Too few companies find modern slavery in their supply chains, according to research from a leading investment management firm, casting doubt over the due diligence practices used at many companies.

The view comes from Martin Buttle, better work lead at CCLA, the investment manager with £15.8bn in assets under management, after publication of its first Global Modern Slavery Benchmark report.

The report found only 23 companies, among the world’s largest 100 with business operations in the UK, report finding slavery in their supply chains, fewer than expected given the estimated prevalence of slavery around the world. The Global Commission on Modern Slavery & Human Trafficking, estimates there are 50 million men, women and children worldwide trapped in forced labour conditions.

Buttle says: “I think we would be expecting companies to be finding it more readily.” He adds: “We are slightly alarmed given the size and influence of the companies that we’re benchmarking.”

The benchmarking study found that the world’s largest companies scored on average 30 out of a possible 62 marks for their reporting on tackling forced labour, behind the benchmark average for UK companies of 36 out of 62. Four of the global companies finished with a score below 12.

Of the global companies that found forced labour, 13 reported some form of redress but only one reported the victims were “satisfied” with the outcome.

CCLA’s report argues global firms operating in the UK are falling short “preferring policy to practice when it comes to addressing modern slavery.”

Buttle said a global standard for reporting on modern slavery “would be welcome” for global companies tackling what is a key human rights issue.

CSDDD support

And he offered support for the Corporate Sustainability Due Diligence Directive (CSDDD), an EU law mandating companies report on human rights abuses in their supply chains but currently caught in a reform process expected to soften many of its provisions. Some EU states have even called for its complete abolition.

Buttle says: “We are supportive of CSDDD in some form. We acknowledge that it is a complicated area and there may be some simplification that could occur to make it easier, but we think broadly that companies should be doing their human right due diligence.”

The key worry for CCLA is the proposal that due diligence under the proposed reform would extend to top level suppliers only.

“Our concern is the constraint to the scope is to constrain it to first-tier suppliers which— when you’re looking at things like modern slavery and forced labour—when we know that the greater risks are often further down the supply chain.

“If the scope was just the first tier, than I think it would be missing significant risks in this case.”

Buttle advocates for companies to take a “risk-based” approach to modern slavery due diligence rather than having an “arbitrary” responsibility to check on only the first-tier suppliers.

The CSDDD along with sister legislation in the Corporate Sustainability Reporting Directive (CSRD) are subject to the “omnibus” reform process following a report that the EU sustainability regulation should be eased to make the trading bloc more competitive.

Modern slavery reporting in the UK was launched with the Modern Slavery Act in 2015. Section 54 sets out reporting responsibilities for companies turning over £36m or more with the intention of providing transparency about the actions taken to remove modern slavery form supply chains.

However, as the law firm Skadden writes, the act has “arguably had less impact than hoped”. The CSDDD in its existing form goes much further than the UK legislation.

Reform Modern Slavery Act

This has prompted calls for reform. Reviews and consultation have taken place but as yet no new version of the act has emerged.

In October last year a House of Lords committee reported: “when the Modern Slavery Act was passed in 2015, the UK was said to be ‘world-leading’ but that is not longer the case. The UK is falling behind other countries and victims are paying the price.”

Corporate reporting on modern slaver was criticised as ”inconsistent and the lack of mandated requirements for content make it difficult for companies to be held accountable for their transparency”.

The Lords argued for strengthened reporting responsibilities making publication of statements on the current public registry mandatory “setting out each topic for the statements to cover”.

Recommendations also include a public “dashboard” detailing information about the state of reporting alongside examples of good practice and bad.