With the public’s focus on key global events like political elections, the Olympics and climate change, it’s easy to forget about a systemic risk affecting supply chains all around the world.
Modern slavery is the exploitation of an individual by others, for personal or commercial gain. This scourge is estimated to be a $150bn a year illicit trade, affecting at least 50 million people, and both these numbers are believed to be severely underestimated. Most, if not all people, would or should agree it is a heinous moral crime. But how many would realise that there is also a strong economic argument for tackling modern slavery?
It can indeed weigh heavily – financially, legally and reputationally – on governments and businesses alike. Global economies can also suffer from the lost productivity of millions of people trapped in forms of slavery.
Modern slavery can also work its way into all sectors, and in both the public and private space – in some shape and form. For instance, in June 2024, the Court of Appeal ruled that the National Crime Agency’s failure to investigate the importation of cotton produced in the Uyghur Region was unlawful.
Companies can also face severe repercussions, including hits to their reputation and legal problems, if found to be associated with such practices – even if they are unaware. With over £1bn lost in shareholder value and an ongoing lawsuit of £100m against the company, Boohoo Group is a crucial reminder of the financial risks facing companies, should they fail to take modern slavery reporting seriously.
Concerningly, our analysis in 2024 found 158 FTSE 350 & AIM listed companies are not meeting the requirements of Section 54 of the UK Modern Slavery Act 2015 – designed with the good intention to combat this systemic risk. This may hint at a more fundamental issue across UK companies and other indices likely to be falling short of the requirements, often without even realising.
To keep modern slavery front of mind for businesses, our Votes Against Slavery initiative – now in its fifth year – comprises a 154-strong investor coalition, created with the aim of ensuring compliance with the reporting requirements of the Act, which is a bare minimum required of companies. The initiative was set up to bring all companies on a level playing field when it comes to assessing the risks in their supply chains, getting all runners to the start line.
While a landmark piece of legislation to combat modern slavery when first produced, Section 54 of the UK Modern Slavery Act 2015 still lacks enforcement powers and the teeth needed to eradicate this crime. While Votes Against Slavery has attempted to plug this enforcement gap, it is clear that the UK government needs to step up and develop a tougher Act.
As investors we are particularly well-placed to have influence and drive change in the companies in which we invest. Through investor engagement and active stewardship, we have a voice to educate business on the importance of complying with the Modern Slavery Act (2015).
As such, working with CCLA and supported by 18 investors with £1.78trn in AUM, in 2023 we created a separate coalition calling for a new Modern Slavery Bill with clearer reporting requirements and sanctions for companies found to be non-compliant with the reporting requirements of the Act. To this end, we submitted a joint response on behalf of this coalition to the House of Lords Select Committee’s review of the impact of the 2015 Modern Slavery Act, and its effectiveness in achieving its aim.
In October 2024 the House of Lords report on the Modern Slavery Act was published which makes several practical recommendations about supply chains, including several suggested changes from our submission with CCLA, which advocated that the government mandate the contents of modern slavery statements, including an assessment of the effectiveness of a business’s actions to ensure slavery and modern slavery is not taking place.
But we need to go further and work with all stakeholders, including government, to drive better practices.
