While organisations are working towards publishing their first statement regarding transparency in their supply chain or still embedding systems to ensure their next statement shows a continuous improvement approach, things are moving on.
The government has published its response to their consultation on the EU Non-Financial Reporting Directive (2014/95/EU) and issued draft regulations. The Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016 will require relevant companies to prepare a non-financial information statement as part of their strategic report covering a number of human rights issues. The new regulations have been laid before parliament and are likely to come into force very shortly as they apply to financial reporting for relevant companies and partnerships from 1 January 2017.
The Regulations apply to:
- traded companies (i.e. those with securities admitted to trading on regulated markets)
- banking companies
- authorised insurance companies; and
- those companies carrying out insurance market activities
Companies which benefit from a 'small' or 'medium sized' company exemption need not comply. Companies or groups with, on average, less than 500 employees during the relevant reporting period are also exempt.
The Regulations amends the Companies Act 2006 and whilst they sit alongside the provisions requiring the production of a strategic report, they have been kept separate from them.
If caught, an organisation will need to report to 'the extent necessary for an understanding of the company's development, performance and position' the impact of its activity relating to, as a minimum -
- environmental matters (including the impact of the company's business on the environment)
- the company's employees
- social matters
- respect for human rights, and
- anti-corruption and anti-bribery matters
The organisations policies in these areas will need to described as well as setting out how risks in these areas are managed.
Meanwhile the European Parliament has recently adopted a report requesting legislation to prevent and punish human rights abuses by businesses in third countries.
MEPs have urged the European Commission to propose binding and enforceable rules, sanctions and monitoring mechanisms for corporate human rights abuses.
In the report, MEPs also call on Member States and third countries to urgently adopt binding instruments devoted to the protection of human rights in business, specifically providing for thorough investigations into such abuses and stating that victims should have access to an effective remedy against corporations, which pierce the corporate veil where corporations have complex structures.
The report additionally calls on companies directly to carry out human rights due diligence and create internal policies on such issues.
As well as being considered best practice in the area of corporate social responsibility, these developments are likely to be a sign of things to come for many organisations. Businesses should ask themselves now, do we carry on with mere Modern Slavery Act compliance or to the extent we do not already cover these areas, bite the bullet now and move towards wider human rights policies and procedures.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.