The key message for businesses to take away from the statutory review into Australia’s Modern Slavery Act is simple – ‘modern slavery reporting is not being taken seriously enough.’
Professor John McMillan AO was tasked with leading the independent review to examine the operation of the Modern Slavery Act three years after its commencement. A view widely expressed in the review was that there is not yet ‘any clear story that the Act has successfully combatted any of the drivers of modern slavery.’
The federal Government is now considering its response to the Modern Slavery Review and whether it will seek to introduce additional measures to improve the operation of the Modern Slavery Act.
Which leads to the question – what do businesses need to know about the Modern Slavery Review?
Modern slavery in Australia
It is important to consider this review and the key recommendations in the context of the Global Slavery Index published by Walk Free last week, which estimates that 41,000 people in Australia are currently living with modern slavery.
This is a deeply troubling statistic. It reinforces both the need for the federal government to strengthen Australia’s modern slavery response and for businesses to ensure that they are addressing modern slavery risks within their business.
Targets for legislative change
The Modern Slavery Review singled out three key points which it highlighted as the targets for legislative change:
- improving the standard of modern slavery reporting
- enforcing the reporting obligations of entities
- addressing the large percentage of incompatible Modern Slavery statements.
To help address these weaknesses within the existing Modern Slavery Act, thirty recommendations for change have been made. These include lowering the revenue threshold for reporting from AU$100 million to AU$50 million, introducing penalties for non-compliance, requiring reporting entities to have a due diligence system for modern slavery, and introducing a high-risk declaration procedure.
Improving the standard of modern slavery reporting
To help improve the standard of modern slavery reporting, the Modern Slavery Review has recommended streamlining the reporting process to allow entities to submit a full modern slavery statement every three years, and update reports in the intervening two years. This is designed to reduce the compliance burden, with the aim of encouraging more comprehensive statements by entities. The addition of standardised coversheets that highlight the key features of an entities’ statement (including any incidents that have occurred and key actions taken) is also designed to improve the standard of modern slavery reporting. These recommendations have the potential to assist businesses in streamlining their internal reporting processes and providing a clearer focus on what needs to be done to comply with the legislative requirements.
The recommendation to lower the reporting threshold to AU$50 million is accompanied by recommendations for the provision of specific guidance to ‘small and medium-sized entities on complying with the reporting requirements of the Modern Slavery Act.’ This is also relevant for businesses that may be currently reporting or considering reporting on a voluntary basis, as it will provide clarity on what they must consider.
Another key recommendation that centres on improving the standard of modern slavery reporting would be the introduction of a declaration procedure by either the Minister or Anti-Slavery Commissioner, which identifies regions, industries, products and suppliers that are likely to carry a significant modern slavery risk. The declaration would also specify the extent to which entities would be required to report specifically on that identified risk when preparing their modern slavery statements. Businesses should be aware of how this might affect their practices and/or supply chains if such a provision were to be enacted.
Enforcing the reporting obligations of entities
The Modern Slavery Review also made recommendations to enhance the enforceability of reporting obligations by providing that non-compliance with reporting obligations should ‘be an offence for a reporting entity’ in certain circumstances. These included failure ‘without reasonable excuse’ to submit a modern slavery statement, provision of a statement that ‘knowingly includes false information’ and failure to ‘comply with a request given by the Minister to the entity to take specified remedial action to comply with the reporting requirements of the Modern Slavery Act.’
It was also recommended that businesses be required to put a due diligence system in place. This represents a significant strengthening of the existing provisions, which only require entities to ‘describe’ their due diligence processes in their modern slavery statements. If these recommendations are adopted in the legislative scheme, it would place an affirmative obligation on entities to implement and utilise a due diligence process. This aligns with the international trend towards due diligence models, potentially helping to streamline obligations for businesses operating across multiple jurisdictions.
If due diligence obligations are introduced, this would force entities to reconsider their systems and show proof of utilisation. A related step is ensuring adequate remediation options for victims of modern slavery, with the Review also making recommendations about amending mandatory reporting criteria to require an entity to report on identified incidents or risks, as well as grievance and complaint mechanisms.
These recommendations around due diligence and remediation processes will mandate change, with businesses benefitting from giving early thought to how they may need to strengthen their existing systems to meet these new requirements.
Addressing the large percentage of incompatible Modern Slavery statements
A third key issue highlighted by the Modern Slavery Review is the lack of clear guidance for reporting entities, which has likely contributed to the publication of minimalistic modern slavery statements that do not go far enough in addressing the underlying risks and reporting criteria. The Review highlighted the importance of further guidance being published to make it easier for businesses to understand exactly what the legislation requires, and to assist them in instigating meaningful change within their systems and supply chains. Specifically, the Review has recommended the publication of guidelines ‘on the reporting requirements in Part 2 of the Act’ as well as more detailed provisions on any ‘special issues‘ relating to the above requirements of the Act. Improving the compatibility of Modern Slavery statements with the legislative requirements should be a priority for businesses in light of the recommendations of the review.
The Modern Slavery Review is the first step towards strengthening Australia’s modern slavery laws, and will likely result in legal reforms being introduced in the near future. Already the Federal Government has provided funding in the 2023-24 Budget for the establishment of an independent anti-slavery commissioner, and is currently considering the recommendations made in the Review.
If they are implemented, these recommendations have the capacity to significantly improve Australia’s ability to prevent and tackle modern slavery whilst enhancing its global reputation as a leader in this field. The recommended reforms will, however, require businesses to actively strengthen their own modern slavery responses and it is important for businesses to give early consideration to the changes that may be on the horizon.
Written by Lorraine Finlay and Hannah Turl.