Does Your Business Need To Give A Modern Slavery Statement?

Modern slavery can taint the supply chain of any Australian business. To mitigate this risk, the Modern Slavery Act 2018 requires certain entities and encourages others to give annual modern slavery statements to the Commonwealth Attorney-General’s Department.

Modern slavery reporting requirements under the Modern Slavery Act have been in place since 2019, and thousands of statements are now lodged across Australia each year.

Yet many businesses remain unsure whether they are required to report, what their statement must include, and what the consequences of non-compliance look like.

With proposed reforms potentially lowering the reporting threshold and introducing financial penalties for the first time, there has never been a better time to understand your obligations.

What Is Modern Slavery?

Generally, modern slavery refers to serious crimes and human rights abuses such as human trafficking, forced and child labour, and forced marriages. Modern slavery remains prevalent within Australia and across the globe. Recent statistics published by the International Labour Organisation estimated that 50 million people were subjected to slavery on any given day in 2021.

Modern Slavery Is Increasingly an Issue in Commercial Litigation

Modern slavery disputes affecting businesses and their supply chains are increasingly appearing in commercial litigation. Examples from court decisions across the globe include:

• A labour hire company in Australia which hired employees from Vanuatu and underpaid them and deprived them from access to adequate food and accommodation.¹
• A labour hire company in the United Kingdom which failed to pay the minimal wage and provide access to food, water and rest to its Lithuanian workers who were contracted to catch chickens for a major supplier of poultry products to various retailers.²
• Multinational chocolate manufacturers in the United States sourcing cocoa from a part of the world rife with people trafficking and child slavery.³
• A Canadian mining company using the forced labour of Eritrean military conscripts in one of its mines.⁴

What Is the Modern Slavery Act 2018?

The Modern Slavery Act 2018 (Cth) mandates entities publicly report their actions to address modern slavery risks in their supply chains.

This involves the entity giving the Commonwealth Attorney-General a modern slavery statement within six months after the end of their reporting period (usually by 31 December at the end of each year). The statements are then registered on the Modern Slavery Statements Register which is available for public inspection without charge on the internet.

This means that a business’s modern slavery statement in Australia is publicly visible to clients, investors, procurement teams, and the broader community.

Businesses that fail to lodge, or that lodge statements of poor quality, are exposed to reputational scrutiny in an environment where supply chain ethics are under increasing commercial and regulatory focus.

For advice on your obligations under the Modern Slavery Act, please contact Coleman Greig’s Commercial Advice team.

Which Businesses Have Modern Slavery Reporting Requirements?

The Modern Slavery Act 2018 (Cth) requires that every ‘reporting entity’ gives a modern slavery statement. As far as businesses are concerned, this means entities which have a consolidated revenue of at least $100 million for the reporting period that carry on business in Australia or that are an ‘Australian entity’. Businesses may also volunteer statements if they choose.

What Must Be Included in a Modern Slavery Statement?

A modern slavery statement in Australia must satisfy the following mandatory criteria under the Modern Slavery Act 2018 (Cth):

1. identify the reporting entity;
2. describe the entity’s structure, operations and supply chains;
3. describe the risks of modern slavery within their entity;
4. describe actions including due diligence and remediation processes that have been implemented to prevent slavery within the entity;
5. describe how they assess the effectiveness of these actions;
6. describe the process of consultation within their controls and other entities; and
7. include any other relevant information.

Corporate Groups and Joint Statements

The Modern Slavery Act 2018 (Cth) facilitates reporting by corporate groups by permitting joint modern slavery statements.

This does not allow one of the entities merely signing off for the others but requires consultation between each reporting entity in the group.

What Happens If Your Business Does Not Comply?

There are no penalties for failing to give a modern slavery statement under the current legislation. However, the Commonwealth Attorney-General can publicly name and shame businesses that do not comply by publishing details of contraventions on the Modern Slavery Statements Register.

This reputational exposure is increasingly significant. Growing scrutiny of businesses’ modern slavery reporting requirements from institutional investors, government procurement teams, and major commercial clients means that non-compliance, or the absence of a statement, is unlikely to go unnoticed.

Proposed Reforms to the Modern Slavery Act

The Australian Government released the ‘Report of statutory review of the Modern Slavery Act 2018 (Cth) The first three years‘ by Professor John McMillan in 2023. The report made numerous recommendations to amend and tighten the Modern Slavery Act 2018 (Cth). Some of the more notable recommendations include:

• Lowering the threshold of what constitutes a ‘reporting entity’ to those with a consolidated revenue of $50 million for the reporting period
• Adding the following mandatory criteria to statements:
  • the incidents and risk of modern slavery the entity identified during the reporting year
  • any complaints and/or grievances expressed to the entity by staff and or other people regarding modern slavery
  • any modern slavery risk management consultations held within and outside of the entity during the reporting period
• Penalty offences for reporting entities when they:
  • fail to provide a modern slavery statement (without explanation)
  • knowingly provide false information in the statements
  • fail to comply with reporting requirements and take remedial action following a government request
  • fail to enact a due diligence system

If the proposed reforms are enacted, the number of businesses with modern slavery reporting requirements will increase significantly, and the consequences for non-compliance will move well beyond reputational exposure.

Businesses that are not currently required to report, but that would fall within the proposed $50 million threshold, should begin preparing now rather than waiting for reform to be legislated.

Footnotes

1. Fair Work Ombudsman v Maroochy Sunrise Pty Ltd [2017] FCCA 559

2. Galdikas v DJ Houghton Catching Services Ltd [2016] EWHC 1376 (QB); Antuzis v DJ Houghton Services Ltd [2019] EWHC 843 (QB); Antuzis v DJ Houghton Catching Services [2021] EWHC 971 (QB)

3. Néstle USA, Inc and Cargill, Inc v John Doe 929 F 3d 623 (2021)

4 Nevsun Resources Ltd v Araya [2020] 1 SCR 166