Modern slavery - what CAs need to know

By ICAS Ethics Board

15 October 2024

With legislation around the globe moving at pace, this guidance for members considers the practical steps you should take as a finance professional in relation to modern slavery. We also highlight what you should be thinking about and what questions you should be asking in your everyday work.

Modern slavery is an illicit supply and demand commodity trade, where the commodity is a human being. There are invariably links with organised crime and members should therefore be cognisant of their responsibilities under anti-money laundering and related legislation which of course will depend on their role and the sector that they work in.

Anti-slavery International ¹defines modern slavery as:

“When an individual is exploited by others, for personal or commercial gain. Whether tricked, coerced, or forced, they lose their freedom. This includes but is not limited to human trafficking, forced labour and debt bondage.”

We know that it happens in the supply chains of UK goods, services and business. More than 11,700 people contacted the UK’s Modern Slavery and Exploitation Helpline run by Unseen (a UK based anti-slavery charity) in 2023, an increase of 20% from 2022².

As Unseen says: “Modern slavery is an issue that happens everywhere and affects us all – from the clothes we wear, to consumer electronics, to the food and drink we consume. Slavery is not just something that’s happening beyond our borders. It is happening right here in the UK too.”³

The need for change

A report by the International Labour Organization (ILO), Walk Free and the International Organization for Migration⁴ estimated that in 2021 modern slavery affected 50 million people globally, 28 million being in situations of forced labour, typically within the world’s supply chains.

In its 2023 Global Slavery Index ⁵, Walk Free states that the UK imports US$26.1 billion of products at-risk of being made using forced labour annually including electronics, garments, textiles, timber and fish. In the UK, it was estimated that there were 122,000 individuals living in modern slavery.

A report published by the ILO in March 2024 ⁶ estimated that forced labour in the global private economy generates US$236 billion in illegal profits per year.

Andrew Wallis OBE, CEO Unseen, notes that:

“Modern slavery is a supply-and-demand business, where the demand is for cheap labour, services and goods. As consumers, we tend to believe we are not connected to modern slavery. However, it is estimated we are connected to at least 40 to 60 slaves, because of the nature of the global supply chains: it exists within every industry, and is found in villages, the countryside, towns, and cities in the UK and around the world. Change needs to happen at the individual, corporate, and political levels.

“On an individual basis, we need to think about how and where we consume and invest. We need to bring the issue down to personal responsibility. If it’s too cheap to be true, then we should probably be wary. It is the little steps that create change.

“At the corporate level, we need to think about how we work out what the “S” (from Environmental, Social and Governance (ESG)) looks like for our business. Changes in legislation are beginning to take place around the globe, including the US and EU banning products made with forced labour from their markets and the Corporate Sustainability Due Diligence Directive (CSDDD) legislation. If businesses don’t address this issue, it is likely to be costly in terms of reputation, fines and penalties with profits being restricted.”

Finance professionals have an important role to play. The impact the accountancy profession can have on this could be similar to that of the anti-money laundering regime, i.e. if we spot it, report it, and, in so doing, the spread of the membership could make a positive influence on business practices. As we state in The Power of One 'The CA and the organisation' paper: “Ethical principles upheld by one CA can influence many – indeed, The Power of One can become The Power of Many.”

Chartered Accountants have a significant role to play in ensuring our services are not used to further a criminal purpose. As professionals, accountants must act with integrity and uphold the law, and must not engage in criminal activity. Members in practice are also reminded of their responsibilities under anti-money laundering and related legislation, and of the obvious connection between the original crime of modern slavery and the need to launder the money generated by it.

