By Neil Johnson Financial accounting and reporting What accountants can do to help fight modern slavery 16 Jul 2018 The UK National Crime Agency (NCA) reported a 35% increase in incidents of modern slavery and human trafficking in the UK in 2017. Global estimates indicate that there are 40.3 million slaves in the world – 24.9 million in forced labour and 15.4 million in forced marriage. Of the 24.9 million people in forced labour, 16 million are exploited in the private sector. In an increasingly connected world, with far-reaching supply chains, businesses cannot ignore the risk of modern slavery. And as the 2017 figure from the NCA shows, it’s not merely a problem for ‘other’ countries. Within the UK, the Modern Slavery Act that came into effect in 2015 requires companies, or parts of companies, providing goods or services in the UK with a turnover above £36 million to publish a slavery and human trafficking statement. This should set out the organisational structure (including supply chains) and detail what steps they are taking to prevent modern slavery within their own business and supply chains, identify risk areas and explain what staff training is being undertaken to combat this. The statement needs to be signed off by a director or other member of the governing body in the firm, ensuring senior level buy-in to the whole process. “The Act appears to be having a positive impact, not simply because business is taking the issue more seriously, but because the total number of convictions has increased considerably – 349 in in 2016 compared to 189 in 2014,” says Phil Hall, AAT’s head of Public Affairs and Public Policy. What are accountants doing? There have been big commitments from big firms. PwC has had a human rights policy and working group since 2012 and the Modern Slavery requirements are being met by that group. KPMG established a Steering Group, which meets on a quarterly basis, to guide their approach to Modern Slavery. Meanwhile, the chief executive of Grant Thornton in 2017 provided a clear commitment to collaborate closely with suppliers to help them understand and work towards their own obligations under the Modern Slavery Act. They already had a Responsible Purchasing Policy and now have a Supplier Code of Conduct, used for all new major suppliers of goods or in re-tendering, which clearly states Grant Thornton will cease working with a supplier if any occurrence of modern slavery is discovered. Additionally, in their role as auditors and advisors, accountants undertake modern slavery audits at businesses to identify areas of concern or risk, and for the purposes of completing legally required statements. However, it’s been questioned whether accountants are best-placed to undertake this given a traditional focus on numbers rather than social issues. “But this ignores both the multi-faceted skillsets of accountants today and the many existing requirements for ethical considerations, such as the International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants, which places a clear responsibility on professional accountants to act in the public interest,” says Hall. Furthermore, accountants can strive to clean out slavery with integrated reporting, which takes a more holistic view compared to single-capital financial reporting, which it can be argued has lost touch with modern values beyond the balance sheet and what increasingly conscious stakeholders demand, such as improving the environment and society. Turnover below £36 million? While there’s no legal obligation for SMEs to comply with section 54 of the Act, there are clear benefits to doing so, says Hall. “It’s worth remembering that the statement will appear online. Such transparency is appealing not just to suppliers, but it could prove helpful in reassuring large companies who are customers or potential customers as it provides them with certainty about their own supply chain. There’s a clear role for accountants too, as they can help SMEs understand Government guidance in this area and ensure that the SME has a statement that meets the requirements of section 54.” Indeed, AAT has inserted modern slavery compliance clauses into all its new supplier contracts for some time, even though it has a turnover well below the £36m threshold. “It is likely that we will soon begin publishing a statement in just the same way as much larger companies, demonstrating not only commitment to fighting modern slavery, but serving as a reassuring measure to our suppliers,” says Hall. “Naturally we’d encourage others to do the same.” Neil Johnson is a freelance business journalist who contributes regularly to trade publications and member organisations, covering employability, recruitment, business trends and industrial analysis.