In an eventful year and with the first season of modern slavery reporting deadlines fast approaching, it is important to revisit these obligations and their underlying objectives.
What is modern slavery?
Modern slavery describes the use of coercion, deception, threats and financial pressures to exploit and undermine the freedom of 40 million workers around the world. These situations include but are not limited to:
- human trafficking
- forced or unpaid labour
- wage theft
- unsafe conditions
- inadequate accommodation
- debt bondage
- passport confiscation
- child labour
- deceptive recruiting methods.
Modern slavery in the property and construction sector
Property and construction is a labour-intensive sector heavily reliant on international raw material supply, complex global supply chains and foreign labour.
Reliance on imported raw building materials and complex supply chains means that companies often have poor visibility of the manufacturing process and less confidence that the materials and services they use are ethically sourced.
Labour-intensive industries are more susceptible to modern slavery due to the high demand for low-skilled labour forces globally. For example, Qatar's development requirements to host the 2022 FIFA World Cup has seen a huge increase in demand for manual labour and an influx of migrant workers. There have also been widespread reports of modern slavery practices and migrant worker mistreatment as a result of this infrastructure boom.
One does not need to look as far as Qatar to observe instances of modern slavery. These practices are common in developed countries, including Australia.
Examples of high-risk functions within the property and construction sector include:
- corporate: Hospitality, company merchandise and promotional item procurement
- construction: Labour, raw materials and manufactured plant and equipment
- asset management: Cleaning, security, preventative and reactive maintenance.
Australian companies and foreign entities conducting business in Australia with a consolidated revenue of over $100 million are required to submit an annual modern slavery statement under the recently enacted Modern Slavery Act 2018 (Cth) (Act).
The original deadlines for the first round of reporting under the Act were extended by three months to allow entities to meet their obligations and assess new modern slavery risks linked to the COVID-19 pandemic. The below table shows the first round of deadlines for modern slavery statements, which are dependent on a company's financial reporting period.
Approximately 3,000 companies will be subject to this first round of reporting and must disclose the following seven mandatory reporting criterion in their statements:
- identify the reporting entity
- describe the reporting entity's structure, operations and supply chains
- describe the risks of modern slavery practices in the operations and supply chains of the reporting entity and any entities it owns or controls
- describe the actions taken by the reporting entity and any entities it owns or controls to assess and address these risks, including due diligence and remediation processes
- describe how the reporting entity assesses the effectiveness of these actions
- describe the process of consultation with any entities the reporting entity owns or controls (a joint statement must also describe consultation with the entity giving the statement)
- provide any other relevant information.
The Modern Slavery Register
The Federal government launched the Modern Slavery Register on 30 July of this year, which is the World Day against Trafficking in Persons. The register will act as a public repository of modern slavery statements.
Functionally, the register allows companies to submit modern slavery statements and the Australian public to:
- search historical statements by any term or phrase
- refine results by reporting period, entity revenue, company location, industry sectors and overseas reporting obligations
- download and export statements or lists thereof
- subscribe for updates as company statements are published.
In practice, this register will act as a self-regulation mechanism using transparency and publicly available information to drive compliance. The government has opted to apply reputational pressure rather than harsh financial penalties for non-compliance. It will no longer be possible for companies to enjoy blissful ignorance as public perception and company reputations will be impacted by the information laid bare on the register.
Opportunities and risks for companies
Boards must look at the register as an opportunity to positively impact the lives of the people they interact with directly and indirectly around the world. A bi-product of this is highlighting their ethical sourcing capability and building their reputation as an organisation
Proactive boards are looking at the register not as another reporting hurdle but as a chance to refresh and develop best practices.
This process starts with the ‘heart' of the organisation:
- what are its values?
- what will it stand for?
- what difference does it want to make?
These values should govern the sourcing decisions of the company.
The ‘head' of the organisation can then drive the code of conduct by implementing changes, such as:
- centralised subcontractor management and oversight
- consolidation of supplier information
- supply chain auditing and due diligence
- risk assessments in high-risk regions and functions (as above)
- grievance and remediation mechanisms.
Companies who do not have the necessary visibility of their supply chains and labour force should see this as a chance to review the company's values and align their practices with the Australian standard. If they choose not to, they will damage their reputation, public trust, investor and lender confidence and employee perception as their statements are easily compared with those of industry leaders at the click of a mouse.
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.