Legislation

Legislation is increasingly becoming stricter around the globe, which businesses need to be prepared for. For example:

US law (Uyghurs Forced Labour Prevention Act)⁷ states that you cannot have access to the US market unless you can prove that there is no forced labour in the supply chain. Any goods coming out of the Xinjiang region of China are presumed to have involved forced labour and therefore cannot be imported to the US. This is the first presumptive piece of legislation.
In April 2024, the European Parliament voted to adopt the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) “requiring firms and their upstream and downstream partners, including supply, production and distribution to prevent, end or mitigate their adverse impact on human rights and the environment” ⁸. The CSDDD applies to EU companies, and non-EU companies with activities in the EU, reaching certain thresholds. For example, the rules will apply to EU and non-EU companies and parent companies with turnover of more than 450 million euro. Companies will be liable for fines of up to 5% of their global net turnover for breaching the CSDDD. In July 2024, the Directive entered into force and there is to be a phased introduction of the new rules from Summer 2027.⁹
In April 2024, the European Parliament also voted to adopt the EU’s Forced Labour Regulation which prohibits products made with forced labour from being imported into or exported from the EU.¹⁰
Germany’s Supply Chain Act has fines of up to 2% of net worldwide turnover for larger companies¹¹.
In May 2024, the Australian government passed legislation to establish its first federal Anti-Slavery Commissioner noting: “The Anti-Slavery Commissioner will further strengthen the work undertaken across government, business and civil society to prevent and respond to modern slavery by supporting victims and survivors, raising community awareness, and helping business address the risk of modern slavery practices in their operations and supply chains.”¹²
In July 2024, Scotland adopted the UN Convention of the Rights of the Child into Scottish Law. Scotland is the first country in the UK to adopt the Convention into its domestic law.

With legislation moving at pace, it can make it difficult for businesses to keep up. Companies need to comply with the current standards that apply to them and also ensure they meet the expectations of their stakeholders.

On top of legislation, investors also need to consider where the risks are. Balanced, quality disclosures provide the means to make this assessment, so it’s notable that stock markets are encouraging and sometimes mandating issuers to share more about their sustainability aspirations and activities, including human rights. For example, the London Stock Exchange has voluntary ESG reporting guidelines – 'Revealing the full picture – Your Guide to ESG Reporting'. Investors need to decide if it is appropriate and aligned with their values to invest in a company if they are not taking modern slavery seriously.

UK Modern Slavery Act 2015

In the UK there is the Modern Slavery Act 2015 (MSA). Section 54 of the MSA states that every organisation carrying on a business in the UK with a total global annual turnover of £36m or more will be required to produce a slavery and human trafficking statement for each financial year of the organisation. Please note that although most of the provisions in this Act only apply to companies in England and Wales, as Scotland has a separate Act (the Human Trafficking and Exploitation (Scotland) Act 2015), section 54 is applicable to all UK companies and any company with UK turnover regardless of where it is incorporated.

Sections 54 (4) and (5) of the Modern Slavery Act 2015 state:

“(4) A slavery and human trafficking statement for a financial year is—

(a) a statement of the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place—

(i) in any of its supply chains, and

(ii) in any part of its own business, or

(b) a statement that the organisation has taken no such steps.

(5) An organisation’s slavery and human trafficking statement may include information about—

(a) the organisation’s structure, its business and its supply chains;
(b) its policies in relation to slavery and human trafficking;
(c) its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
(d) the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;
(e) its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate;
(f) the training about slavery and human trafficking available to its staff.”

In addition, Section 54 (7) states: “If the organisation has a website, it must—

(a) publish the slavery and human trafficking statement on that website, and
(b) include a link to the slavery and human trafficking statement in a prominent place on that website’s homepage.”

It is however expected that the MSA will be reformed within the next few years. Proposed amendments were published by the government in 2020 including: Mandatory reporting requirements; extending the reporting requirement to public bodies; the required publication of modern slavery statements on a government registry; and possible penalties for non-compliance.¹³

Over 20 civil society and trade union organisations in the UK¹⁴, including Unseen, have called for legislation to introduce import controls to prevent the import to the UK of goods made with forced labour, and director disqualification and fines for companies for failure to comply.¹⁵ Following the General Election, it remains to be seen how this will be taken forward by the new government, however the likelihood of revised legislation appears to have increased. For example, in September 2024, Liam Byrne, a Labour MP and Chair of the Business and Trade Committee, called on the government to introduce a British equivalent to the US Uyghur Forced Labour Prevention Act, especially if the government wishes to build closer trading relationships with the US.

