Modern Slavery unfortunately remains prominent across the world, with 27.6 million people in situations of forced labour on any given day. The latest data tells us that Modern Slavery has increased in prevalence over recent years.
Preventing Modern Slavery requires international co-operation and the implementation of robust processes and controls throughout business operations - from head-offices to the first link in the supply chain. Underpinning these processes must be good quality data reporting to senior management so effective decisions can be made.
Reliable information and statistics on forced labour and human trafficking is critical to promoting awareness and understanding of the problem, and to in-forming policy responses.
The overarching processes and approach an organisation takes towards Modern Slavery should be outlined within a Modern Slavery Statement. Unfortunately, due to the limited requirements of the UK Act (as outlined in the below appendix) we see inconsistent Modern Slavery Statements. Some organisations have highly detailed statements with metrics and data utilised to show year-on-year improvements in the Modern Slavey and human rights agenda, whilst others are narrative focused with only the minimum requirements met. These findings are not unusual and have been reported on by the FRC in their 2022 Modern Slavery report which KPMG has previously commented on.
Suggested changes within the Queen's Speech (2022) will look to reduce the impact of these findings by increasing supply chain transparency requirements, including that of supply chains. However, proactive work is required by organisations to truly eliminate Modern Slavery.
Materiality of Modern Slavery
It is commonly expected that companies perform materiality assessments on a regular basis. This helps to inform stakeholders of the areas that matter most to companies – those meeting CSRD eligibility requirements will be required to perform a double materiality assessment once the directive is applicable. For some sectors, Modern Slavery may not be a material topic area, that is not to say that it should be ignored, but it may just be that the inherent risks are lower.
However, there are many organisations and industries where the risk of Modern Slavery is higher, including that of the Services, Manufacturing, Construction, Agriculture, and Domestic Work industries to name but a few. Companies that are exposed to a high risk of Modern Slavery should ensure that their Modern Slavery Statement is reflective of this risk and the recommended disclosures should be adopted and expanded upon to give stakeholders a deep understanding of how the company is addressing the risks of Modern Slavery throughout its supply chain. This should consider the risks identified, with the mitigations that have been implemented to prevent these risks from occurring.
What Gets Measured Gets Managed
The expectations laid out above are not unusual nor are they out of the ordinary. These merely follow the recommended disclosures of the Modern Slavery Act (MSA). We have seen that some organisations follow the government recommendations and have clearly defined statements, which address all aspects, whilst measuring effectiveness of the modern slavery agenda on a yearly basis.
The most mature of these statements use metrics and KPIs to quantify the performance of the progress made on a yearly basis, however this is a minority with only 39% of companies reporting one or more KPIs relating to Modern Slavery risks. These KPIs include topic areas such as the number of suppliers who have been subject to due diligence, the number of staff trained on modern slavery, or even the number of breaches of Modern Slavery identified in the supply chain. This is not a descriptive list of indicators, and these should be strategically selected to ensure relevance to the individual company’s circumstance and Modern Slavery agenda.
To measure performance, it should be quantifiable and tracked over time, ‘what gets measured, gets managed’. Data is significant to understand where Modern Slavery breaches are occurring and give management the ability to understand where change is needed to prevent repeated violations, whilst giving investors the ability to assess their risk exposure. For all of this to happen, the data must be reliable.
Assurance of Modern Slavery Statements
Currently it is a very rare sight to see an assurance statement within a Modern Slavery Statement. Some companies measure their Modern Slavery effectiveness with KPIs that are also assured as part of an ESG report. For instance, forced labour or training programmes may be part of an overall ESG assurance programme, but very rarely do we see standalone Modern Slavery statement assurance opinions.
Non-financial information remains on a journey, the reliability and accuracy of this data is not as robust as that of financial information and is not subject to the same rigour that would be applied as part of a financial audit. This is where assurance becomes useful, helping to increase the confidence over the indicators used to measure the performance of the Modern Slavery agenda, and act as a signal to stakeholders that the commitments surrounding Modern Slavery are taken seriously and there is a clear management buy-in to the process.
Given the importance and real-world impact of Modern Slavery, it is critical that organisations are ensuring that it is eliminated from supply chains. Part of this process is ensuring that the information that is influencing decisions surrounding Modern Slavery is robust, accurate and subjected to an independent third-party assurance process.