Modern Slavery’s Accountability Gap
Modern slavery is a significant business risk, but many companies are still failing to properly account for it.
Although UK law requires companies of a certain size – those with more than £36 million ($46 million) in global turnover – to produce yearly slavery and human trafficking statements, investors say that firms often fall short. They are therefore taking things into their own hands, actively engaging with companies to eliminate modern slavery from supply chains.
The number of people in modern slavery increased by 20% globally between 2016 and 2021, rising to an estimated 50 million people, according to the International Labour Organisation (ILO). Modern Slavery includes human trafficking, forced labour, forced marriage and debt bondage.
A 2024 report says that forced labour in the private economy generates US$236 billion in illegal profits per year.
In the UK, the Global Slavery Index estimates that 122,000 people were living in modern slavery in 2023. The Home Office received almost 20,000 potential victim referrals in 2024, representing a 13% increase year-on-year.
These are sobering statistics as the UK marks the tenth anniversary of the Modern Slavery Act (MSA).
At a recent conference in London, Murray Hunt, Director of the Modern Slavery and Human Rights Policy and Evidence Centre (PEC), said: “Modern slavery continues to be a blight on our society. The persistently high numbers and their trajectory indicate that our approach isn’t working.”
While the MSA was seen as a groundbreaking piece of legislation in 2015, inspiring similar legislation in Australia (2018) and Canada (2024), many panellists criticised weak enforcement of the act.
Specific concerns were expressed about section 54 (s54), which requires companies with a global turnover of at least £36 million to explain what they have done to stamp out slavery and human trafficking.
Baroness Young of Hornsey, Member of the House of Lords, described the mandatory reporting regime as “absolutely toothless”.
“No injunction was brought against any of the thousands of businesses that didn’t submit even the most basic zero-tolerance statement,” she said.
Áine Clarke, Head of KnowTheChain and Investor Strategy at the Business and Human Rights Resource Centre, pointed out that s54 is a requirement to report, rather than conduct due diligence. “As such, it has the potential – which has been realised in practice – to become a tick-box exercise,” she said.
Research by international human rights group Walk Free, carried out in 2023, found that only two-thirds had published a statement on their website and even fewer had board sign-off.
Iris Karaman, Senior Associate at global law firm Pillsbury Winthrop Shaw Pittman, says that she has seen some companies simply copy and paste from reports that others have produced. “This means they haven’t assessed the risks in their supply chains nor taken steps to adequately mitigate those risks,” she tells ESG Investor.
As Jess Phillips, UK Minister for Safeguarding and Violence Against Women and Girls, stated in the updated Transparency in Supply Chains guidance, “Modern slavery is so prevalent that if businesses are not identifying risks and cases, they are probably not looking hard enough.”
Accountability gap
Investors see modern slavery as a serious business risk, according to Karaman.
“As such, some shareholders are taking on a more activist role in encouraging companies to adequately mitigate modern slavery risk in their supply chains, as well as the potential reputational and legal liability risks that come from failing to do so,” she says.
Matt Crossman, Stewardship Director at Rathbones, views modern slavery as an economic crime and a systemic risk that touches supply chains throughout an institutional investor’s portfolio. “We see modern slavery as one of the big issues – alongside climate change – that has the potential to affect every aspect of the modern economy,” he says.
Rathbones decided to take action after seeing that many UK companies falling under the s54 regime weren’t producing statements. In the absence of a complaint mechanism, as well as the political will to force companies to comply, the UK asset manager began a FTSE 100 benchmarking project in 2018. The initiative broadened out to FTSE 350 with 17 other investment firms the following year. Most companies were eager to engage and improve their reporting, according to Crossman.
The success of this engagement led Rathbones to launch Votes Against Slavery (VAS) in 2019. “Investors need to have proper disclosures to make the best decisions, so we decided to link the legal reporting requirement to a voting outcome, leveraging the power that we have as investors,” explains Crossman. “We saw a need to bridge the accountability gap because we want to see a ‘race to the top’ to improve the overall quality of risk management in our investments.”
Out of the 158 FTSE 350 and AIM companies that VAS reached out to in 2024, 112 subsequently became s54 compliant.
Last month, Rathbones launched the sixth round of VAS, which now numbers 168 institutional investors, with assets under management totalling £2.96 trillion. The 2025 engagement targeted 61 AIM companies and 25 FTSE 350 companies that fail to comply with s54.