Organisations ought to be aware of the changing legislative environment, and start to prepare accordingly, as there could be significant penalties for breaches going forward.

The need to ‘walk the talk’

Most businesses in the UK operate to a high level of ethics but the UK is not immune to modern slavery.

As highlighted in The Power of One ‘Organisational culture and values’ paper, the right ‘tone at the top’ of organisations is essential. An organisation’s values, ethical principles and code of conduct, including policies and procedures in relation to modern slavery, need to be set, and then promoted, by the board to influence all in the organisation to adopt and live them. Despite the corporate rhetoric about championing ethical goals, the reality of organisational culture can be quite different, with some organisations failing to live up to their stated values. It is all too easy for an organisation just to have words on their website. The modern slavery statement should not be a tick box exercise. Organisations need to ‘walk the talk’. As the Institute of Business Ethics ¹⁶states:

“Producing a comprehensive Modern Slavery Statement that reflects the actual steps taken by an organisation and incorporates deliverable actions is one such step, but does not mean that an organisation’s efforts to eradicate modern slavery in its operations are complete.

While having a comprehensive statement is a good place to start, it should reflect genuine activities that are embedded in a company’s day-to-day operations which are aimed at increasing transparency and accountability.”

Organisations ought to know where the problems could be in relation to modern slavery and have mechanisms in place around what they’ll do if an issue is found. If no problems are being reported, then boards need to be curious as to how that can be. There is a need for proactive disclosures from businesses around what they are doing, what they found, and how issues were dealt with.

Training should be provided to improve awareness of modern slavery and ensure people know how to raise concerns via ‘speak up/whistleblowing’ channels. There is a need for risk assessments of prospective and current suppliers, and monitoring on an on-going basis including on-site inspections, unannounced audits and worker interviews. There are growing technologies for businesses to employ by geographical area to enable workers to share their experiences. Technology is allowing businesses to obtain the information much quicker, hence allowing them to focus on any issues identified. However, it also has to ensure the anonymity of the worker as well as potentially providing compensation to the worker for sharing their data.

There is a need to be suspicious and watchful of patterns of behaviour, especially if you are not the principal employer. As well as the Unseen website, there is also helpful information available on Gangmasters & Labour Abuse Authority (GLAA) website - including a list of indicators “Spot the Signs” - and links to guidance, helplines and other resources.

In 2023, ICAS published research ‘Implementing the UN Guiding Principles on Business and Human Rights into the Corporate Context’.

Key questions for consideration

Who on the board has fiducial responsibility for your modern slavery statement(s) [depending on jurisdictions you operate in] and are you being: fully transparent, showing your progress in tackling the problem – KPI reporting etc - and have a clear strategy going forward?
What is the assessment of the board of the risk in relation to modern slavery? Is it a ‘when’ or ‘if’ mentality? If it is ‘if’ then you are on the backfoot. There is a need to take the view that you are going to find something when you look, therefore how do you risk assess and prioritise.
Are you keeping up with the changes in legislation which are happening not only in the UK but also globally? Have you considered the future implications that the reforms of legislation could have for your organisation in terms of reputational, financial and custodial penalties for non-compliance?
What is your understanding of forced labour in your organisation? It could be in the supply chain for everything you procure. Very often the issue is further down the chain and therefore you need to do due diligence down the supply chain. You need to be reporting near misses. You need to know where you might have forced labour and, if you have had it, you need to know details of how it took place.
How can you prevent it in the first place? What are the fundamental changes you need to make? What happens if you pay both a contextualised living wage and align to the International Labour Organization (ILO) principles of decent work across the whole of the supply chain? However, this potentially might not be enough - there is a need to get ‘under the hood’ of your business to understand the level and scale of any exploitation.
Is it easy for people to voice concerns within your organisation? All organisations, regardless of size, should have broad policies and procedures in terms of ‘speak up’ and ‘listen up’, including in relation to modern slavery. There is a need to ensure employees know the details of the policies - whistleblowing, speak up and listen up policies and procedures should be clear and visible. Employees should be aware of how they can raise concerns, what happens to reports once they have been made, and where they can find both internal and external sources of help and advice. How many incidents of modern slavery have you found in the last 12 months, and if none why are you confident that there are no incidents? If problems are not being reported, then you need to be curious as to how that can be - don’t believe that just because it looks like there is no issue, that there is no issue.
Has consideration been given to the risk that the organisation is investing in entities with direct or indirect involvement in modern slavery as part of an investment portfolio?
What is your plan for what your business looks like in 20/30 years’ time?
How are you rapidly going to transition from an exploitative model of business/investment to a sustainable model of business where you can demonstrate and evidence no harm to people and planet, and no greenwashing?
If you work in an accountancy practice, or another business covered by the Money Laundering Regulations, are you aware of the connection between modern slavery and money laundering? Would you recognise the signs of modern slavery if you came across them in the course of your work? Would you know what to do about modern slavery if you encountered it at a client?

