The UN Guiding Principles on Business and Human Rights set the expectation that companies should identify and address human rights risks, and track and communicate how effectively they do so. This global standard is reflected in various areas of UK Government policy and law. The UK Government’s 2013 National Action Plan on business and human rights states that companies should respect human rights wherever they operate. Recent amendments to EU and domestic law now place duties on companies related to disclosure about how they manage their human rights impacts.
The Companies Act 2006 requires that UK listed companies include non-financial information in a strategic report to ‘the extent necessary for an understanding of the development, performance or position of [the company’s] business’ . The Act will be revised in 2016 to incorporate provisions of the EU Non-Financial Reporting Directive of 2014.
The EU Non-Financial Reporting Directive 2014 applies to large public interest companies (including listed companies, banks and insurance companies) with over 500 employees. It requires the disclosure of information relating to human rights (among other issues) ‘to the extent necessary for an understanding of the undertaking’s development, performance, position and impact of its activity’ . Such disclosure should include the company’s policy and its outcomes, due diligence processes, principal risks, and (where relevant and proportionate) its business relationships, products or services that are likely to cause adverse impacts, along with information about how those risks are managed.
The Modern Slavery Act 2015 requires boards to approve and publish an annual slavery and human trafficking statement on their website where the business has a turnover of £36 million or more and carries out any operations in the UK. The statement may include information about:
- the organisation’s structure, business and supply chains
- policies in relation to slavery and human trafficking
- due diligence processes in relation to slavery and human trafficking in its business and supply chains
- 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
- 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, and
- training about slavery and human trafficking available to its staff.
The Financial Reporting Council’s non-mandatory Guidance on the Strategic Report states that a strategic report should contain ‘material’ information. It explains that ‘information is material if its omission or misrepresentation could influence the economic decisions shareholders take on the basis of the annual report as whole’ .
The Financial Reporting Council’s UK Corporate Governance Code states that the board should confirm in the annual report that it has carried out a robust assessment of the principal risks facing the company, including those that would threaten its business model, future performance, solvency or liquidity .
1. The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. See https://frc.org.uk/FRC-Documents/Accounting-and-Reporting/BIS-letter-guidance-on-narrative-reporting.pdf [accessed: 12 May 2016].
2. Directive 2014/95/EU of the European Parliament and of the Council 22 October 2014, amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups. See Article 19a.
3. Financial Reporting Council (2014), Guidance on the Strategic Report, Section 5.1.
4. Financial Reporting Council (2014), UK Corporate Governance Code, Section C.2.
Last updated: 13 May 2016