Yahoo Finance UK companies must do more to eradicate modern slavery, watchdog says
Companies in the UK have been accused of "significant shortcomings" in their modern slavery reporting and many are breaking the law, according to a new study.
Analysis from the Financial Reporting Council (FRC) found one in 10 firms did not provide a modern slavery statement despite this being a legal requirement in Britain. Where firms did comply, only one third of these statements were considered clear and easy to read.
The review, conducted with the UK Anti-Slavery Commissioner and Lancaster University, looked at a sample of 100 firms' modern slavery statements and their strategic and governance reports.
The report highlighted that most companies were "particularly poor" at setting out how they measure steps to minimise the risks of modern slavery.
It suggests that many firms 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.
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As a result it found that companies may be reluctant to disclose their performance on modern slavery because they worry it may harm their reputation. However, it warned failure to report risks additional costs as shareholders demand more transparency and the issue faces more regulatory focus.
It is "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," FRC CEO Jon Thompson said.
Less than 40% of firms disclosed that they actively participate with stakeholders or industry initiatives on human rights and modern slavery, and only 18% said they engage directly with workers in the supply chain.
While 57% of companies reported that they monitor suppliers on slavery and disclose results of these monitoring processes, only 15% said that they work with suppliers to improve their labour rights practices. Similarly, just 18% engage directly with employees in the supply chain using mechanisms such as site visits and worker interviews as part of monitoring processes.
The report also found that FTSE 100 (^FTSE) firms provided "significantly more information" in modern slavery reporting compared to FTSE 250 (^FTMC) companies and small-caps.
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Researchers say these findings are an opportunity for businesses to present a more cohesive approach to reporting and provide information on the effectiveness of their company policies.
"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," said the UK’s independent anti-slavery commissioner Dame Sara Thornton DBE QPM.
"Companies have a responsibility to demonstrate the steps they are taking to minimise modern slavery risks and to show strong leadership in this area."
Professor Steve Young from Lancaster University Management School, who led the research, alongside Dr Mahmoud Gad said: "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."
