What legal counsel need to know about the Modern Slavery Act
The passage of the Modern Slavery Act in 2018 has left many large companies concerned about how to meet their obligations under the Act. How do you effectively combat modern slavery, when the phenomenon by its very nature lurks in the shadows of supply chains that are often multinational and opaque? Companies often have thousands if not tens of thousands of suppliers across the tiers of their supply chain, yet frequently do not have transparency of what these supply chains look like, and unravelling these supply chains can seem like an overwhelming process. Modern slavery reporting entities and their suppliers are now entering an unfamiliar territory of trying to map their own complex, multi-tiered supply chains while understanding key modern slavery risk factors.
Unfortunately, this leads to too many companies paying lip service to their anti-slavery commitments, with AFR recently publishing research estimating that only 8% of Modern Slavery Statements lodged to date go past a rudimentary Tier 1 analysis. Fortunately, there is a better way, with technology enabling companies to turn policy in best-practice, faster and easier.
So, what does this all mean from the perspective of legal counsel? Firstly, it is critical to understand whether a company is a reporting entity, what their obligations under the Act are, and how they can meet these obligations.
What is modern slavery, and how is it relevant in Australia?
According to the Department of Home Affairs, “modern slavery describes situations where offenders use coercion, threats or deception to exploit victims and undermine their freedom. Modern slavery can occur in every industry and sector and has severe consequences for victims. Modern slavery also distorts global markets, undercuts responsible business and can pose significant legal and reputational risks to entities.” For many Australians, modern slavery seems like something faraway and unrelated to the realities of doing business in Australia; however, our close trade ties to the APAC region put Australian companies at great risk of inadvertent exposure to modern slavery in our supply chain, particularly at Tier 2 and beyond.
It’s also important to note that this is not only a problem that occurs overseas. It may surprise you to find that the Global Slavery Index estimates that on any given day in 2016, there were 15,000 living in conditions of modern slavery in Australia, predominantly in high-risk sectors such as agriculture, construction, domestic work, meat processing, cleaning, hospitality, and food services. Modern slavery happens within our borders, too.
Who is required to lodge a Modern Slavery Statement, and what does this Statement entail?
Large businesses and other entities in the Australian market with annual consolidated revenue of at least AUD$100 million are required to lodge a Modern Slavery Statement each year. Reporting entities are obligated to take reasonable steps to identify and address modern slavery risks, and maintain responsible and transparent supply chains.
Modern Slavery Statements must set out the reporting entity’s actions to assess and address modern slavery risks in their global operations and supply chains.
The Australian Government publishes these statements through an online central register, which can be found at https://modernslaveryregister.gov.au/
What needs to be included in a Modern Slavery Statement?
The Modern Slavery Act does not contain a prescribed format, but does include mandatory criteria as set out in Section 16 of the Act (which can be found here). Modern Slavery Statements must:
- identify the reporting entity
- describe the structure, operations and supply chains of the reporting entity
- describe 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;
- describe the actions taken by the reporting entity and any entity that the reporting entity owns or controls, to assess and address those risks, including due diligence and remediation processes;
- describe how the reporting entity assesses the effectiveness of such actions (for example, process reviews, internal audits, compliance monitoring, reports from suppliers on their own compliance and initiatives);
- describe the process of consultation with any entities that the reporting entity owns or controls; and (in the case of a reporting entity covered by a statement under section 14)—the entity giving the statement; and
- include any other information that the reporting entity, or the entity giving the statement, considers relevant.
The reporting entity must also ensure the statement is approved by the ‘principal governing body’ of the reporting entity (for a company, this would be the board of directors) and signed by a ‘responsible member’ of the reporting entity.
What are the legal implications of the Modern Slavery Act?
Excluding the obvious ethical and reputational risks of modern slavery occurring in a supply chain, the legal risk is also great. Australian reporting entities must do their due diligence, and must be able to prove that they have done so; otherwise, there is significant risk exposure to litigation.
Combating modern slavery requires more than policy commitments; it is all-too-easy to not shine a spotlight on the murky waters of a supply chain, but high-profile recent international cases (Nestle, Cargills, etc.) demonstrate that neither policy commitments nor ignorance are a particularly valid excuse. As such, reporting entities must take reasonable steps to put these commitments into practice, and there is a significant body of knowledge of how to do that. That said, this knowledge generally does not exist internally within individual Australian companies, which is why it is critical to work with modern slavery experts to form and execute on a robust modern slavery statement; furthermore, collaboration and knowledge-sharing within industries has proven to be the most effective way to get results. Finally, with much of modern slavery lurking in Tiers 2 and beyond, proactively equipping suppliers with the knowledge and capabilities to combat modern slavery is absolutely indispensable; your suppliers need to know their responsibilities, and how to deliver on these. We’ve recently seen retail behemoth Wesfarmers end contracts with 20 suppliers over concerns about modern slavery; if the suppliers you work with are unwilling to take the steps necessary to fulfill your legal and ethical obligations, they likely shouldn’t be your suppliers.
Many companies are struggling with the difficulty of navigating these previously unchartered waters, and the invisible nature of modern slavery can lead to decisionmakers putting the development of a robust strategy for combating modern slavery into the too-hard basket. But rudimentary analysis for box-ticking purposes won’t solve a problem that is worse today than it was yesterday, and which will be worse tomorrow than today.
What can be done to combat modern slavery?
Modern slavery is what is frequently called a ‘wicked problem’ in public policy. When a problem is ‘wicked’, it means that much of the problem is invisible and unmapped; multiple stakeholders must work together collaboratively to combat it, and despite best efforts a company cannot be entirely sure that it has been successful. However, this doesn’t mean that best efforts shouldn’t be made.
Many companies want to do the “right thing” where modern slavery is concerned. However, they may feel woefully under-resourced and underprepared to deal with the scope and nature of this problem. While it can seem overwhelming at the outset, there are best-practice expertise, methods and tools that be of great help.
Working together with others in industry means that a body of knowledge can be built, and we’ve seen that done to great effect in industries like fishing, construction and fashion. At Informed 365, we’re proud to be the provider of the Property Council Supplier Platform to stamp out modern slavery, currently used by 25 organisations to capture tens of thousands of suppliers and billions of dollars in annual procurement spend.
Lastly, agile tech solutions such as Informed 365 are essential in order to provide reliable & meaningful data, turning Corporate Social Responsibility and Environmental, Social, and Corporate Governance commitments from policy into practice. Here at Informed 365, our solutions help organisations to become more efficient through the automation of data gathering, visualisation and reporting processes that have traditionally been conducted manually (and taking up significant time and resources in the process). With CSR & ESG requirements becoming more and more important, and internal and external stakeholders increasingly demanding that companies act in a socially and environmentally responsible manner, our agile Business Intelligence systems can benefit companies of any size and industry.
We help our clients to track, calculate, monitor, visualise and report against any data, through a highly automated process requiring minimal input from busy or resource-poor companies. We offer our clients an end-to-end solution with our support team and onboarding assistants, making it easier than ever for Australian companies to breathe life into their CSR & ESG commitments.
If you would like to know more about Informed 365 and our offerings, contact our friendly team; we would be more than happy to assist. And if you enjoyed this article, you may be interested in our extensive resources relating to modern slavery, supply chain management and CSR reporting and certification, including our recent post on why you need a tiered approach to combat modern slavery.