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The number of modern slavery victims detected globally increased by 25% in 2022 compared to 2019. The 2024 Global Report on Trafficking in Persons from the United Nations Office on Drugs and Crime has a message for businesses: Preventing modern slavery should be key to protecting workers and ensuring responsible supply chains.

Understanding the intersection of business and human rights is crucial in the context of modern slavery. Businesses must proactively engage in practices that ensure their operations do not contribute to human rights violations, including modern slavery. They must have policies and procedures to find and remove risks of forced labor, child labor, and human trafficking in their supply chains to show good corporate governance and prevent reputational damage. It also helps them comply with legal rules like the United Kingdom Modern Slavery Act.

What is the UK Modern Slavery Act?

The UK Modern Slavery Act is a piece of landmark legislation aimed at combating modern slavery and human trafficking in supply chains. Implemented in 2015, it consolidated previous offenses of human trafficking, slavery, and various forms of exploitation found in other legislation including the Sexual Offences Act 2003.

Who Needs to Comply with the UK Modern Slavery Act?

The requirements of the UK Modern Slavery Act apply to all commercial organizations operating in the United Kingdom that supply goods or services and have a total turnover of £36 million or more. The Act has an extraterritorial effect – it also applies to commercial organizations formed outside the UK that do business in any part of the UK.

According to the Act, a commercial organization is any company, whether incorporated or a partnership, which carries on a business in any part of the UK. This business includes any trade (e.g., plumbing) or profession (e.g., accountancy) in addition to providing goods or services.

This turnover threshold applies collectively to group companies with subsidiaries. For example, suppose Company A, Company B, and Company C are part of the same group, each having a turnover of at least £12 million. In that case, the UK Modern Slavery Act requirements kick in, and the group must ensure its operations are compliant with this legislation.

UK Modern Slavery Act Requirements

Currently, the only requirement in the UK Modern Slavery Act can be found in Section 54 of the Modern Slavery Act 2015 (Transparency in the Supply Chains).

This requires organizations that meet the turnover threshold to publish an annual modern slavery and human trafficking statement outlining the steps taken to prevent modern slavery in their operations and supply chains. If no steps are taken, this must also be disclosed.

What to Include in a Modern Slavery Statement

Organizations must publish their annual modern slavery statement within six months of the end of their financial year. It must be published prominently on the organization’s website (if the organization has one) and include:

  • Policies concerning modern slavery and human trafficking
  • Risk assessment and risk management in their operations and supply chain
  • KPIs that measure actions taken to prevent modern slavery
  • Due diligence processes
  • Staff training on modern slavery

The board of directors must approve the annual modern slavery statement, which also requires a signature from a director. In addition to posting the statements on their website, organizations can register them in the modern slavery statement registry of the UK government.

Consequences of Non-Compliance with the Modern Slavery Act

The UK Modern Slavery Act does not currently impose direct penalties for failing to comply with its transparency requirements. However, there are two caveats:

  1. The United Kingdom government can enforce the Section 54 requirement through a High Court injunction. Failure to comply with an injunction would be contempt of court, punishable by a fine.
  2. The Modern Slavery Act is expected to undergo reforms in the medium term due to criticism of the Section 54 reporting requirements and the law’s overall ineffectiveness in integrating modern slavery reporting into UK business culture. Any forthcoming reforms are highly likely to introduce penalties for non-compliance.

Upcoming UK MSA Reforms

The UK Modern Slavery Act has faced criticism for its ineffectiveness, stemming from the poor quality and limited scope of modern slavery statements, as well as a lack of enforcement. As a result, there have been calls for reform, prompting the UK government to mandate an independent review of the Act. The findings of this review were published in 2019 and were followed by a public consultation; however, no legislative changes were ultimately made. More recently, in January 2024, a committee from the House of Lords was established to consider potential amendments to the Modern Slavery Act.

Although no legislative reforms have yet been implemented, the 2019 recommendations highlight areas likely to change. These include the introduction of mandatory reporting requirements (including a requirement to publish a modern slavery statement), the introduction of a single enforcement body, and the extension of modern slavery due diligence obligations beyond the supply chain.

Introduction of Mandatory Reporting Requirements

The 2019 review recommended that Section 54 reporting should be mandatory and more rigorous. This would enable third parties to draw more meaningful comparisons between organizations. To ensure public access to Section 54 reports, companies could be obliged to publish their statements in the UK government’s modern slavery statement registry. While the registry already exists, submissions are currently voluntary.

Due Diligence Obligations Beyond the Supply Chain

Organizations can expect more attention on how they do business within their corporate group. They will also face scrutiny regarding their supply chain and relationships with customers and other partners. This will likely lead to additional topics to the mandated areas for reporting, including:

  • Disclosure of modern slavery incidents
  • Disclosure of known or associated risks and any actions taken
  • Whistleblowing and grievance mechanisms
  • External collaboration and partnerships
  • Governance, accountability, data, and evidence

Enforcement of Reporting

Alarmingly, the 2019 Review of the UK Modern Slavery Act estimated that 40% of eligible companies were not complying with Section 54 and that there had been no attempts at enforcement. The review proposed introducing a staged enforcement approach that escalates from initial warnings to turnover-based fines to court summons and injunctions to strengthen compliance.

The review further highlighted the importance of enforcement against company officers with the reporting duty. Under potential reforms, companies may be required to designate a board member who is personally responsible for producing the report (and, by extension, for non-compliance.)

Modern Slavery Regulations Around the World

The UK is not the only jurisdiction to introduce modern slavery legislation. There has been a growing trend toward mandatory, enforceable accountability in addressing human rights abuses in the last decade. This has led to the emergence of regulations worldwide, including:

These legislative frameworks share common goals: They aim to address forced labor, human trafficking, and modern slavery in supply chains through transparency and accountability measures. They all require businesses to disclose efforts to identify and mitigate risks of modern slavery in their operations or supply chains. Here’s an example of how Johnson & Johnson addressed all these regulations with a single human rights and anti-modern slavery statement.

That said, there are some key differences. Modern slavery legislation, such as the UK Modern Slavery Act and Canadian Bill S-211, primarily focuses on reporting requirements to promote transparency in supply chains. These legislations encourage companies to disclose efforts to combat modern slavery but often lack mechanisms to scrutinize what is reported.

In contrast, recent regulations like Norway’s Transparency Act, CTCSA, and emerging EU directives such as the Corporate Sustainability Due Diligence Directive (CSDDD) incorporate elements of due diligence, mandating specific actions and accountability.

This illustrates an obvious trend: The world is moving away from laws focusing on transparency toward mandatory due diligence frameworks with real teeth. These compel organizations to take action and levy significant punitive measures against those who do not. They must commit to addressing systemic modern slavery issues in their supply chains or be prepared to suffer significant reputational and financial losses.