Lancaster University Management School (LUMS) research into how companies report on modern slavery within annual reports has been published today as part of the Financial Reporting Council’s Annual Review of Corporate Governance.

Researchers reviewed firms’ reporting on modern slavery governance, policies, and due diligence in Modern Slavery Statements within annual reports, and compared this with a framework developed by the Business & Human Rights Resource Centre.

Findings reveal:

• 42% of companies discussed, to some extent, the person/ department/committee(s) responsible for overseeing modern slavery in their annual report
• Only 19% referred to key performance indicators or other non-financial performance indicators relating to modern slavery
• 15% of companies reported, to some extent, on their assessment of risks relating specifically to modern slavery in their annual reports, compared to 72% disclosing this within their Modern Slavery Statement (although half of the latter were only partial disclosures)
• Just 13% of companies explicitly discussed board-level decisions relating to modern slavery in their annual report with just 2% referring to the long-term impact of modern slavery-related issues on their business
• 9% of companies provided evidence in their s.172 statement (the section in an annual report which allows a company to describe any factors that promote a company’s successes) that they had engaged their stakeholders on the topic of modern slavery, while only 2% reported on how any gathered views had helped inform board decisions.

Professor Steve Young from LUMS’ Department of Accounting and Finance designed the study and directed the research for the Funding Research Council (FRC). He said:

“It was disappointing to find that reporting policy in modern slavery statements remains largely descriptive and superficial, with little attempt to critique performance and highlight areas of concern. The evidence suggests that modern slavery considerations remain surprisingly low on management’s list of priorities in many companies.”

Overall, the Annual Review of Corporate Governance found that there was a general improvement in reporting against the UK Corporate Governance Code. The report highlights areas of high-quality reporting, however, says there is still room for further improvement in areas such as substantive disclosures on Board appointments, succession planning and diversity.

Sir Jon Thompson CEO of the FRC said: “The best governance reporting offers transparency that goes beyond broad-brush declarations and sets out clearly and concisely how the Principles of the Code were applied and the nature of compliance with the Provisions of the Code. This supports public confidence in business.

“As we emerge from the pandemic, companies should use this report’s examples of good corporate governance policies and reporting to deliver long term benefits for the company for all its stakeholders, the economy and society as a whole.”

Professor Steve Young focuses his research on company performance and annual reporting, and works as part of a multi-disciplinary team across Lancaster University– involving colleagues from the School of Computing and Communications and the ESRC Centre for Corpus Approaches to Social Science (CASS) – which studies companies’ financial reports and the language therein.

His expertise has led to consultancy work for the Financial Conduct Authority (FCA) – the primary financial markets regulator in the UK – the Pensions and Lifetime Savings Association (PLSA) – an industry body representing pension funds in the UK – and RPMI Railpen, who manage the Railways Pension Scheme.