ICAS Code of Ethics

You need to be cognisant of your obligations in the ICAS Code of Ethics. Several sections of the Code are highlighted below.

Integrity: Preparation and presentation of financial information - CAs shall not knowingly be associated with misleading information

You may be responsible for the preparation and reporting of non-financial information for your organisation, including sustainability reporting and modern slavery statements, on which investors, creditors, employing organisations, governments, regulators and the general public might rely. You might also find yourself under pressure from others regarding the way in which non-financial information is being reported. You need to be aware of such threats and ensure you are adhering to the fundamental ethics principles when it comes to your organisation’s non-financial reporting.
Subsection 111 of the ICAS Code of Ethics provides the requirements and application material in relation to the fundamental ethics principle of Integrity.

Paragraph R111.2 contains the following requirement: “A professional accountant shall not knowingly be associated with reports, returns, communications or other information where the accountant believes that the information: (a) Contains a materially false or misleading statement; (b) Contains statements or information provided recklessly; or (c) Omits or obscures required information where such omission or obscurity would be misleading.”

You need to be cognisant that if your company is within the scope of the Modern Slavery Act 2015, a Section 54 statement is required to be made and, in accordance with the principle of integrity, you cannot knowingly be associated with misleading information in relation to that statement, and must address any threats accordingly.

Non-Compliance with laws and regulations (NOCLAR)

The ICAS Code of Ethics also contains provisions in relation to ‘Responding to Non-Compliance with Laws and Regulations’ (NOCLAR) - Section 260 for Professional Accountants in Business and Section 360 for Professional Accountants in Professional Practice.

The NOCLAR provisions require auditors or other professional accountants in public practice or business, who discover, or suspect, non-compliance with laws and regulations to assess the implications of the matter and take the appropriate action.

You should be aware that these sections of the Code cover laws and regulations involving sustainability matters, which would include modern slavery. Indeed, in the International Ethics Standards Board for Accountants (IESBA) Exposure Draft 'Proposed International Ethics Standards for Sustainability Assurance (including International Independence Standards) (IESSA) and Other Revisions to the Code Relating to Sustainability Assurance and Reporting’ (January 2024), “Protection of human rights” is now given as a specific example of a law and regulation to which the NOCLAR sections of the Code relate.

The underlying principle of NOCLAR is the same for all professional accountants i.e. they should respond to an issue and not turn a blind eye. However, NOCLAR has different requirements depending on the particular role and level of seniority of the professional accountant. Four categories of professional accountant are distinguished and specific steps are identified for each.

The classifications are:

Section 260

Senior-level professional accountants in business
Other professional accountants in business

Section 360

Auditors
Other professional accountants in public practice

Greater responsibility is placed on auditors and senior-level professional accountants in business.

Auditors also have a role in considering modern slavery in accordance with International Standard on Auditing (UK) 250 “Consideration of Laws and Regulations in an Audit of Financial Statements”.

