Section 54 of the UK’s Modern Slavery Act: the evolution from voluntary to mandatory?

Posted: 20/11/2017

Section 54 of the Modern Slavery Act 2015 requires commercial organisations carrying out business in the UK, with a turnover of at least £36 million, to prepare and publish a slavery and human trafficking statement for each and every financial year.

Section 54(5) of the Act sets out the types of information that may [our emphasis] be included in such a statement; namely:

• the organisation’s structure, its business and its supply chains;
• its policies in relation to slavery and human trafficking;
• its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
• the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;
• its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate;
• the training about slavery and human trafficking available to its staff. 

Despite the level of detail given in section 54(5), many organisations have not included this information in their statements (to the disappointment of civil society commentary because civil society bases much of its benchmarking work on the extent to which organisations have included disclosures on each of these six topics). That said, on 4 October 2017, the UK Government released updated guidance on, amongst others, the section 54 reporting obligation. Whilst there have been no changes to the law; the revised guidance takes an important step in the right direction so far as civil society is concerned, as it now states that a statement ‘should aim to include information about’ each of the six section 54(5) categories set out above (rather than it ‘may’ include such information). The updated guidance has also removed the passage that stressed that the section 54(5) categories were ‘not compulsory’ and that they just ‘provide guidance and examples as to the type of information to include’.

The updated guidance also encourages organisations with turnovers of less than £36 million to produce a section 54 statement voluntarily, noting that these smaller organisations might be within the supply chain of a reporting entity. In our experience, smaller organisations are being commercially compelled to prepare and publish annual statements in order to be able to participate in procurement exercises and/or satisfy larger customers’/clients’ supplier codes of conduct.

However, additional change to section 54 may soon occur, which would go much further than the updated guidance. A new bill currently making its way through Parliament – the Modern Slavery (Transparency in Supply Chains) Bill 2017 – is seeking to extend the reporting requirements in section 54 and would make providing the information listed under section 54(5) mandatory [our emphasis] rather than voluntary.  

The bill also proposes that:

• in addition to commercial organisations, public authorities will also be required to make modern slavery statements;
• if an organisation has not taken steps to ensure that slavery and human trafficking is not taking place in its own supply chains or business, it must explain the reasons for this;
• the Secretary of State must publish a list of all commercial organisations that are required to publish a statement under section 54; and
• regulation 57 of the Public Contracts Regulations 2015 would be amended so that a bidder will be prevented from participating in a public procurement procedure unless it has complied with the obligation to publish a statement (if applicable).

This new bill had its first reading in July this year. Last year, a similar private member's bill sought to introduce two of these amendments. That bill passed all three readings in the House of Lords, as well as its first reading in the House of Commons. It was due for its second reading in the House of Commons earlier this year but due to the tragic events that occurred on Westminster Bridge, it did not proceed. It is understood that it was withdrawn following strong indications from the Government that it agreed with its contents and would introduce its own, similar bill in due course. We are expecting the date for the second reading of the new bill to be announced soon and for the Government to remain supportive.

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