Australian Modern Slavery Act
By Abigail McGregor, Head of Business Ethics Anti-corruption Group, Norton Rose Fulbright Australia
During the course of the year, the term ‘modern slavery’ has gained significant recognition in mainstream Australian society, parliaments and in the wider business community. Given the confronting statistics on the prevalence of slavery in the supply chains of products that commonly end up in our homes, there has been growing acceptance that legislation is necessary to help eradicate slavery in the 21st century.
Modern Slavery Legislation
To this end, the Commonwealth Modern Slavery Bill 2018 (Bill) proposes a reporting requirement for large businesses and other entities in Australia to report publicly on the actions they have taken to address modern slavery risks in their operations and supply chains. The annual statements will need to be adopted by the Board of Directors and signed by one board member. Mechanisms exist within the Bill to permit a degree of group reporting.
In many ways, the Bill mirrors the UK Modern Slavery Act. An important difference, however, is that the proposed reporting criteria are mandatory (whereas in the UK the criteria are recommended only - which has resulted in few reports covering each criteria). That means that a statement prepared for the UK will not necessarily comply with the Australian law. The criteria proposed in the Bill are:
- identify the reporting entity
- describe the structure, operations and supply chains of the business;
- describe potential modern slavery risks in operations and supply chains of the reporting entity and any entities it owns/controls;
- describe the actions taken to assess and address these risks, including due diligence and remediation processes (including policies and training);
- describe how the business assesses the effectiveness of its actions; and
- the process of consultation with controlled entities (if reporting for a group).
NSW already has a Modern Slavery reporting requirement enshrined in legislation. The NSW legislation is awaiting proclamation and regulation before commencement. NSW has also enacted penalties of up to $1.1million for failure to report or provide information that the person knows or ought reasonably know is false or misleading, whereas there are no penalties proposed at Commonwealth level. The misleading or deceptive conduct provisions in the Australian Consumer Law will apply to statements.
Importantly, both regimes require reporting from their respective governments. As the largest acquirers of goods and services in Australia, they will contribute to the race to the top. Businesses transacting with the Commonwealth of Australia and New South Wales should anticipate being asked about how they manage modern slavery in their operations and supply chains.
The Commonwealth reporting requirements and the reporting threshold, currently set at $100 million annually in the Commonwealth Modern Slavery Act, are likely to remain unchanged. The Bill is due to be debated in the House of Representatives over the next few sitting weeks and in the Senate thereafter, with a view to the Act being passed by the end of the year. This will be followed closely by NSW Regulations on the exact reporting criteria under the NSW Modern Slavery Act.
It’s likely that there will be two separate reporting regimes in Australia by the end of the year:
- Businesses and organisations carrying on business in Australia with consolidated revenue ≥$100 million globally will report only in the Commonwealth; and
- Businesses and organisations with employees in NSW and an annual turnover of between $50 million and $100 million will report only in NSW.
It will be possible to opt into the Commonwealth regime even if a reporting entity does not meet the threshold. The Hon Premier Gladys Berejiklian stated that her Government will ensure the NSW reporting obligations will not overlap with any Commonwealth regulations. It remains possible that NSW will decide to increase its threshold by regulation to $100 million and entirely pass responsibility for managing reporting to the Commonwealth, thereby delivering only one reporting regime. This will likely be welcomed by business.
Preparing for the new reporting regime
Although it is subject to debate, we anticipate that for reporting entities with an Australian financial year, the first reporting year will be 2019-2020, with the initial report due within 6 months of the end of financial year.
It is important for reporting entities to start planning now so that they can properly describe and respond to modern slavery risk identified during due diligence. The head start gained from starting now will also maximise the opportunities for your initial statement being a good news story.
Businesses that have not already done so should consider taking the following steps:
- Map the organisation’s structure, businesses and supply chains.
- Formulate policies in relation to modern slavery – this will involve collating current policies, identifying gaps, adapting existing policies and formulating new policies, as needed.
- Carry out a risk assessment – identify those parts of the business operations and supply chains where there is a risk of modern slavery taking place.
- Assess and manage identified risks – this may include carrying out further due diligence in the entity’s operations and supply chains and reviewing and adapting contract terms and codes of conduct with suppliers.
- Consider and establish processes and KPIs to monitor the effectiveness of the steps taken to ensure that modern slavery is not taking place in the business or supply chains
- Carry out remedial steps where modern slavery is identified.
- Develop training for staff on modern slavery risks and impacts.
Businesses should expect NGOs and others to actively compare the statements of competitors. The statements will be held by a government funded registry intended to facilitate that comparison and encourage the “race to the top”.
Norton Rose Fulbright is a global law firm, with 63 offices across Europe, the USA, Canada, Latin America, Asia Pacific, the Middle East and Central Asia. We have experience in Australia and globally assisting clients with modern slavery risk management and reporting, as well as broader business and human rights advice. We provided regular probono assistance to the Joint Standing Committee’s Inquiry, made a submission to the Inquiry (No. 72) and participated in the public hearing held in Sydney on 23 June 2017. Click here to download our submission. We actively participated in the Attorney-General’s Department national consultation process to refine the Government’s proposed Modern Slavery in Supply Chains Reporting model including providing detailed submissions and regular consultation.
For more information, contact Abigail McGregor to discuss how modern slavery legislation may impact on your business and ways to manage your supply chain risks.