In 2018, we saw two key pieces of modern slavery legislation enacted in Australia - the Australian Modern Slavery Act 2018 and the NSW Modern Slavery Act 2018.
Under the Australian Modern Slavery Act over 3000 companies will be required to publish modern slavery statements disclosing what they are doing to combat modern slavery in their business operations and their supply chains. Even more businesses will be affected under the NSW Modern Slavery Act because it has a lower reporting threshold.
Why we need modern slavery legislation
There is estimated to be 40.3 million people working in slavery, worldwide. Modern slavery affects almost every sector, region and company.
The Walk Free Foundation proposes that just under two thirds of the estimated 40.3 million people in modern slavery are in the Asia-Pacific region. Many of the goods produced in the Asia-Pacific region are linked to the global supply chain of many businesses across the world, including Australia.
Australian companies that procure goods from the Asia-Pacific region may unwittingly be complicit in modern slavery and human and labour rights abuses.
The Australian Modern Slavery Act 2018 requirements
The Australian Modern Slavery Act 2018 came into effect on 1 January 2019 and it requires entities operating in Australia, with more than AUD $100 million annual revenue, to produce an annual public statement describing the risks of modern slavery in their operations and supply chains.
Smaller entities that fall under the reporting threshold of AUD $100 million can opt-in and voluntarily report.
A modern slavery statement must include:
The reporting entity’s structure, operations and supply chains
A description of the risks of modern slavery practices in the operations and supply chains
Actions taken by the reporting entity, and any entity that it owns or controls, to assess and address those risks, including due diligence and remediation processes
Assessment of the effectiveness of such actions
To ensure a high-level commitment, the statement must be approved by the board of directors or equivalent and signed by a director.
Non-compliance to legislation
The Australian Modern Slavery Act does not impose financial penalties on non-complying entities, although the government will keep a publicly available online register of modern slavery statements and failures to comply may require explanation and remediation. This excerpt outlines the extent to which government can oversee compliance under the legislation:
The Minister may request an explanation about the entity’s failure to comply with a requirement in relation to modern slavery statements, and may also request that the entity undertake remedial action in relation to that requirement. If the entity fails to comply with the request, the Minister may publish information about the failure to comply on the register or elsewhere, including the identity of the entity.
Entities will understand the significant risk to reputation and to their brand for non-compliance, as entities will not want to be named-and-shamed by NGOs.
Who does the Legislation affect?
An Australian entity, or any entity which carries on business in Australia, with an annual turnover of AUD $100 million will be affected by this Commonwealth legislation. This includes partnerships, trusts, charities, companies and universities, regardless of whether they are incorporated. Corporate Commonwealth entities or Commonwealth companies which have consolidated revenue of a least $100 million for the reporting period will also be required to report.
Reporting
The first relevant period for reporting will relate to the financial year 2019. Therefore, modern slavery statements will be due between January to December 2020, depending on each company’s annual reporting period. This may differ slightly for entities with an international financial year – they may have to report earlier.
NSW Modern Slavery ACT 2018 requirements
Commercial organisations with an annual turnover of over AUD $50 million, and operating within NSW, are mandated to report annually on what they are doing to combat modern slavery within their business operations and their supply chains.
Key points to the legislation:
- Companies are required to prepare a modern slavery statement outlining the steps taken to ensure that the goods and services they procure are not a product or service of modern slavery – maximum penalty: 10,000 penalty units or AUD $1.1 million
- Commercial organisations must make their modern slavery statement publically available in accordance with the regulation – maximum penalty: 10,000 penalty units or AUD $1.1 million
- Organisations’ modern slavery statements are to include:
The organisation’s structure, business and supply chains
Its due diligence process in relation to modern slavery in its business and supply chains
The areas of its business and supply chains where there is a risk of modern slavery and steps taken to assess and manage risk
Training of employees about modern slavery
- A person must not provide information in connection with a matter that the person knows, or ought to reasonably know, is false or misleading – maximum penalty: 10,000 penalty units or AUD $1.1 million
For more information on the NSW Modern Slavery Act, visit the Sustainable Business Matters blog page
Differences between the NSW and Australian Modern Slavery Acts
The NSW Act is stronger in its reporting requirements than the Australian Modern Slavery Act and it has a lower reporting threshold (i.e. annual turnover AUD $50 million) than the Australian Act, which has a reporting threshold of AUD $100 million. Financial penalties for non-compliance are imposed only under the NSW Modern Slavery Act, although this is expected to be reviewed in 3 years under the Australian Act. The NSW Act also creates the role of an independent Anti-Slavery Commissioner.
Conclusion
The point of the legislation is to bring awareness and drive change to eliminate modern slavery in companies’ operations and their supply chains. We know addressing modern slavery and human and labour rights issues can be complex and challenging. It will take time, education and commitment from all stakeholders, including board members, managers, procurement teams and suppliers.
Due diligence needs to be taken to map your supply chain, understand where the modern slavery risks may be, engage with your suppliers, and put in place policies and procedures to help your company and your suppliers eliminate the risk of modern slavery impacts.
For more information on how to prepare for the Modern Slavery Act, please visit the Sustainable Business Matters website for a free guide on Preparing for the Modern Slavery Act.
If you would like to book in a free consultation, please call Libby on 0448 026 508 or email libby@sustainablebm.com.au