A Decade of Insight: UK Home Office updates guidance on supply chain transparency

For further information on the MSA more generally, including the latest proposed reforms for change of the underlying legislation (which are still being considered and are separate to this revised Guidance), please refer to our earlier article "UK Modern Slavery Act 2015: to reform or not to reform – that remains the question following latest position from Government".

What areas does the Guidance cover?

The Guidance is (largely, as before) structured around the reporting criteria under Section 54 MSA (outlined below) and provides detailed information and examples of what information can be provided under each of the relevant criteria.

Section 54(5) of the MSA sets out the content that may be included in a modern slavery statement:

1. organisational structure, its business and its supply chains
2. organisational policies
3. assessing and managing risk
4. due diligence in relation to modern slavery (including approach to remediation)
5. training
6. monitoring and evaluation (understanding and demonstrating effectiveness)

Although such criteria remain technically optional, proposals seek to make them mandatory in the future (including the House of Lord Select Committee's recommendations in October 2024) in order to generally help improve the quality of MSA statements. The Guidance acknowledges that these are still voluntary areas to include in an MSA statement, but provides a list of what information an organisation can include in a modern slavery statement to achieve ‘good’ and ‘best’ practice and offers a brief explanation as to why these recommendations are important for organisations.

For each of the above criteria, new guidance on "Level 1" and "Level 2" (more in-depth actions to be completed in addition to Level) 1 is provided. For example, Level 2 actions in respect of an organisation's structure may include providing a detailed map of the organisation’s structures and relationships with suppliers and subcontractors (including long-term partnerships, outsourcing, contracts and spot purchases) as well as providing an overview of the labour supply chain structure, such as how workers are recruited at different stages in the supply chains, sources and transit countries of migrant workers in the supply chain and the involvement of agents, brokers and other labour market intermediaries.

Overall, the Guidance is a welcome tool for businesses in navigating existing legal requirements in this area. It includes further clarity in some areas and much more practical, business-friendly suggestions for organisations to consider when drafting their MSA statement. For example, several practical case studies relating to multinational organisations and ongoing compliance considerations have been included, which are reflective of real-world issues faced by businesses. 

Specific links and references to the UNGPs and the OECD Guidelines for Multinational Enterprises have been included, to help bring together overlapping and complementary recommendations and frameworks across multiple areas (for example, the risk assessment guidance refers to OECD Guidelines Steps 2: identify and assess adverse impacts in operations, supply chains and business relationships, and Step 3: cease, prevent and mitigate adverse impacts). This appears to be a (small) step to bring the UK more explicitly in line with these global guidelines, which are starting to appear in various supply chain laws in other jurisdictions.

Further information on the application of the corporate reporting requirements to different business structures has been included, which was previously criticised as a "grey area" for organisations to work out themselves. For example, the Guidance provides additional, but far from comprehensive, detail on parent and subsidiary organisations and overseas organisations trading in the UK or UK organisations trading overseas. The Guidance (as was previously the case) states that having a UK subsidiary will not, in itself, mean that a parent company is carrying on a business in the UK, since a subsidiary may act completely independently of its parent or other group companies. However, it does not go any further in clarifying the circumstances in which the UK subsidiary would trigger a notification obligation on behalf of the parent.

In terms of group reporting more generally, the Guidance explains that if a group chooses to publish one joint statement, such statement:

• must cover the steps taken to prevent modern slavery in all the organisations within that group that meet the criteria, and their supply chains;
• should clearly name the parent and subsidiary organisations it is covering; and 
• should be published on the UK websites of all the organisations covered by the statement.

In addition, a (non-exhaustive) list has been provided to help determine whether an organisation is carrying on a business, or part of its business, in the UK, including whether it:

• is registered at UK Companies House
• has UK offices
• provides service or support functions in the UK
• receives income in the UK
• has other visible UK business presence, for example a website.

The distinction between "Level 1" and "Level 2" steps to be considered is also a welcome addition, as it acknowledges that every company is unique and that each business will be on a different journey in terms of its anti-slavery and human trafficking practices. These levels may help businesses to plan ahead, and better understand what future developments might be needed.

The Guidance also acknowledges a more victim-centred approach to remediation following identified incidents of modern slavery, including guidance for organisations on providing details of the organisation's remediation mechanisms, policies and processes. In practice, this may include providing details on grievance mechanisms to assist whistleblowing or reporting of suspected incidents of modern slavery, as well as detail on how workers and/or modern slavery survivors have been consulted in developing such remediation processes within the organisation and its supply chains.

However, as helpful as the Guidance is in some respects, it does not address some of the underlying criticisms of the MSA expressed in the House of Lords Select Committee's consultation on the MSA published in October 2024. For example, whilst the Guidance encourages clear, detailed and informative statements, it acknowledges that legal compliance does not turn on how well the statement is written or presented (provided that it sets out the steps taken or that no steps have in fact been taken). In addition, whether the MSA will be updated to develop "teeth" (e.g. specific financial penalties) to respond to a recurring criticism of failure of enforcement action in this area remains to be seen.

What practical steps can businesses take in light of the updated Guidance?

In light of the updated Guidance, businesses may consider taking the following practical steps:

• Review the Guidance in light of the business' relevant operations and existing MSA statement (if applicable). 
• Consider what (if any) changes to approach, policies or procedures might be required as a result of the Guidance, including, as a first step, properly mapping out relevant supply chains and understanding who might be considered "higher risk".
• Work out which stakeholders may need to be consulted as part of this exercise (e.g. the company’s finance team, third-party consultancy, human resources, compliance and/or external legal advisors). 
• Implement any updates to the existing MSA statement and other related policies/procedures as might be necessary in light of the revised Guidance and related assessment(s). 

 The updated Guidance indicates that the Government expects more in-depth reporting in MSA statements (for example through its inclusion of 'Level 1' and 'Level 2' considerations) and also assists in placing such reporting requirements in the broader context of relevant international supply chain standards, such as the UNGPs and OECD Guidelines. This comes at a time of immense international flux in supply chain laws, with the EU's Corporate Sustainability Due Diligence Directive being reined back in certain respects by the Omnibus Directive, but nonetheless still including more positive duties (albeit only in relation to larger entities, as compared to the UK's MSA). (See Travers Smith's Sustainability Insights: All aboard the unstoppable omnibus, for further detail).

Additionally, new legislative proposals in relation to supply chain reporting continue to emerge around the world. For example, Thailand is taking a significant step towards strengthening corporate accountability by drafting new legislation that would require businesses to conduct human rights and environmental due diligence in their supply chains. These national and international developments highlight that regulatory focus on modern slavery and broader human rights abuses in supply chains continues to remain a global priority.

If you require any further assistance in this area, please feel free to reach out to a relevant member of our Operational Risk & Environment team.