MODERN SLAVERY ACT 2015 – TRANSPARENCY IN SUPPLY CHAINS: REPORTING BY UNIVERSITIES AND LOCAL AUTHORITIES - Anna Gorma and Patrycja Krupinska, April 2018
In April 2017, the UK Parliament’s Joint Committee on Human Rights stated that “If the Government expects businesses to take human rights issues in their supply chains seriously, it must demonstrate at least the same level of commitment in its own procurement supply chains.” Unfortunately, modern slavery in public procurement remained absent from the Modern Slavery Act 2015, as highlighted by submissions by the Learning Lab to the JCHR. The Act itself omits public bodies from the requirement of publishing a modern slavery statement and instead focuses on ‘commercial entities’. This is despite public procurement making up 13.7% of the UK GDP in 2015 making public bodies into a major influence.
Initially by creating an unclear air about who is supposed to report, many public bodies were left unconcerned with reporting or further investigating their supply chains. This mirrors the position across many other jurisdictions where public buyers are uncertain as regards scope for measures to promote respect for human rights in their supply chains.
However, as Dr. Olga Martin-Ortega has put it, universities, as both a public body and a commercial entity, had to “wake up: they, too, are players in fighting modern slavery” (further see Ready or not: Universities and reporting requirements under the UK Modern Slavery Act by Dr. Olga Martin-Ortega for some initial observations on early reporting by Universities). Public authorities had equally little awareness of the reporting criteria, since they do not fall under the requirements of the Act, as analysed below.
This following article is based on our research at the Business, Human Rights and the Environment Research Group (BHRE) at the University of Greenwich. Firstly, it explains what s.54, Transparency in Supply Chains (TISC) provision of the Modern Slavery Act 2015 is, which organisations it applies to and the legal reporting requirements. Secondly, it includes a summary of general reporting trends seen among public sector bodies, that is, universities and local authorities.
What is the MSA Transparency in Supply Chains Provision?
The TISC requires commercial entities to report annually on their actions to identify, prevent and mitigate modern slavery in their supply chains. It aims to engage commercial organisations in the fight against slavery, human trafficking and forced labour by producing an annual Modern Slavery and Human Trafficking Statement (the statement).
Which organisations does the TISC apply to and what are the requirements?
The MSA 2015 s.54(12) defines “commercial entities” as suppliers of goods or services with a total annual turnover of £36 million or more. The provision is aimed at making the private sector more transparent. However, the public sector faces the same risks in their supply chains. The BHRE has focused its research on the practice of the public sector, where the legal obligation to comply with the Act is unclear. Main public sector reporters include universities and other higher education providers, but a number of local authorities have also reported voluntarily.
Universities are obliged to report because they can be considered as commercial organisations, even if they are contracting authorities covered by public procurement law. As our research revealed, the majority of UK universities exceed the annual turnover threshold and are thus obligated by the Act to report. Our research did not find any instances of UK universities under the threshold and, therefore, reporting voluntarily. However, not all universities publish their turnovers. Local authorities, which are not legally obliged to report under the Act, have also chosen to report voluntarily, demonstrating notable awareness and ethical leadership.
The Act identifies two core requirements in order to comply with the TISC provision: that entities publish their statements on their website via a link located in a prominent place on their homepage or in a relevant dropdown menu as per s.54(7)(a); and that these statements must be approved at the highest level of governance of the institution and must be signed by a senior member of the organisation as per s.54(7)(b).
The TISC provision provides a non-exhaustive list of information that may be included in a modern slavery statement under s.54(5): the organisational structure, its business and supply chains; its policies relating to slavery; its due diligence processes; steps taken to assess and manage modern slavery risk; its effectiveness in ensuring that slavery and human trafficking is not taking place, measured against key performance indicators; the training available to its staff. The Government also published a guide entitled: ‘Transparency in Supply Chains etc. A Practical Guide’designed to provide direction on how businesses should comply with the MSA and advice concerning best practices.
Reporting by universities
As noted above, universities are obliged to report under s.54. 73 universities reported during the 2015-2016 financial year and 63 reported during 2016-2017.
Universities have shown an increased effort to comply with mandatory requirements. The report set to be published by the BHRE has revealed that many universities which reported for the second time are now placing their statements at the bottom of their homepage. However, some can still only be found using the university website search; others could only be found using an internet search engine. With regards to the second requirement, the general trend is that now universities place more emphasis on ensuring the statement is signed by a senior member of the university. However, there were still instances where a statement was signed by a person not of senior status, it was unclear, who has signed it or where statements have not been signed at all.
When comparing reporting on organisational structure in university statements, the general trend is that although the second year of reporting has passed, there has not been any significant improvement in reporting on this criteria. Effective reporting can only be achieved if organisations have good knowledge and understanding of their own supply chain and their own structure. A significant number of universities fail to provide information on their supply chains beyond areas of procurement and keep the section on organisational structure very brief.