Pressure to breach the fundamental principles

Section 270 recognises that pressure exerted on, or by, a professional accountant might create an intimidation or other threat to compliance with one or more of the fundamental principles. This could arise in relation to modern slavery.

R270.3 states:

“A professional accountant shall not:
(a) Allow pressure from others to result in a breach of compliance with the fundamental principles; or
(b) Place pressure on others that the accountant knows, or has reason to believe, would result in the other individuals breaching the fundamental principles.”

The section goes on to provide application material in relation to how you might evaluate and eliminate the threat, including disclosing the matter in line with the organisation’s ethics and whistleblowing policies.

Integrity: Having the strength of character to act appropriately

The 2022 IESBA ‘role and mindset’ revisions to the Code introduced new application material to the fundamental ethics principle of Integrity to emphasise that, for professional accountants, integrity includes having the strength of character to act appropriately when faced with challenging circumstances.

The Code states:

“R111.1 A professional accountant shall comply with the principle of integrity, which requires an accountant to be straightforward and honest in all professional and business relationships.

111.1 A1 Integrity involves fair dealing, truthfulness and having the strength of character to act appropriately, even when facing pressure to do otherwise or when doing so might create potential adverse personal or organisational consequences. Fair dealing includes respecting values of equality, diversity and inclusion.

111.1 A2 Acting appropriately involves:
(a) Standing one’s ground when confronted by dilemmas and difficult situations; or
(b) Challenging others as and when circumstances warrant, in a manner appropriate to the circumstances.

111.1 A3 It follows that a professional accountant’s advice and work must be uncorrupted by self-interest and not be influenced by the interests of other parties.”

This application material contains the substance of the concept of ‘moral courage’ which was first introduced into the ICAS Code of Ethics in 2017. ‘Moral courage’ being regarded by ICAS as an enabler – an underpinning qualitative characteristic - which helps CAs to comply with the fundamental principles. This is discussed further in ICAS’ The Power of One publication – Moral Courage. ICAS viewed this new IESBA material as reinforcing the message of moral courage and retained moral courage as an enabler in paragraphs 110.2 A0 and paragraph 270.1 A1 of the Code.

Speak Up? Listen Up? Whistleblow?

Whistleblowing and ‘speak up’ mechanisms are vitally important for the long-term success of organisations. A speak up culture allows issues to be dealt with at the earliest opportunity before they escalate. Individuals throughout organisations should be encouraged and empowered to have the confidence to ‘speak up’ if they encounter ethical issues, to promote good behaviour and to influence others. If a problem is left to fester, the potential harm that could be caused increases. Ultimately, ‘turning a blind eye’ could lead to reputational ruin for an organisation.

In 2019, ICAS published two research papers – Speak Up? Listen Up? Whistleblow? - reflecting the results of a project which investigated the experiences of ICAS Members when encountering ethical dilemmas.

Given the growing importance of sustainability related information, it may be envisaged that you will experience issues in relation to sustainability matters, including in relation to modern slavery.

In order to assist CAs, as well as resources from the Speak Up? Listen Up? Whistleblow? research, ICAS has also published guidance which focuses particularly on the importance of organisations ‘listening’ to their employees when they ‘speak up’ - Organisational culture: The importance of listening.

ICAS also provides an Ethics Buddy Service to enable CAs with an ethical dilemma, where deemed appropriate, to have confidential, informal, discussions with an experienced ICAS Member. This is a supplement to the ICAS Ethics Helpline Service as well as access to the confidential helpline of Protect, the independent whistleblowing charity.

Other guidance

Unseen

The Institute of Business Ethics

Gangmasters & Labour Abuse Authority (GLAA)

The UK government has published guidance in relation to modern slavery:
https://www.gov.uk/guidance/publish-an-annual-modern-slavery-statement
https://www.gov.uk/government/publications/transparency-in-supply-chains-a-practical-guide/transparency-in-supply-chains-a-practical-guide
https://www.gov.uk/government/collections/modern-slavery
https://www.gov.uk/government/publications/modern-slavery-industry-factsheets

ICAS ethics resources

Find out more about the ethics resources ICAS provides to support our members.

