Campaigners will be concerned this week by the state of corporate efforts to stamp out modern slavery. New research reveals many anti-slavery reports are falling short of required standards.
A report by Lancaster University for the Financial Reporting Council (FRC) and the UK anti-slavery commissioner shows one in ten companies fail to provide a modern slavery statement, despite it being a legal requirement.
The majority of statements were “fragmented” and lacking a “clear focus and narrative”. Only a quarter of the 100 reports examined contained any form of key performance indicator (KPI), while only 12% could say they had made decisions based on their KPIs. Just 8% say their KPIs are developed alongside experts.
Perhaps more surprising is the researchers’ conclusion that few companies regard modern slavery as important enough for inclusion in their section 172 reports—disclosures that detail how directors have fulfilled their duties.
Just 13% of companies mention forced labour and slavery issues in their section 172 documents; 9% mention the subject in the context of supplier relationships; another 9% report engagement with suppliers on slavery questions; and a mere 1% mention modern slavery KPIs.
Corporate responsibility
The findings have prompted disappointment among regulators and researchers. Sir Jon Thompson, chief executive of the FRC, describes the result as “unacceptable”. “Looking ahead companies must clearly set out the actions they are taking to deal with modern-day slavery in all aspects of their operations,” he says.
Meanwhile, Dame Sara Thornton, the UK anti-slavery commissioner, stresses the role of corporates in combating abuses by “organised criminals and cynical opportunists”.
“Companies have a responsibility to demonstrate the steps they are taking to minimise modern slavery risks and to show strong leadership in this area,” she says.
Reporting on modern slavery was introduced in 2015 and requires companies to disclose an annual statement, signed off at board level, on an organisation’s structure and its supply chains; the due diligence procedures used to check on slavery and human trafficking; risk assessments; and an organisation’s “effectiveness” in ensuring slavery and trafficking is not embedded in their supply chain.
Hailed as groundbreaking at the time, the statements should be a fixture of the annual reporting cycle for large companies. Most companies (46%) offered their best reporting on their anti-slavery policies, followed by the structure of their business, (42%). But the poorest showing in reports regarded “effectiveness”. Researchers conclude just 17% of the reports examined served up sufficient disclosure on this topic.
Some decent disclosures were found by the research team, but the final conclusion was less than positive.
“Overall… the research found that many companies are still providing limited and often superficial commentary on this key business risk,” the report says. “The same patterns of poor reporting practice identified in previous research continues in key ares, such as due diligence, risk assessment and performance measurement and effectiveness, even among the largest and most experienced reporters in our sample.”
Global anti-slavery reports
The UK is not alone introducing reporting requirements. Many other countries, including France, Germany and Norway have their own rules.
However, Brussels is working on legislation for all EU member states with publication of new rules for mandatory human rights and sustainability due diligence. The proposals face a raft of criticism but they are unlikely to derail the push in Brussels.
In October last year a slew of UK companies helped launch a campaign for reform of UK due diligence law.
Thulsi Narayanasamy, of the Business and Human Rights Resource Centre, told Board Agenda voluntary commitments to due diligence have failed. “It speaks volumes that leading investors themselves are uniting to call for a level playing field and clear regulatory environment to ensure that the right of the most vulnerable are respected.”
The landscape for business has changed. There is greater concern than ever about the impact of corporate activity on people and societies. Pressure over meaningful anti-slavery reporting is unlikely to end any time soon.