Section 54 Modern Slavery Act – where do we go from here?

The Modern Slavery Act had its 10^th anniversary earlier this year, and although hailed as a landmark piece of legislation there is the sense, certainly with regard to section 54 of the Act, that it is not achieving what it set out to do.

The aim of section 54 is to encourage transparency in supply chains and make businesses accountable by requiring certain large organisations to publish a modern slavery statement annually, either setting out the steps that it has taken to ensure that modern slavery and human trafficking is not taking place in its supply chain, or that it has taken no such steps.  However, without greater penalties for non-compliance, section 54 is widely criticised and the motivation for organisations to comply has largely come from the risk of reputational damage and the potential loss of commercial opportunities.

Although for years the UK government has intended reform, by mandating the content of modern slavery statements, introducing a single reporting deadline, requiring submission of statements to the government’s modern slavery registry as well as the introduction of civil penalties for non compliance this has not progressed. 

Change remains on the agenda, but developments on the international stage have overtaken the UK’s position.  These include:

EU Regulation on Prohibiting Products Made with Forced Labour on the Union Market

• From December 2027, the Forced Labour Regulation will ban companies from placing or making available on the EU market, or exporting from the EU market, any product that is made in whole or part with forced labour. 
• It applies to all companies operating in the EU regardless of size or where they are incorporated. 
• While the Forced Labour Regulation does not create new due diligence obligations on businesses, it has potentially serious consequences for any organisation wishing to trade in the EU market which has not taken steps to assess its exposure to issues of forced labour in its supply chains and undertaken associated remedial action.

United States of America Import Bans

• Import bans introduced by the US allow it to block the release of goods into the US market if information indicates that the goods were made with forced labour. 
• Goods made wholly or partly in China’s Xinjiang Uyghur Autonomous Region are prohibited from the US market unless the importer can demonstrate that the product was not made using forced labour, or that they are in fact not connected with the XUAR.
• Similar to the Forced Labour Regulation above, such restrictions can have a serious impact on businesses wishing to place their products into the US market if they are unable to provide clear evidence that forced labour was not used in their production.

Corporate Crime Compliance

• Modern slavery and money laundering are often interconnected, as the proceeds from forced labour and human trafficking are regularly integrated into the legitimate economy.
• Forced labour anywhere in the world qualifies as criminal conduct for the purposes of the Proceeds of Crime Act 2002 (“POCA”), meaning if a person knows or suspects that goods/services come from forced labour anywhere in the world, they are committing a money laundering offence.
• Companies who import and trade in goods which are produced using force labour now face an increased risk of being investigated and prosecuted under the POCA for money laundering or trading in criminal goods.

EU Corporate Sustainability Reporting Directive (“CSRD”) and Corporate Sustainability Due Diligence Directive (“CSDDD”)

• The CSRD came into force in July 2023 and extends the non-financial reporting obligations on certain EU and non-EU businesses with significant EU business including annual disclosures relating to human rights.
• The CSDDD came into force in July 2024 and requires in-scope companies to undertake environmental and human rights due diligence on their global operations and value chains. 
• Both Directives are however subject to delay and amendment as a result of an Omnibus Simplification Programme intended to lessen the regulatory burden on businesses.

So, what next for section 54?

Change is afoot:

• A House of Lords report in 2024 highlighted that the UK’s response to modern slavery has fallen behind international standards.
• In March, the UK government issued new statutory guidance on publishing a modern slavery statement and an international reporting template statement to use when meeting the supply chain transparency requirements in the UK, Australia and Canada. 
• The UK government’s (i) new Trade Strategy aims to ensure responsible business conduct, (ii) statements about businesses conducting risk-based human rights and environmental due diligence, and (iii) commitment to launch a review that will focus on the global supply chains of businesses operating in the UK, are all welcome developments. 
• In its Trade Strategy, the UK Home Office also published a commitment to consider how to strengthen section 54 of the Modern Slavery Act, including the reporting requirements, the turnover threshold, and penalties for non-compliance.

Whilst some may say this is groundhog day, the UK government’s consistent messaging to strengthen section 54 coupled with the advances being made on the international stage mean it is likely that mandatory human rights due diligence is on the horizon for businesses in the UK.

A law similar to the Forced Labour Regulation, to ban products with links to forced labour being imported or sold in the UK is also likely.

Organisations are advised to prepare for these legislative changes and may wish to be  ahead of the curve, to protect their businesses from the associated legal, commercial and reputational risks of modern slavery being found in their business and supply chains.

CMS experts can provide support to your business, whether that be with reporting requirements and in preparing your modern slavery statement, or advice on the potential impact of the Forced Labour Regulation, CSRD or CSDDD at both a UK and global level.  Our CMS E-Learning Module helps train staff and management on Modern slavery and human trafficking | CMS eLearning | CMS UK, and our Experts Guide on Forced Labour and Human Rights CMS Expert Guide on Human Rights and Forced Labour provides a helpful overview of the law in this area across 27 jurisdictions.