Modern Slavery Reporting for Australian Businesses

Today, the Assistant Minister for Home Affairs, the Hon Alex Hawke MP, tabled the Modern Slavery Bill 2018 in Parliament. The new reporting regime will have a significant impact on larger businesses operating in or from Australia.

The Modern Slavery Bill requires businesses based, or operating, in Australia, which have an annual consolidated revenue of more than $100 million, to report annually on the risks of modern slavery in their operations and supply chains, and actions to address those risks. Entities not caught by this threshold can opt in.

Under the Bill, businesses will be required annually to submit a "modern slavery statement" that complies with the following mandatory criteria (which may change as the Bill passes through Parliament and is referred to a committee for consideration). In summary, the statement must:

  • identify the reporting entity;
  • describe the structure, operations and supply chain of the reporting entity;
  • describe the risks of modern slavery practices in the operations and supply chains of the reporting entity and any entities that the reporting entity owns or controls;
  • describe the actions taken by the reporting entity and any entity it owns or controls, to assess and address those risks, including due diligence and remediation processes (the Bill notes that those actions may include the development of policies and processes
  • to address modern slavery risks and training for staff about modern slavery);
  • describe the process of consultation with:
    • any entities that the reporting entity owns or controls; and
    • in the case of a reporting entity covered by a joint statement, the entity giving the statement; and
  • include any other information that the reporting entity, or the entity giving the statement, considers relevant.

Entities can report on behalf of their subsidiaries and entities they control by publishing a "joint statement".

The modern slavery statement must be approved by the 'principal governing body' of each reporting entity or an entity in a position to influence or control each reporting entity (for a company, this will be the board of directors) and otherwise by at least one reporting entity. It must be signed (electronically) by a 'responsible member' of the approving entity, normally a company director or secretary.

The statement must then be sent or uploaded to the (soon to be established) register of modern slavery statements to be run by the Commonwealth Government and freely accessible on the internet.

The Bill stipulates that Commonwealth corporate entities and companies that meet the monetary threshold will also be required to report. Further, the Commonwealth Government will be required to report on behalf of all non-corporate Commonwealth entities.

The introduction of this Bill comes after several Government inquiries and consultations into the prevalence of modern slavery in Australia and globally, and is modelled on the UK's Modern Slavery Act 2015, butwith some significant differences. For further background on the development of this law, check out our Modern Slavery Act hub.

The Bill will likely become law later this year, as is or with amendments. We anticipate that the first reporting year for businesses reporting in accordance with an Australian financial year will be 2019-20, although this will depend upon the progress of the Bill.

Business Impact of Modern Slavery Statements

The new reporting regime will impact significantly on the way that Australian businesses deal with their suppliers, contractors and customers. Reporting entities will need to act quickly to get ready to comply with the new regime and smaller suppliers will also be affected.

Businesses that operate in Australia and already report under UK laws may find it easier to comply with the Australian reporting requirements, but they will still need to watch out for differences in the two regimes and adapt their reporting accordingly – this includes verifying that they have complied with the Australian mandatory criteria.

Although the Commonwealth reporting regime is currently targeted at larger businesses – those with annual gross consolidated revenue of at least $100 million – there will inevitably be a "trickle-down" effect as reporting entities seek information and understanding from their group entities and suppliers about the modern slavery risks in their supply chains and how best to manage them. Suppliers to the Commonwealth Government ought to expect that their modern slavery strategies will be interrogated as agencies develop their own response to the Act.

In addition, businesses with at least $50 million in annual consolidated revenue and one or more employees in New South Wales will need to comply with the NSW Modern Slavery Act, which was passed on 21 June 2018. See our update here.

These new reporting requirements will impose a regulatory burden on businesses, but there are opportunities too. Reporting entities can use the opportunity to review their procurement and risk management processes and check whether they are effective in identifying and addressing not just modern slavery risks but other legal, commercial and reputational risks in their operations and supply chains.

This continues to be a complex undertaking and we anticipate the new reporting regimes will prompt businesses to create new and innovative tools to help them better understand and manage their risks.

For more information about what companies are doing in this area, check out our global best practice and human rights research here or contact us.

Preparing for the new reporting regimes – what next?

At minimum, 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.

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.