On 29 November 2018, the Modern Slavery Bill 2018 (bill) passed both Houses of Parliament, heralding a new statutory modern slavery reporting requirement for larger companies operating in Australia. After assenting to the Bill on 10 December 2018, the Governor-General, by way of proclamation, fixed 1 January 2019 as the day on which the operative provisions of the Modern Slavery Act 2018 (Act) would commence.
The manner in which the bill was debated, with great passion in both chambers of Parliament, demonstrates the bipartisan acceptance of the need for such legislation in Australia and sends a powerful message to the business community that modern-day slavery must be addressed as a matter of priority.
First introduced into Parliament on 28 June 2018, the bill was debated in the House of Representatives before being passed on 17 September 2018, spearheaded by the former Assistant Minister for Home Affairs, the Hon Alex Hawke MP, and in more recent months, by the new Assistant Minister for Home Affairs, Senator the Hon Linda Reynolds CSC.
When are the first statements due?
The Act creates an annual reporting requirement for large businesses and other entities in Australia to report publicly on the actions they have taken to address modern slavery risks in their operations and supply chains (see below for the thresholds). Given the Governor-General’s proclamation of commencement:
- reporting entities with an Australian financial year will need to prepare their first modern slavery statement in relation to the 1 July 2019–31 June 2020 financial year. The statement has to be submitted by the end of 2020.
- reporting entities with a different financial year will report in relation to their first full financial year following commencement of the reporting provisions in the Act. They also have six months following the conclusion of their financial year to submit their statement.
Entities should expect scrutiny of their reports by NGOs, customers, consumers, investors and business partners.
What do the statements need to cover?
Reporting entities must submit a ‘modern slavery statement’ to the Minister for Home Affairs which details the following:
- the identity of the reporting entity
- the structure, operations and supply chains of the reporting entity
- 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
- the actions taken by the reporting entity and any entity that the reporting entity owns or controls, to assess and address those risks
- how the reporting entity assesses the effectiveness of such actions
- the process of consultation with any entities the reporting entity owns or controls or is issuing a joint modern slavery statement with
- any other information that the reporting entity, or the entity giving the statement, considers relevant.
These criteria are mandatory, which is a significant departure from the UK regime and means that most entities that already report in the UK will need to expand their current reporting. Entities should expect scrutiny of their reports by NGOs, customers, consumers, investors and business partners.
If the Minister is reasonably satisfied that an entity has failed to comply with the reporting requirements, then the Minister may require an explanation or remedial action. Failure to comply may result in the Minister publishing the failure in a register.
Parallel reporting regimes — NSW and Commonwealth
NSW already has a statutory modern slavery reporting requirement. The NSW legislation is awaiting proclamation and regulation before commencement.
Once both laws are operative, there will be two separate reporting regimes in Australia:
- Businesses and organisations carrying on business in Australia with consolidated revenue of ≥$100 million globally will report only in the Commonwealth
- Businesses and organisations with operations in NSW, supplying goods or services, and with an annual turnover of between $50 million and $100 million will report only in NSW.
This assumes that NSW will accept that the Commonwealth reporting regime is comparable to its own (the NSW Act provides that commercial organisations reporting under a ‘corresponding law’ will be exempt). The exact reporting criteria under the NSW law is to be prescribed by regulation. In the Second Reading Speech of the NSW Modern Slavery Act, the Hon Premier Gladys Berejiklian stated that the NSW Government will ensure the NSW reporting obligations will not overlap with any Commonwealth regulations.1 It remains possible that NSW will decide to increase its threshold by regulation to $100 million and pass all responsibility for managing modern slavery reporting to the Commonwealth, thereby delivering only one reporting regime.
Both the Commonwealth and New South Wales have, to different degrees, bound their own departments and agencies to report. That means that entities contracting with government departments and agencies will be expected to show and warrant how they are managing their modern slavery risk.
Preparing for the new reporting regimes
At a minimum, reporting entities that have not already done so should consider taking the following steps:
- Map the organisation’s structure, businesses and supply chains.
- Formulate policies and procedures 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.
Norton Rose Fulbright has developed the NRF Transform | Risk Sonar, a technological solution that helps entities identify risk in their supply chains, with an initial focus on human rights, and comply with statutory reporting requirements. It is designed to mirror best-practice supply chain and legal risk management processes in the context of evolving modern slavery legislation worldwide.
Technology does not provide a single answer to improving sustainability across businesses, their broader ecosystems and supply chains. It can, however, enable companies wishing to improve the sustainability of their supply chains to identify, mitigate and ultimately minimise risk.