CORE believes that companies should be more transparent about the risks and impacts that their operations can have on people and the environment. Large companies should publish this information in their annual reports, enabling investors and other stakeholders, including civil society to scrutinise the actions that companies are taking to manage and mitigate their risks and impacts. Legal requirements for large companies to report this information are the most effective way to provide clarity for business on what’s required and to create a level playing field for companies.
As a result of CORE’s company law campaign, a requirement was included in the Companies Act 2006 for directors of UK companies to have regard to the impact of the company’s operations on the community and the environment; this was amended in 2012 to include human rights. Directors of companies listed on the main UK markets must report annually on how they have fulfilled this duty.
A new European-wide reporting requirement (the non-financial reporting directive) was introduced in 2014 for ‘Public Interest Enterprises’ with over 500 employees. The directive must be transposed into UK law by 6 December 2016. In February, the UK government published a consultation document setting out options for the transposition.
CORE is concerned that one the options proposed is to repeal existing UK reporting requirements and to replace these with a requirement applying only to PIES with over 500 employees. This would dramatically reduce the scope and effectiveness of the UK reporting regime and is not supported by the Financial Reporting Council, the body responsible for overseeing corporate reporting in the UK. Rather than restricting reporting requirements, CORE would like to see the current requirements in the Companies Act extended to large, non-listed companies. Read our response to the Department for Business Innovation & Skills consultation on Non-Financial Reporting here.
Modern Slavery Act (2015)
The Modern Slavery Act – which received Royal Assent in March 2015 – provides an important opportunity to improve the transparency of UK companies’ operations and introduce measures to identify and address slavery in their supply chains.
In March 2016, CORE and our partners published Beyond Compliance: Effective Reporting Under the Modern Slavery Act, setting out our initial thinking on how companies can use the new provision to link reporting to the wider due diligence needed to eradicate human trafficking, forced labour and slavery from their supply chains. This complements the Home Office practical guide for companies on the supply chains provision, which provides some useful pointers on producing the statement and a list of other guidance documents and resources.
During the development of the Modern Slavery Bill, CORE was instrumental in securing the inclusion of a clause on Transparency in Supply Chains (TISC), requiring that businesses covered publish a “slavery and human trafficking statement” setting out the steps taken to ensure that slavery and human trafficking are not taking place within their supply chains and within their own businesses. Following a public consultation to which CORE responded, the government announced in July that all companies with a turnover of more than £36m operating in the UK would be covered by the new requirement.