Do you understand the risk of modern slavery to your organisation’s supply chain?

15 July 2020

The Modern Slavery Act 2018 (Cth) (Modern Slavery Act) reporting requirements came into effect on 1 January 2019. It was enacted to address the risk of modern slavery in an organisation’s supply chain and establishes Australia’s national modern slavery reporting requirements.

Modern slavery refers to a range of serious forms of exploitation, including forced labour, debt bondage, human trafficking, slavery, servitude and child labour.

The United Nations and Walk Free (an initiative of the Minderoo Foundation) estimate in 2016, 40.3 million people were victims of modern slavery around the world[1]. Australia is not immune to modern slavery; Anti-Slavery Australia estimate there are almost 1900 victims of modern slavery in Australia and only one in five are detected[2].

NSW has enacted its own modern slavery act, Modern Slavery Act 2018 (NSW) (NSW act). This act is more stringent than the Commonwealth modern slavery act with non-compliance breaches subject to penalties of up to $1.1 million. It is applicable to companies with annual consolidated revenue of at least $50 million and covers only 'commercial organisations' who have staff in NSW.

The NSW act is due to commence on or before 1 January 2021 so, while not enacted yet, it is recommended for impacted businesses to analyse their preparedness to report under the NSW act.

Types of organisations the Commonwealth Modern Slavery Act applies to

The Modern Slavery Act is applicable to a wide range of entity types. This includes legal entities such as:

  • Companies.
  • Trusts.
  • Superannuation funds.
  • Other types of investment organisations.
  • Individuals, associations and partnerships.

Both commercial entities and not-for-profit entities are included within the purview of the Modern Slavery Act and extends to acts and omissions outside Australia.

Any Australian entity which has a consolidated revenue of AU$100 million or more during its reporting period, or, any foreign entity carrying on business in Australia at any time in that reporting period, is required to meet the ‘reporting obligations’. The act is applicable to commonwealth entities and has provision for voluntary reporting by entities to which the act is not applicable.

Reporting obligations of the Commonwealth Modern Slavery Act

The Modern Slavery Act places certain reporting obligations on the reporting entities. Impacted organisations are required to annually report the risk of modern slavery to their operations and supply chains, along with the entities they own or control. They must then report on the actions taken to mitigate those risks in a report including information on the seven mandatory requirements, which are:

  • Clearly identify the reporting entity and its subsidiaries.
  • Provide details of the entities’ and subsidiaries’ structure, operations and supply chain.
  • Evaluate risk of modern slavery vulnerabilities in the entity’s operations or supply chain.
  • Inform on the actions taken to address the identified risks.
  • Assess effectiveness of actions taken to address the identified risks.
  • Inform on the process of consultation with other controlled entities.
  • Inform on other relevant matters such as modern slavery advocacy; participation in external forums on modern slavery; partnering with civil society or industry body to increase awareness of modern slavery; or any other similar activities to address modern slavery.

Reports made under the modern slavery act are public documents and will be published by the Minister of Home Affairs on an online central register that will house all modern slavery statements, including voluntary statements. The Government plans to launch the register in 2020 and has established a standalone domain name www.modernslaveryregister.gov.au. The statements will be freely and easily available to anyone who wants to access them so entities should be careful to consider that this when preparing their reports.

Commonwealth Modern Slavery Act reporting timelines

The Modern Slavery Act came into effect from 1 January 2019, meaning this is the first complete financial year reporting is required.

An organisation's modern slavery statement must be submitted within six months after the end of the entity's financial year. However, due to COVID-19, the reporting timeline of six months has been temporarily extended by three months for all entities whose reporting period ends on or before 30 June 2020. The six-month deadline for reporting periods ending after 30 June 2020 remains unchanged.

As an example, an entity with a financial year running from July to June would have their first reporting period from July 2019 to June 2020. Under normal circumstances, their reporting deadline would be 31 December 2020, however due to COVID-19, this has been extended to 31 March 2021.

Entities which report in other international jurisdictions may still have to submit the reports as per the timelines of those countries.

How reporting expectations have changed due to COVID-19

The uncertain economic conditions around the world has placed entities under financial stress making them susceptible to modern slavery risk and worker exploitation.

The Australian Border Force (ABF) has issued a guidance statement to address the enhanced risk of modern slavery in global supply chains. The guidance reiterates the importance of maintaining good relations with suppliers and having an open communication channel to be able to identify any early indicators of modern slavery.

There is an expectation from the ABF that reporting entities will explain how COVID-19 has impacted their supply chains and outline what they have done to manage the enhanced risks in their modern slavery statements.

How to prepare for modern slavery reporting

While most companies who have a turnover greater than AU$100 million and are subject to the Commonwealth Modern Slavery Act have already started preparing for the annual submission, the entities which may become subject to the NSW act can also take a number of steps to be better prepared.

Irrespective of whether the turnover of your entity is greater than AU$100 million or not, some of the actions that entities can take in preparation of their reporting obligations are:

1. Understand your supply chain and suppliers.

The starting point for this preparation is to understand the nature of goods produced and services provided by suppliers, your vendor mix and domestic vs international purchases.

2. Perform a Risk Assessment.

Perform a risk assessment of all the suppliers to identify those who may be potentially higher risk for modern slavery due to the type of product/services, geographic location of manufacturing facilities (onshore/offshore), use of sub-contractors or other similar factors.

3. Policy Framework.

Develop a policy framework to support modern slavery reporting readiness. This could include policies such as supplier code of conduct, modern slavery or human rights policy, grievance reporting mechanism or anonymous reporting mechanism, procurement policies and procedures, standard contract templates with modern slavery clauses or legal review of contracts, supplier due diligence and monitoring mechanism.

4. Roles and responsibilities.

Consider assigning the responsibility to Senior Management or Executive level.

5. Reporting.

Develop ongoing periodic reporting processes to Senior Management or Executives to inform on the progress, issues and matters related to modern slavery.

If you have any doubts about your reporting obligations or need help in meeting your reporting obligations, contact the Findex Risk Consulting team, who can help and guide you.

[1] https://www.minderoo.org/global-estimates-of-modern-slavery/

[2] https://antislavery.org.au/modern-slavery/