FRC report finds boardrooms must still do more to eradicate modern slavery
FRC report finds boardrooms must still do more to eradicate modern slavery.
The Financial Reporting Council (FRC) has published research undertaken in conjunction with the UK Anti-Slavery Commissioner and Lancaster University which highlights significant shortcomings in the quality of companies’ modern-slavery reporting.
The modern-slavery statements and strategic and governance reports of 100 comprising FTSE 100, FTSE 250, and Small Caps were reviewed. Ten per cent of those reviewed did not provide a modern-slavery statement despite it being a legal requirement. Where companies did comply, only one third of these statements were considered by the researchers to be clear and easy to read.
The research found that most of modern-slavery statements reviewed were fragmented, lacked a clear focus and narrative, and often contained boilerplate language. In particular, it found that disclosures about key performance indicators (KPIs) which measure the effectiveness of steps to minimise modern-slavery risks were deemed to be particularly poor. Only twenty-five per cent of companies disclosed KPI results and just twelve per cent confirmed they had made informed decisions based on those KPIs.
A range of influencing factors
Important factors that were found to influence the level of transparency in modern-slavery statements were company size, sector and business complexity. Interestingly, however, the impact of company size did not appear to be constant across the entire size range. Whilst FTSE 100 companies provided significantly more information in comparison with other size groups, the difference between FTSE 250 companies and Small Caps was much less pronounced. Additionally, transparency levels were broadly similar in some reporting categories, such as policies and training, while for descriptions of organisational structure, Small Caps provided better disclosure than FTSE 250 companies.
Companies taking a reactive approach
The vast majority of modern-slavery statements were found to be wholly backward-looking, with only a minority clearly identifying emerging issues or a long-term strategy. The researchers highlight that this finding is consistent with companies opting for a reactive, rather than proactive, approach to addressing modern-slavery risks. Furthermore, although the majority of companies report that they assess modern-slavery risk in their own business and supply chain, only twenty eight per cent disclosed an action plan based on the risks identified.
FRC: Findings present an opportunity
The research suggests that too many companies 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. The FRC highlights that the findings of this research present an opportunity for companies to present a more joined-up approach to reporting and provide information on the effectiveness of their policies.