Anti-slavery efforts “unacceptable” among UK companies, FRC says

Anti-slavery efforts “unacceptable” among UK companies, FRC says

One in ten businesses are failing to submit compulsory modern slavery statements

Anti-slavery efforts “unacceptable” among UK companies, FRC says

Research published by the Financial Reporting Council (FRC) has revealed that many of the UK’s largest businesses are falling short of requirements to eradicate modern slavery.

The research report analysed 100 major companies and found that one in ten did not provide a modern slavery statement despite being required to do so under Section 54 of the Modern Slavery Act 2015 (MSA).

“High quality reporting is vital to shining a light on how seriously businesses take social issues in their day-to-day operations,” said FRC CEO Sir Jon Thompson.

Under the MSA, businesses with an annual turnover of £36m must provide an annual statement outlining the steps the company is taking to address the risk of slavery in their operations and supply chains.

“It is therefore unacceptable that many companies did not produce a modern slavery statement and that modern slavery considerations appear not to be a mainstream concern for many boardrooms,” Thompson said.

The report, which was produced in collaboration with the UK Anti-Slavery Commissioner and Lancaster University, found that where companies did comply, only one third of modern slavery statements were considered “clear and easy” to read.

“The majority [of statements] were fragmented, lacked a clear focus and narrative, and often contained boilerplate language,” the FRC said in a statement.

Disclosures regarding key performance indicators (KPIs) to measure the effectiveness of the steps taken to minimise modern slavery were “particularly poor”, according to the report. Only a quarter of companies reported results against their KPIs, and just 12% confirmed they have made informed decisions based on those KPIs.

“Companies have a responsibility to demonstrate the steps they are taking to minimise modern slavery risks and to show strong leadership in this area,” said Dame Sara Thornton, the UK’s independent Anti-Slavery Commissioner.

“Businesses carry significant material and reputational risk of modern slavery being found somewhere in their supply chains.”

An estimated 16 million modern slavery victims work in the private sector globally today, with poor governance creating the conditions that allow this exploitation to thrive, according to Thornton.

Boards and corporate responsibility

Offering a resolution to the malpractice, the FRC report goes on to state that company boards have the potential to “drive outcomes and provide insightful disclosures” when it comes to modern slavery risk.

In March, the Chartered Institute for Internal Auditors (CIIA) published a report, which was produced in conjunction with AuditBoard, found that nearly two-thirds of senior internal audit executives believe that the FRC must increase efforts to ensure that company directors take corporate culture more seriously.

“The FRC should be doing a lot more in terms of providing guidance and toolkits to company directors,” said Gavin Hayes, head of public policy and external relations at the CIIA, going on to call the watchdog’s progress “glacial“.

“When the UK Corporate Governance Code is next reviewed, there needs to be much greater emphasis on the role of the board in terms of monitoring and assessing the corporate culture.”

According to the CIIA report, more than half of senior internal audit executives have not been asked by the board or audit committee to provide reports on corporate culture.

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