If the House of Lords and House of Commons Joint Committee on Human Rights report Human Rights and Business 2017: Promoting responsibility and ensuring accountability is taken up by the new UK Government, we are likely to see a renewed commitment to human rights activities and legislation during the next Parliament. Given that Theresa May is the odds on favourite to win the General Election and she introduced the Modern Slavery Act 2015 when she was Home Secretary, business should expect improvements to be made and more, not less, accountability. Whilst there is still a significant lack of awareness of the Modern Slavery Act, this looks set to change.
In March 2015, the Modern Slavery Act introduced a groundbreaking annual reporting requirement for applicable businesses and strengthened criminal penalties for serious human trafficking and modern slavery offences. Whilst recognising the Modern Slavery Act is still new and it is still too early to assess its full effect, some areas for improvement have already been identified in the Joint Committee on Human Rights report.
The Joint Committee considered two studies, which found that early modern slavery statements fail to meet basic requirements, such as being signed off by a company director. “35% of statements say nothing on the question of their risk assessment processes… Two-thirds do not identify priority risks, whether in terms of countries, supply chains or business areas.” They considered further analysis that identified that many companies are using remarkably similar statements. “Some of these even have the same KPIs [key performance indicators] and outline the same training actions…, suggesting that they may be [using] the same advisers or template.” So why is this happening? There is a view that the varying quality of modern slavery statements is a result of companies having too much discretion when it comes to what needs to be reported. Companies 'may' include a number of details in their statements, and the guidance from the Government is not prescriptive or obligatory. We do not expect this state of affairs to continue. Sarah Newton MP, Parliamentary Under-Secretary of State at the Home Office, confirmed to the Joint Committee: “The Prime Minister, the Home Secretary and I have made it very clear that we expect all businesses with a high turnover to produce a statement about what they are doing … Obviously, once we see the results from the whole first year and we see the statements, if we find that there are significant problems, including the one you are alluding to, we will take further action.”
The need for a central repository of statements
Why is this important? To quote Anti-Slavery International: “At present, it is not clear which businesses… are covered by the provision. Without clarity on who is required to report, the public, investors, parliamentarians and the Government itself cannot effectively monitor compliance with the Modern Slavery Act requirements.”
Sarah Newton MP also confirmed that the Government would be doing further work in this regard: “I hope that by the end of the year you will be very pleased with the positive steps that we have taken.”
Support for the Modern Slavery (Transparency in Supply Chains) Bill
On 23 May 2016 Baroness Young of Hornsey introduced a Private Member’s Bill, The Modern Slavery (Transparency in Supply Chains) Bill which seeks to amend the Modern Slavery Act to:
- include public bodies in the transparency in supply chains requirements of the Modern Slavery Act;
- require companies and public bodies to publish their statements in their company reports, lodging them with appropriate bodies such as Companies House or the Charity Commission;
- require the Secretary of State to compile a list of companies that should be compliant with transparency in supply chains; and
- prevent public bodies from procuring services from companies that have not conducted due diligence.
The Joint Committee report concluded that the Government should facilitate the passage of Baroness Young of Hornsey’s Bill. “If that bill fails to be enacted in the present parliamentary session, we recommend that the Government bring forward its own legislation in the next session to achieve a similar objective.”
Increasing the Modern Slavery Act’s scope
The Act has been criticised for focusing only on transparency in relation to modern slavery, without requiring companies to address the many other human rights issues that may arise in their supply chains. The Joint Committee concluded that the Government “should bring forward legislation to impose a duty on all companies to prevent human rights abuses, as well as an offence of failure to prevent human rights abuses for all companies, including parent companies, along the lines of the relevant provisions of the Bribery Act 2010”. The Bribery Act 2010 has an offence of failure to prevent bribery for all companies, including parent companies. The Joint Committee’s report highlights that “in the last five years, the Serious Fraud Office has successfully prosecuted three British companies and 10 individuals, nine of whom were British citizens, for bribery or corruption overseas”.
If this proposed improvement was made, then it would require all companies to put in place effective human rights due diligence processes both for their subsidiaries and across their whole supply chain. Company directors would be best advised to take special note because we would expect civil (as well as criminal) remedies against the parent company and other companies when abuses do occur. To defend such an offence, the existence of effective human rights due diligence would be critical, which means that those who are still not aware of the Modern Slavery Act would have a steep learning curve.
So while the focus of the General Election is “Brexit”, if the Conservatives win, then business should anticipate the Government introducing legislative proposals to make reporting on due diligence for all other relevant human rights, not just the prohibition of modern slavery, compulsory, perhaps with a monitoring mechanism and an enforcement procedure. Indeed, will we see the next Government adopt the Joint Committee’s conclusion: “We encourage the Government to use the opportunity of Brexit to set higher human rights standards in future trade agreements, to include workable provisions on enforcement, and to undertake human rights impact assessments before agreeing trade agreements”? These are interesting times for those monitoring new business and human rights improvements.