The Modern Slavery Act 2018 (Cth) requirements are now in full swing. Companies with reporting obligations will need to be ready to report their modern slavery risks to the Modern Slavery Statements Register in late 2020. This article covers the essentials of the new modern slavery reporting requirements, with some practical tips and guidelines to assist with compliance.
Modern slavery may be relatively uncommon in Australia, but it is estimated that there are over 40 million people in modern slavery conditions worldwide.
Over 50% of the victims of modern slavery are in the Asia-Pacific region, an important location for many Australian supply chains.
The predominant supply chain capabilities in the Asia-Pacific region include textiles, digital capabilities, financial and operational processes, electronics, manufacturing, and metals and minerals processing.
Modern slavery describes situations where offenders use coercion, threats or deception to exploit victims and undermine their freedom. It encompasses human trafficking, deceptive recruitment, forced labour, debt bondage, forced marriage, slavery, servitude, child labour, and other kinds of exploitation that violate a person's human rights and dignity.
Many Australian businesses may be unaware of the risk of slavery in their business or supply chain. Indeed, it has recently been reported that Cotton On Group and Target Australia have ceased sourcing cotton from China's Xinjiang province following an internal investigation of their supply chain, such action being prompted by an expose by ABC's Four Corners in July 20191.
REQUIREMENTS UNDER THE AUSTRALIAN MODERN SLAVERY ACT
On 1 January 2019, the Modern Slavery Act 2018 (Cth) (Modern Slavery Act) came into effect. Where previously only slavery occurring in Australia was addressed by legislation, the Modern Slavery Act addresses conduct occurring overseas where it forms part of the supply chain of an Australian business, or an overseas entity that conducts business in Australia.
Entities that are Australian or carry on a business in Australia with annual consolidated revenue of more than $100 million must now submit an annual modern slavery statement.
These obligations extend to Commonwealth entities. Other companies that do not fall within the statutory threshold may voluntarily submit statements. Statements are kept by the Minister in the Modern Slavery Statements Register, which may be accessed by the public, free of charge.
An organisation's modern slavery statement (Statement) must be submitted within six months after the end of the entity's financial year. The Statement requires board approval (which is designed to ensure high levels of corporate engagement in the issue) before it is submitted for approval by the Minister for Home Affairs (Minister). Full guidance on reporting obligations can be found here2.
There are no penalty provisions under the Commonwealth Act for non-compliance, but the Minister may take further action where an entity has failed to comply with the reporting obligations of the Act. The Minister may contact the entity with a written request to explain why no report was made. If an entity still fails to comply, the Minister is authorised to release the identity of the entity failing to comply on the register and the reasons why the Minister believes the company has failed to comply. The decision to make companies publicly accountable for non-reporting is at the Minister's discretion, but repeated non-compliance may increase the likelihood of the Minister's decision to 'name and shame'.
DOES NSW HAVE A MODERN SLAVERY ACT?
NSW was the first jurisdiction in Australia to assent to legislation aimed at combatting modern slavery practices, with the Modern Slavery Act 2018 (NSW) (NSW Act), but a commencement date for the NSW Act has not yet been announced.
Some key points to note regarding the NSW Act include that:
- it applies to companies with annual consolidated revenue of at least $50 million;
- non-compliance breaches will incur penalties of up to $1.1 million; and
- it applies only to 'commercial organisations' with employees in NSW that supply goods and services for profit or gain.
The differences between the NSW Act and the Commonwealth Modern Slavery Act (Cth) have raised constitutional issues that need to be resolved before the NSW Act can come into effect. If and when it finally commences, is likely that the NSW Act will differ from its current form.
ACTION REQUIRED FROM BUSINESSES
As it stands, around 3,000 Australian businesses are likely to be affected by the Modern Slavery Act. Although the NSW Act has stalled for now, relevant NSW entities with annual consolidated revenue of more than $50 million may be well advised to make preparations.
The following are some practical points to help prepare for the reporting obligations:
- Be prepared to be transparent
- Collect as much information as possible on your supply chains in Australia and internationally.
- Make enquiries with suppliers in order to identify modern slavery risks in your supply chains and operations.
- Record all actions the business has taken to assess and address modern slavery risks, including due diligence and remediation processes.
- Demonstrate how the business assesses the effectiveness of its actions to manage modern slavery risks.
- Involve the company's Board of Directors – they will be required to read and approve the Modern Slavery Statement.
The due date for an entity's first reporting period will depend upon its financial year. Most entities have a 30 June financial year (Australian Financial Year), so the first reporting period will be 1 July 2019 to 30 June 2020, with the report due by 31 December 2020. Organisations with a different financial year will need adjust their reporting time frame accordingly – eg those entities with a 31 March financial year (Foreign Financial Year) will need to submit their reports by 30 September 2020.
It is critical that all businesses with annual consolidated revenue of more than $100 million begin reviewing their supply chains and developing internal anti-slavery policies and frameworks to ensure compliance with reporting obligations. Many high-profile companies that do not meet the statutory threshold are also choosing to voluntarily report as part of their broader ESG commitments, and in response to increased public scrutiny of corporate social impacts.
HOW CAN WE HELP
Hazelbrook Legal can assist your business in the preparation of your modern slavery statement. We can also help with developing frameworks for identifying risks, conducting due diligence, refining policies and plans for reporting on modern slavery in your supply chain and establishing internal reporting mechanisms. We can also advise on the preparation of a company-wide commitment to combatting modern slavery. That commitment could take any form suitable to your business, including statements of intent, implementation of measures to reduce the potential for modern slavery in your supply chain, and renegotiation or amendment of contracts in your supply chain.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.