Endnotes

¹ https://www.antislavery.org/slavery-today/modern-slavery/ (accessed 15 October 2024), Anti-Slavery International, 'What is modern slavery?', fifth paragraph.

²https://www.unseenuk.org/wp-content/uploads/2024/05/Press-release-AA-2023-for-immediate-release.pdf (accessed 15 October 2024), Unseen, Press Release, 18 April 2024.

³ https://www.unseenuk.org/about-modern-slavery/ (accessed 15 October 2024), Unseen, 'What is modern slavery?'

⁴https://www.ilo.org/publications/major-publications/global-estimates-modern-slavery-forced-labour-and-forced-marriage, (accessed 15 October 2024), report by the International Labour Organization, Walk Free and the International Organization for Migration, 'Global Estimates of Modern Slavery: Forced Labour and Forced Marriage', September 2022.

⁵https://cdn.walkfree.org/content/uploads/2023/05/17114737/Global-Slavery-Index-2023.pdf, (accessed 15 October 2024), Walk Free, ‘The Global Slavery Index 2023’, pages 132 and 147

⁶ https://www.ilo.org/resource/news/annual-profits-forced-labour-amount-us-236-billion-ilo-report-finds (accessed 15 October 2024), International Labour Organization, 'Profits and Poverty: The economics of forced labour', 19 March 2024.

⁷ https://www.cbp.gov/sites/default/files/assets/documents/2024-Feb/Forced_Labor_Guidance_UFLPA_Fact_Sheet_0.pdf, (accessed 15 October 2024), US Customs and Border Protection Office of Trade Fact Sheet, Uyghur Forced Labor Prevention Act.

⁸https://www.europarl.europa.eu/news/en/press-room/20240419IPR20585/due-diligence-meps-adopt-rules-for-firms-on-human-rights-and-environment (accessed 15 October 2024), European Parliament News, Press Release, 'Due diligence: MEPs adopt rules for firms on human rights and environment', 24 April 2024, second paragraph.

⁹ https://commission.europa.eu/business-economy-euro/doing-business-eu/sustainability-due-diligence-responsible-business/corporate-sustainability-due-diligence_en (accessed 15 October 2024), European Commission, 'Corporate Sustainability Due Diligence'.

¹⁰ https://www.europarl.europa.eu/news/en/press-room/20240419IPR20585/due-diligence-meps-adopt-rules-for-firms-on-human-rights-and-environment (accessed 15 October 2024), European Parliament News, Press Release, 'Products made with forced labour to be banned from EU single market'.

¹¹ https://www.csr-in-deutschland.de/EN/Business-Human-Rights/Supply-Chain-Act/supply-chain-act.html (accessed 15 October 2024), Federal Ministry of Labour and Social Affairs, Supply Chain Act.

¹² https://ministers.ag.gov.au/media-centre/albanese-government-establishes-anti-slavery-commissioner-28-05-2024(accessed 15 October 2024), Attorney General's portfolio, Media release, 28 May 2024, third paragraph.

¹³https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/919937/Government_response_to_transparency_in_supply_chains_consultation_21_09_20.pdf (accessed 15 October 2024), Home Office, 'Transparency in Supply Chains Consultation - Government Response', 22 September 2020, pages 40 and 41.

¹⁴ https://www.antislavery.org/latest/modern-slavery-and-legal-reform-in-the-uk-what-were-calling-for/ (accessed 15 October 2024), Anti-Slavery International, 'Modern slavery and legal reform in the UK: what we’re calling for', 18 October 2022.

¹⁵ https://www.antislavery.org/wp-content/uploads/2022/10/Modern-Slavery-Bill-Supply-Chain-Principles.pdf (accessed 15 October 2024), 'Principles for strengthening measures on Supply Chains through the new Modern Slavery Bill'.

¹⁶ https://www.ibe.org.uk/resource/modern-slavery.html (accessed 15 October 2024), The Institute of Business Ethics, 'Modern Slavery', 18 October 2019.

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Modern slavery - what CAs need to know