The Commonwealth modern slavery legislation (the Modern Slavery Act 2018 (Cth) (‘Act’) came into effect on 1 January 2019.
The Act asks organisations to identify the risk of modern slavery occurring in their operations and supply chains and set out the steps they are taking to address the risk (through reporting requirements).
At the G20 Summit in 2017, member countries signed a declaration to eradicate all forms of modern slavery specifying that businesses should bear the onus of responsibility to ensure their supply chains are free from forced labour, child labour and other forms of modern slavery. As reported by the Walk Free Foundation, there are over 40m people living in Modern Slavery across the globe, with over 65% being from the Asia-Pacific region and over 4,000 people in Australia enslaved. Modern Slavery generates approximately US$150 billion per year for the private economy. Australia, along with the UK, France, Germany and Canada are one of the first countries to introduce a Modern Slavery Act.
What is ‘modern slavery’?
The Act defines modern slavery as including eight types of serious exploitation:
- trafficking in persons
- slavery, servitude
- forced marriage
- forced labour
- debt bondage
- the worst forms of child labour and
- deceptive recruiting for labour or services.
It does not apply to practices like substandard working conditions or underpayment of workers. However, these practices are also illegal and may be present in some situations of modern slavery.
What does it mean for my business?
While a business may not directly engage in modern slavery practices, the nature and extent of modern slavery means that there is a high risk that it may be present in a business’ operations and supply chains. Obvious examples include forced labour including where businesses may engage overseas workers in manufacturing or farming through third party labour hire businesses that have confiscate workers’ travel documents. A key challenge for some company’s will be engaging directly with third party suppliers/ brands to seek alignment in policies and practices to ensure compliance with their own Modern Slavery commitments.
What is my reporting obligation?
For Australian businesses the first reporting year will be for FY20 with reports due by 31 December 2020.
Under the Act, businesses will be required to submit annual statements to the Department of Home Affairs (‘reporting entities’) if they:
- have consolidated revenue of at least AUD$100 million over the twelve month reporting period; and
- are an Australian entity at any time in the relevant reporting period; or
- are a foreign entity carrying on business in Australia at any time in the relevant reporting period.
|Who needs to report||What is included in the statement|
|Businesses that have consolidated revenue of at least AUD $100m in the twelve month reporting period; and||Identification of the reporting entity|
|Are an Australian entity at any time in the reporting period; or||Description of the reporting entity’s structure, operations and supply chains|
|Are a foreign entity carry on business in Australia in the reporting period||Description of the risks of modern slavery practices in the operations and supply chains of the reporting entity and any entities it owns or controls|
|Description of the actions taken to address these risks including due diligence and remediation|
|Description of the effectiveness of these actions|
|Description of the process of consultation with any entities that the reporting entity owns or controls|
These statements will be a public document and must meet specific requirements for approval and publication.
What if don’t submit my statement?
Much like the UK Act that came before it, the most controversial aspect of the Act is the fact that it does not impose penalties on companies for failing to lodge a report or for lodging an incomplete report, rather it relies on transparency through disclosure.
The Minister may only require a business to explain its noncompliance or take remedial action, such as providing a statement that meets the requirements for approval set out in the Act. If the business does not comply, the Minister may publicly identify the entity as being noncompliant. Hence, enforcement of the Act really relies on civil society and consumers.
For the same reasons, the benefits of businesses submitting statements is that they provide companies with an opportunity to showcase their social performance and enhance their reputation.
What should I do next?
- review your operations and supply chains (in Australia and overseas) to identify and assess risks of modern slavery. Update your supply agreement to address issues of modern slavery;
- assess effectiveness of internal controls to prevent modern slavery and new controls for additional risks identified (for example wage audits, employment screening, ethical sourcing reviews, human rights and OH&S audits). Consider implementing a modern slavery policy;
- amend your supply agreements to allow for surprise audits of your suppliers’ factories, farms or operations; and
- prepare and submit a modern slavery statement.
For more information, for assistance in creating a Modern Slavery policy, assessment of your obligations, assessment of your supply chains or to prepare your Modern Slavery statement for public record, please contact Tim Hall or Freya Sinickas.