Part 1 – Introduction to the Australian Modern Slavery in Supply Chains Reporting Requirements
In late 2017 the Commonwealth Government announced that it proposed to enact Australian Modern Slavery in Supply Chain Reporting Requirements (Reporting Requirements).
The announcement came amid an increasing international and domestic focus on addressing modern slavery in the business community, including throughout the extended supply and transport chains. Similar legislative schemes have been implemented or proposed in the United Kingdom, United States of America, France, Netherlands and European Union. Further to that, the Modern Slavery Bill 2018 has been introduced in New South Wales.
The Chartered Institute of Procurement and Supply recently conducted an 'Australian Modern Slavery Survey'. It showed that:
- one per cent of respondents did not think they will be able to comply with the Reporting Requirements based on current management practices
- 20 per cent did not have measures to ensure supply chains were free from modern slavery
- 80 per cent indicated that reputational risk of identifying modern slavery in supply chains was the central concern of businesses.
While the Commonwealth Government is yet to introduce a Bill of its own, the recommendations in the final report, Hidden in Plain Sight (Final Report) released by the Joint Standing Committee on Foreign Affairs, Defence and Trade (Committee) in December 2017 provides some indication of what the national Reporting Requirements will look like.
In summary, the Final Report suggests that the Reporting Requirements will:
- require certain entities to provide Modern Slavery Statements
- provide for an administrative and compliance framework around the Reporting Requirements, to promote awareness of, and transparency in relation to, modern slavery in supply chains.
This article takes a closer look at the expected Reporting Requirements and considers the implications for businesses with supply chains and supply chain businesses.
A closer look at the expected Reporting Requirements:
What is modern slavery?
Modern slavery includes:
- modern slavery crimes already recognised by our legal system, such as slavery, servitude, forced labour, trafficking in persons, forced marriage, child trafficking, debt bondage and other slavery-like practices
- child labour and child exploitation
- any other slavery-like practices, which includes practices that do not meet the threshold for 'slavery' (i.e. the exercise of ownership rights over another person) but nonetheless involve serious exploitation. The inclusion of this broad sub-category of modern slavery indicates flexibility in the proposed terms of the Reporting Requirements to recognise the range of exploitative practices in modern supply chains.
Who will the Reporting Requirements apply to?
The Committee recommends that Reporting Requirements should apply to entities who meet certain threshold requirements and whose activities involve the supply chain. This is explained in our table below.
What information must be reported and how?
The Committee proposes that reporting will come in the form of a Modern Slavery Statement. Modern Slavery Statements will contain information about:
- the entity's structure, its business and its supply chains
- its policies in relation to modern slavery
- its due diligence and remediation processes in relation to modern slavery in its business and supply chains
- the parts of its business and supply chains where there is a risk of modern slavery taking place
- the steps taken to assess and manage any risk of modern slavery
- its effectiveness in ensuring that modern slavery is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate
- the training of its management and staff in relation to modern slavery and compliance measures undertaken by the business
- any other actions taken.
There are likely to be additional requirements for the board or board equivalent of each entity to approve its Modern Slavery Statement and for Modern Slavery Statements to be signed by each entity's director or a person holding an equivalent position.
How often will reports be required?
Entities will be required to provide their Modern Slavery Statements within five months after the end of each financial year.
What happens with the Modern Slavery Statement?
Entities over the threshold will be required to publish their Modern Slavery Statement on their websites or in their annual reports if they do not have a website. It is also likely that Modern Slavery Statements will be published on a central registry, set up for the special purpose of administering and record keeping under the scheme. This means that the public will be able to identify reporting entity's policies and practices in relation to the risks of Modern Slavery in its supply chain.
What happens if my business does not provide a compliant Modern Slavery Statement?
Entities that do not comply with the Reporting Requirements may:
- have penalties imposed on them. Penalty provisions are likely to be enforced from the second year of reporting onwards
- risk negative publicity, as their non-compliance will be listed on the central repository
- miss out on procurement opportunities with the Australian Government. The Committee recommends that the Government should introduce a requirement to procure only from entities that complete a Modern Slavery Statement
- miss out on supply opportunities with other business who determine that they will only deal with modern slavery compliant businesses.
Who does my business report to?
An Independent Anti-Slavery Commissioner will likely be appointed and become the key reporting body.
Reporting is likely to be aligned with reporting to the central repository which will publish Modern Slavery Statements and lists of entities required to comply with the Reporting Requirements. ASIC may also have a role in determining how penalties should be administered.
Stay tuned for Part 2 of our introduction to the Australian modern slavery reporting and compliance requirements, which will consider in detail some practical and commercial implications that will arise from the new scheme.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.