FRC publishes ground-breaking report which finds Boardrooms must still do more to eradicate modern slavery
25 April 2022
The Financial Reporting Council (FRC) has today published new research
, in conjunction with the UK Anti-Slavery Commissioner and Lancaster University, which has identified significant shortcomings in the quality of companies’ modern slavery reporting.
The research looked at a sample of 100 major companies’ modern slavery statements and their strategic and governance reports. One in ten companies do not provide a modern slavery statement despite it being a legal requirement. Where companies did comply, only one third of these statements were considered clear and easy to read.
The majority of modern slavery statements reviewed were fragmented, lacked a clear focus and narrative, and often contained boilerplate language. Disclosures about key performance indicators (KPIs) which measure the effectiveness of steps to minimise modern slavery risks were particularly poor. Only a quarter of companies disclosed KPI results and just 12% confirmed they have made informed decisions based on those KPIs.
The review suggests that too many companies appear not to view human rights issues in their workforce and supply chain as a principal source of risk for their business, and that modern slavery considerations are still not a mainstream concern for many boardrooms.
The findings of this research are an opportunity for companies to present a more joined up approach to reporting and provide information on the effectiveness of their policies.
The UK's Independent Anti-Slavery Commissioner Dame Sara Thornton DBE QPM said:
The FRC’s CEO Sir Jon Thompson said:
“With an estimated 16 million modern slavery victims working in the private sector globally, businesses carry significant material and reputational risk of modern slavery being found somewhere in their supply chains.
Modern slavery is perpetrated by organised criminals and cynical opportunists, however irresponsible commercial practices and poor governance can also create the conditions that allow exploitation to thrive. Companies have a responsibility to demonstrate the steps they are taking to minimise modern slavery risks and to show strong leadership in this area.”
Steve Young, a Professor from Lancaster University Management School and lead researcher, said:
“High quality reporting is vital to shining a light on how seriously businesses take social issues in their day-to-day operations.
It is therefore unacceptable that many companies did not produce a modern slavery statement and that modern slavery considerations appear to not be a mainstream concern for many boardrooms. Looking ahead companies must clearly set out the actions they are taking to deal with modern day slavery in all aspects of their operations.”
“Slavery, trafficking and human rights are critical issues for business and society. Our review of corporate reporting practice suggests that these risks may be passing under the radar in some companies, while others seem to be adopting a compliance-oriented approach with processes and disclosures satisfying regulatory requirements rather than seeking to understand and address fundamental concerns.
“At the other end of the spectrum, however, we see a number of companies that are leading the way in terms of their thinking and transparency. We hope our evidence helps to promote best practice and illustrate the stakeholder benefits that are possible when boards prioritise the issue.”
A link to the full report is available here
Notes to editors:
Section 54 of the UK Modern Slavery Act of 2015 requires businesses with a turnover of £36 million or more to write an annual statement, setting out the steps that they are taking to address the risk of slavery in their operations and supply chains.
In the annual reports of the 100 companies sampled, reporting on modern slavery issues was surprisingly minimal. Although the UK Corporate Governance Code (the Code) does not include specific provision on modern slavery or human rights issues, a number of the Code’s principles and provisions cover the board’s ability to assess and manage the company’s risks and to consider the interests of wider stakeholders in making key decisions. Companies should report on business objectives and strategy, principal risks and matters that directors have had regard to when performing their duty under s.172 of the Companies Act 2006 in the strategic report.