The research examines reporting practice in modern slavery statements (as required under Section 54 of the Modern Slavery Act 2015 (MSA)). The report also investigates the extent to which companies are reporting on modern slavery in their annual reports as part of the separate requirement to describe how opportunities and risks to the success of the business have been considered and addressed, looking in particular at Section 172 statements.
The evidence is based on the reporting practices of a sample of 100 companies comprising FTSE 100, FTSE 250, and Small Caps. The MSA requires organisations with a turnover of £36 million or more to provide an annual statement on the steps that they are taking to ensure that modern slavery is not taking place in any parts of their business or supply chains. The accompanying statutory guidance recommends that disclosure covers the following six reporting categories: policies, structures, due diligence, risk assessment, training, and effectiveness.
The research has found that around one in ten companies did not provide a modern slavery statement at all, and therefore failed to comply with the Section 54 reporting requirement. Where companies did comply, only one third of modern slavery statements were considered clear and easy to read. The majority of statements were fragmented, lacking a clear focus and narrative, or were unduly complicated. Less than half of companies provided a clear and comprehensive discussion of modern slavery concerns in the context of the organisational structure, operating and supply chains. Disclosure therefore often failed to provide information on how policies operated in practice, or how their effectiveness was measured. In addition, the vast majority of modern slavery statements were wholly backward-looking, with only a minority clearly identifying emerging issues or a long-term strategy.
The assessment of disclosures in annual reports suggests that many companies appear not to view human rights issues in their workforce and supply chain as a principal source of risk for their business. For some companies, the report suggests that this lack of concern may reflect strong and positive relationships with trusted suppliers coupled with relatively short supply chains that are easy to manage. For many others, however, it is suggested that the lack of disclosure might raise questions over whether sufficient attention is being paid to such issues.
In terms of the connection between the modern slavery statement and annual reports, only 14% of annual reports provided a direct link in the annual report to the modern slavery statement. The FRC report suggests that this lack of appropriate cross-referencing not only reduces visibility and transparency on modern slavery issues but undermines efforts to address the risks.
The FRC hopes that this report prompts companies to consider their supply chain and the role that the board has in providing oversight to ensure that effective policies are in place which will drive real action to address this important issue. They are keen to see future reporting demonstrating how assessment of the effectiveness of these policies has been undertaken.
The press release and the full report are available on the FRC website.