The UK business landscape could be on the brink of significant regulatory changes as the findings of the parliamentary inquiry into the impact and effectiveness of the Modern Slavery Act become known in November.
Once a groundbreaking legislation on a global scale, the UK Modern Slavery Act has set the compliance bar in the country for nearly a decade. But it has also received a lot of criticism for lacking teeth and, in the years following its enactment, we’ve seen a number of more rigorous acts being introduced worldwide, with Canada being the most recent one. These global trends as well as a range of international developments related to modern slavery clearly emphasise the need for robust compliance programs and we could see the changes to the law bringing broader obligations and penalties.
A Shifting Legal Landscape
Since the enactment of the MSA, there have been significant shifts in the international legal landscape regarding human rights and the eradication of modern slavery. The introduction of the Australian Modern Slavery Act in 2018, the EU Corporate Sustainability Due Diligence Directive, and Canada’s new Modern Slavery Act, among others, represent a global push towards stricter regulations and enforcement mechanisms. These international developments highlight the need for the UK to reassess and strengthen its approach to modern slavery.
The House of Lords Select Committee on the Modern Slavery Act 2015 was appointed to conduct a parliamentary inquiry into the impact and effectiveness of the legislation.
Waning Business Efforts and Government Response
Despite the MSA's initial success in raising awareness and driving action, some recent data reveals a concerning trend: business efforts to tackle modern slavery could be stalling. According to the Chartered Institute of Procurement & Supply (CIPS), the number of modern slavery statements submitted to the government registry for 2022 has significantly decreased. As of February 2023, only 8,074 statements were submitted, compared to 15,019 in 2021, marking a 46% decline.
This drop in submissions suggests that many organizations are deprioritizing their obligations under the MSA. Analysis by CIPS found that 29% of organizations required to submit statements had not done so for 2022. This lack of engagement is alarming, given that section 54 of the MSA mandates businesses with a turnover of more than £36 million to publish annual statements outlining their efforts to combat slavery in their supply chains.
The failure to submit these statements not only undermines transparency but also allows instances of exploitation, abuse, and harm to remain unseen.
The Link Between Climate Change and Modern Slavery
The connection between climate change and modern slavery is becoming increasingly apparent. Catastrophic and unpredictable weather events, such as the 2022 floods in Pakistan, which left a third of the country under water and displaced an estimated eight million people, highlight how environmental disasters exacerbate vulnerabilities to exploitation. Forced migration due to adverse climate conditions accelerates the risk of modern slavery within supply chains. Procurement and supply professionals must dig deeper into their supply chains and go beyond surface-level data to address these evolving risks.
A revealing report underscores that addressing modern slavery in supply chains remains one of procurement’s greatest challenges. According to a recent Gartner report, 71% of sustainable procurement leaders consider tackling modern slavery a priority among the many competing ESG tasks. Investor pressure further amplifies the need for action. As new populations become vulnerable to exploitation, organizations must continuously evolve their understanding of where goods and raw materials originate from.
Insights from the EcoVadis Business Sustainability Index
The EcoVadis Business Sustainability Index provides valuable insights into the state of sustainability among UK suppliers. Analyzing more than 125,000 EcoVadis sustainability ratings from 2019 to 2023, the index highlights six key sustainability trends. A company's overall average is determined by its performance on 21 key criteria across four sustainability themes: Environment, Labor & Human Rights, Ethics, and Sustainable Procurement.
In terms of average scoring and progress since 2019, UK companies in the EcoVadis Network are among top performers with 93% of companies rated in 2023 scoring 45 or higher, indicating they are out of the high-medium risk range and into the "performance" range. This is very optimistic, however, the Index data also indicates that addressing operational labor and human rights challenges is a focus for companies in the early stages of their sustainability journey and companies with multiple ratings are improving, though not as quickly as on the other themes.
The Way Forward: Preparing for Stricter Regulations
Given the anticipated updates to the MSA and the global trend towards more rigorous modern slavery legislation, it is essential for businesses to stay ahead and prepare for these changes. Here are key steps companies can take:
- Collect Information for Reporting: Companies should start collecting detailed information on their business structure and approach to modern slavery. This includes documenting policies, procedures, and any actions taken to mitigate risks within their supply chains.
- Thorough Supply Chain Mapping and Risk Assessments: Strengthened monitoring and human rights due diligence are required. Companies should develop a comprehensive understanding of high-risk locations for forced and child labor within their supply chains. Detailed mapping and continuous risk assessments will help identify and address vulnerabilities.
- Improve Remedy and Mitigation Measures: There’s an opportunity to revise the existing approach to modern slavery and build policy consensus to demonstrate commitment and action in addressing human rights impacts. Enhancing remedy and mitigation strategies can ensure that victims receive the support they need and that companies act responsibly.
- Engage Internal Staff: Developing training and education programs for all employees on the risks of modern slavery is crucial. This ensures that staff at all levels understand the importance of the issue and their role in mitigating risks.
As the global landscape of human rights and modern slavery legislation continues to evolve, the UK must adapt and strengthen its approach. The upcoming findings from the House of Lords Select Committee could provide a roadmap for necessary reforms. In the meantime, businesses must renew their commitment to transparency and accountability.
Contact us to see how we can help your company or check out the UK Modern Slavery Snaphot.
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