The campaign is now moving beyond just getting companies to report to actively engaging with them on improving the quality of the underlying risk management, particularly around human rights risk more generally. The next round of VAS will assess the quality of reporting, deploying artificial intelligence tools to help, according to Crossman.
“We’re working with a few potential providers for VAS 2026, which will benchmark the quality of narrative reporting,” he says. “But we also need better or new legislation to renovate s54 and make it fit for purpose for the next 10 years, which includes expanding reporting.”
Corporate league table
Rathbones is also on the steering committee of CCLA Investment Management’s ‘Find it, Fix it and Prevent it’ (FFP) initiative, which was established in 2019 to increase transparency around companies’ modern slavery risks.
The initiative works in four ways: corporate engagement, currently focused on hospitality, construction and supermarket retail sectors; public policy engagement, such as advocating for changes to the MSA; investor data; and thought leadership and advocacy.
“A key aim of FFP has been to go beyond risk and resilience, demonstrating how the investment industry can drive real change in people’s lives,” says Dr. Martin Buttle, Better Work Lead at CCLA, the largest manager of charitable assets in the UK. “As scepticism about the ‘investor theory of change’ – that is, engagement – grows, it is increasingly important to show the tangible ways in which we can make a positive impact in the real world.”
In 2023 CCLA published its first benchmark on the top 100 UK-listed companies, ranked according to the degree to which they were disclosing finding, fixing and preventing modern slavery. In the 2024 edition, 65 companies had improved their score and 35 went up a tier on the benchmark. At least 10 companies mentioned CCLA’s engagement and the benchmark in their annual statement.
For the past few years, CCLA has focused on the construction sector. Buttle recounts a recent call with a supplier to the industry. “A year ago, they were not doing much to tackle modern slavery. However, now they have set up a committee that meets monthly, developed a new procurement framework, which prioritises modern slavery, identified high risk suppliers, undertaken inspection of some of these suppliers, and insisted on changes to pay structures as a risk mitigation measure,” he says.
Best practice
Indicative of the rising importance of addressing modern slavery in supply and value chains, several organisations have launched guidance and tools for investors and financial institutions, including Asia-based non-profit the Mekong Club, proxy adviser ISS and Walk Free, to mitigate risks, as well as monitor and report on exposures.
Maria Nazarova-Doyle, Global Head of Sustainable Investment at IFM Partners, co-chaired the UK Department for Work and Pensions’ Taskforce on Social Factors, which released a 2024 report “demystifying” social factors for pension trustees. The report includes practical resources, such as global best practices.
“Our aim was to make it easier for pension schemes to address the social side of sustainability, as well as invest in stewardship strategies,” says Nazarova-Doyle. “This guidance was created by pension schemes for pension schemes.” The global institutional asset manager has benchmarked itself against the guidance.
IFM, which is mainly focused on private markets, considers modern slavery to be a key consideration when allocating funds. “It’s not just reputational risk, but also business and regulatory risks, which ultimately makes it an investment risk,” she explains.
While IFM doesn’t tend to invest in sectors with a heightened risk of modern slavery, many sectors have risks in their supply chains. In renewable energy, for example, the risk lies in where the solar panels are manufactured, rather than the company which installs or operates solar farms.
“We do a lot of due diligence and decline deals on the basis of heightened risk, if unmanageable,” says Nazarova-Doyle. “If we do go ahead with an investment because we assess that the company is doing all the right things and can manage the risk, then we continue to work with and help it.”
MSA revamp
The proposed modernisation of the MSA 2015 was a hot topic at the London conference, with many calling for stronger and broader legislation as well as penalties. Others warned that clamping down too hard might lead to more “modern slavery hushing”, where companies are reticent to make public their findings.
“We need to remove the stigma [around finding modern slavery in supply chains], but at the same time focus companies on doing due diligence,” says Nazarova-Doyle.
A consensus has developed around improving enforcement and creating mandatory obligations to file annual statements with a central government registry. While import bans on goods linked to forced labour, such as in the US and EU, are being considered, both Karaman and Crossman doubt that this is likely in the near future, as indicated by the recent Great British Energy Bill vote.
While many support a cross-government approach, Nazarova-Doyle also advocates for a whole of investment industry strategy. “Collective engagement does bear fruit, as it’s easier for companies to understand what investors want when it is a unified voice,” she says.
Crossman goes a step further. “We need radical transparency, which won’t happen until we get the whole of the economy to see modern slavery eradication as [its] responsibility,” he says.
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