obligation can be satisfied by a company stating that it has taken no such steps, if that is in fact the case.

When the MSA was introduced in the UK, the provisions on supply chain reporting, which followed a similar reporting regime introduced in California, were considered world leading. However, in the years since, several countries have gone beyond transparency requirements by introducing legislation requiring businesses to take proactive actions to assess and mitigate adverse impacts in their businesses and supply chains. For example the German Supply Chain Act, and the incoming EU Corporate Sustainability Due Diligence Directive obligations.

Inconsistent statements and accountability

The report criticised section 54 of the MSA, describing modern slavery statements made by organisations as "inconsistent", with the lack of mandated requirements for the content of the statements content making it "difficult for companies to be held accountable for their transparency."

During the preparation of the report, the committee heard analysis indicating that section 54 of the MSA "has not been effective in preventing modern slavery" and that modern slavery cases are "continuing to arise within supply chains of companies that have complied with reporting obligations". The report also stated that "the incentives are not there" for companies falling below the mandatory reporting threshold to report on modern slavery commitments.

On the issue of sanctions for non-compliance with section 54, the committee heard evidence from both sides of the debate on whether directors should incur personal liability for non-compliance. The committee recommended that the government should introduce "proportionate sanctions for organisations that do not comply with the supply chain requirements" but did not specify whether these sanctions should include director liability.

Public procurement

Regarding public procurement, the committee expressed concern that section 54 of the MSA is currently only applicable to commercial organisations and not public bodies. The report mentions specifically a review of NHS supply chains carried out in 2023, which found that 21% of the 1300 suppliers examined "had a high risk of forced labour". It described the public sector as taking "a passive approach, by simply stating conditions in contracts and not taking any further responsibility" for modern slavery in its supply chains.

The report commented that a passive approach is "insufficient" and recommended that "companies should be encouraged to be transparent and address modern slavery where it is found, rather than fear debarment if they discover it." It added that, to facilitate this, the government should meet the same standards of responsibility that are required of private companies.

Committee's primary recommendations

The committee set out primary recommendations to the government for supply chains and corporate reporting, including:

• Make publication of statements on the modern slavery registry mandatory, setting out the required topics for each statement to cover, including a description of how the organisation has assessed the effectiveness of its actions.
• Increase awareness amongst all companies about supply chains and publish standardised and accessible guidance for compliance with section 54 of the MSA.
• Introduce proportionate sanctions for organisations that do not comply with supply chain requirements.
• Clarify responsibility for enforcement in its modern slavery strategy.
• Improve the implementation of its guidelines so that compliance is proactive rather than passive, encouraging companies to report modern slavery if they come across it.
• Extend the section 54 statement obligation to all bodies in the public sector with an annual budget equivalent to that of the commercial organisations to which it applies.
• Introduce legislation requiring companies meeting the threshold to undertake modern-slavery due diligence in their supply chains and to take reasonable steps to address problems. In formulating this legislation, it was noted that due consideration should be given to the ability of small and medium sized companies’ to meet any new requirements.
• Make UK due-diligence law compatible with equivalent standards being introduced elsewhere to make compliance easier for companies.
• Ensure any measures introduced for the private sector apply equally to the public sector, with careful consideration given to how to implement this principle in detail, such as determining the appropriate threshold for the public sector.
• Consider introducing import laws which ban goods being brought into the UK if they are produced by companies known to use forced labour (potentially a similar approach to the new Forced Labour Regulation being introduced in the EU), and ensure these laws are not targeted at particular countries.

The government has until 16 December to respond to the report.

Osborne Clarke comment

It has been a common sentiment for some years that the section 54 TISC statement obligation was a "soft touch" tick box. No proactive obligation to take any due diligence steps and no financial penalties for non-compliance led many to question whether section 54 was really having the intended impact.

This report appears to confirm it has not. However, many larger businesses in the UK are already working towards more proactive measures because they or their international customers are (or will soon be) subject to more substantive human-rights due diligence and reporting obligations in other markets.

Should the government choose to adopt the committee recommendations, this is likely to result in much greater alignment with the EU and other countries adopting a more proactive approach. Practically, it is going to mean more UK businesses needing to understand and be transparent about the modern slavery risks in their supply chains and to take meaningful actions to stop exploitation and mitigate risks when they find them within their supply chains.

This report aligns with a wider international shift in expectations on companies, which has been led by the EU. Companies are increasingly obligated to know about and mitigate the risks of exploitation, not only in their businesses but also in the supply chains that support them. Many more businesses will need to begin grappling with this challenge: understanding what obligations they (and their customers) are exposed to, mapping their supply chains, establishing the systems and procedures to enable information flow and appropriate oversight, building deeper relationships with suppliers, and imposing flow down contractual rights.

This is all potentially a lot of work for lots of businesses. In the "blizzard" of process, it will be important not to lose sight of the underlying risks and issues. Senior management should be discussing and agreeing from the outset how their company will tackle actual and potential modern slavery issues if they are identified in their supply chains. These situations throw up lots of practical and strategic challenges that can inhibit efforts to improve the position of those being exploited. The leadership and direction of senior management will be a key element in adopting an effective holistic approach to these supply chain issues.

Alice Bailey, a Trainee Solicitor with Osborne Clarke, contributed to this Insight.

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