Universities have mostly reported on their policies. Where universities do not already have a standalone policy in place or embedded modern slavery and human trafficking into existing policies, they report on plans to develop them in the coming years with some already taking preliminary steps.
Due diligence is the most reported on criteria with only one university, out of all 2016/17 statements, not reporting on this. The general trend is that in the second year of reporting the greater majority of universities, both those reporting for the second and for the first time, have provided more detail on their due diligence processes and measures explaining how they conduct due diligence, rather than simply saying that measures and processes are in place.
The first step in adopting effective due diligence processes should be to identify potential risks in the supply chain. Although there is increasing effort in universities to conduct risk assessment many still fail to do so prior to implementing due diligence measures and processes. Assessing the risks in supply chains allows for an organisation to implement tailored due diligence measures to effectively tackle modern slavery and human trafficking as well as eliminate the risks.
In line with the UN Guiding Principles on Business and Human Rights, the Government guidance encourages organisations to report on the effectiveness of their measures, including any key performance indicators related to anti-slavery actions. This criterion is the least reported one with less than half of the universities reporting on it. This is however most likely due to the fact that the MSA has only been in force for over two years thus making it difficult for universities to report on the effectiveness of the measures taken so far. The upcoming statements should see an increase in universities reporting on this criterion.
The Government guidance suggests training should be targeted to have the most effect. Training can be expensive as well as time consuming and the majority of universities have opted to target training mainly at those in the procurement teams and very few mention providing training to their suppliers. As supply chains are the root of the issue, it is essential that suppliers receive training so that any risk or occurrence of modern slavery can be avoided rather than eliminated later on if detected during auditing or risk assessment.
Reporting by local authorities
As previously mentioned, local authorities are not legally required to report under s.54. Voluntary reporting on TISC by local authorities shows dedication to mitigating modern slavery and human trafficking from their own business and supply chains.
The sample size of statements written by local authorities is far smaller than the one for universities, just over 10% of all Councils, with 43 having produced statements out of 418 UK Councils. The sample, though not too small to draw reasonable conclusions from, does show that there are very few Councils around the country that have committed to focusing on their supply chains and increased their responsible public procurement practices.
Unlike with the universities, there have only been five Councils which published a second statement. This makes it impossible to draw any observations on any changes or improvements in the quality of reporting within the two years of reporting. It is concerning that Councils have decided to publish statements ‘in advance’, that is, either by publishing it for the financial year 2017-18, which had not yet ended, or simply for the period of 2017-2020. The purpose of the Statement is to ensure an annual review to track and analyse progress with each year.
Councils dealt reasonably well with the first mandatory requirement of publishing. Over half of all Council statements were found to be signed by members at a senior level of governance. Although, there is no guidance as to whom is the appropriate person to sign a Council statement. Councils did not do so well with the second requirement, as statements could be found anywhere from information about the Council, for businesses, or for residents. Where a Council has committed to creating a statement, put in the time and effort to create it, if the statement cannot be found or accessed then it does not have the necessary and intended impact.
Statements published to date demonstrate a clear understanding of several reporting criteria but there always remains room for improvements. Policies, for example, are coherently identified and presented by the majority of Councils, with many putting emphasis on whistleblowing. However, many Councils failed in providing the necessary link between their policies and modern slavery, with some even citing polices irrelevant to the issue.
Although most Councils mention some form of due diligence, the quality of their reporting varies greatly which may be inherently linked to the quality of their risk assessment. Risk identification and assessment, as mentioned above, needs to take precedence – for Councils, this has not been the case. Where risk is mentioned, Councils proclaim that there are no areas of their business that are high risk, with no demonstration of how this conclusion has been reached. Few existing explanations indicate lack of risk is dependent on procuring locally and from the UK, displaying naivety and ignorance to the degree of modern slavery present the country.
Measuring effectiveness largely eludes local authorities and remains unreported. Collaborations with outside parties are rare but, surprisingly, there was significant collaboration between three pairs of Councils where they created joint statements. This is strongly encouraged by the BHRE as pooling of resources of neighbouring Councils should improve analysis and reporting quality. Lastly, training is a popular exercise for the majority of Councils though not all training is well described and only few Councils have modern slavery specific training.
Conclusions
Universities and Councils, especially when coupled together, can have a tremendous impact on modern slavery related supply chain analysis. Though both are yet to undertake fundamental steps towards identifying the risks in their supply chains and developing suitable and effective due diligence processes, it is encouraging to see the efforts displayed by universities reporting mandatorily and local authorities reporting voluntarily.
Universities can address their modern slavery obligations through individual actions or through reaching out to their affiliate purchasing consortium. Whilst local authorities may greatly benefit from pursuing local partnerships. As we have just surpassed the second year of reporting, it is inevitable that in the coming years the public sector will demonstrate improved reporting and determination to understanding supply chains and achieving greater transparency.