Modern Slavery Reporting Laws to Gain Teeth: What You Need To Know
31 May 2023
31 May 2023
On 25 May 2023, a government report was tabled recommending that the Modern Slavery Act 2018 (Cth) be amended to require a broader group of businesses to report on their efforts to tackle modern slavery along their value chain and implement a due diligence system or face concrete penalties. Many of these recommendations are influenced by broader international regulatory trends on ESG.
The report on the independent statutory review of the Modern Slavery Act 2018 (Cth) (the Act) (the Report) was led by Professor John McMillan AO and supported by the Attorney-General's department. The review was informed by an extensive public consultation process, involving 38 targeted consultations with 285 government and non-government organisations across business, civil society and academia.
The Report made 30 recommendations to strengthen the Act and below is a brief overview of some of the key elements of the recommendations and how such recommendations sit alongside broader global regulatory trends towards greater supply chain transparency and mandatory human rights and environmental due diligence.
In short, small, medium and large businesses:
Currently, with the existing threshold at AUD 100 million, small and medium enterprises (SMEs) that are not directly subject to the law may be indirectly impacted by being a subject entity's subsidiary or forming a part of a subject business and supply chain.
However, it is anticipated that the lower threshold will also bring a number of SMEs directly into the fold. The Report therefore proposes that the Guidance for Reporting Entities be amended to provide tailored guidance for SMEs which might be captured as reporting entities due to the lower reporting threshold.
The Act currently imposes an obligation on businesses which fall within the scope of the above (each, a reporting entity) to submit an annual statement to the Australian Government on how it is addressing modern slavery risks in its operations and supply chains in accordance with certain mandatory criteria. The statements are placed on an online public register.
To recap, the mandatory reporting criteria set out in s16 of the Act currently requires a reporting entity to do the following:
(a) identify the reporting entity;
(b) describe the structure, operations and supply chains of the reporting entity;
(c) 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;
(d) 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;
(e) describe the process of consultation with (i) any entities that the reporting entity owns or controls; and (ii) in the case of a joint reporting entity, the entity giving the statement; and
(f) include any other information that reporting entity, or the entity giving the statement, considers relevant.
The Act currently only imposes an obligation on a reporting entity to describe their due diligence system (see (d) above). The Report recommends that the Act go further than this and require a reporting entity to be subject to an affirmative obligation to implement and utilise a due diligence process.
The Report suggests that the elements of such a due diligence system could be specified under s25 of the Act (which permits the Minster, by legislative instrument, to make rules prescribing certain matters relating to the Act).
The Report highlights that an obligation of such a nature would not be a novel step as there are other Australian laws which impose such an obligation, for example, the Work Health and Safety Act 2011 (Cth), the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) and the Illegal Logging Prohibition Act 2023 (Cth).
The Report also recommends additional mandatory requirements to report on the following:
The Report recommends introducing penalties for non-compliance, specifically that the Act be amended to provide that it is an offence for a reporting entity:
The Report highlighted that it is "incongruous" that the Act imposes a reporting duty but contain no robust procedure to ensure that duty is performed. However, the Report does not go so far as to suggest that penalties should apply more broadly to a failure to submit an adequate statement or a failure to display effective due diligence in responding to modern slavery risks.
The review recommendations are not binding on the government and the government has yet to confirm its position on the recommendations. However, the Labour government has indicated it intends to strengthen Australia's anti-modern slavery regulation. For example, as part of its election commitment, the Labour government declared that it would establish an Anti-Slavery Commissioner and introduce penalties for non-compliance with the Act. In light of this, it will be important to continue to monitor this space and we will continue to provide updates on developments.
It is important to appreciate that the recommendations of the Report forms part of a wave of initiatives around the world to enhance responsible business behaviour in the context of the ever-increasing pressure on businesses and regulators to address ESG concerns. Such initiatives span across a number of areas, including:
There will continue to be greater demands for businesses to take concrete steps to address their ESG risks, alongside louder calls for businesses to transition to a lower carbon future as part of a just and sustainable economy. While legislative efforts so far have not yet extended to cover the qualitative elements of such efforts, that is coming – as supply chain transparency and ESG due diligence requirements strengthen, so too is the scrutiny on the effectiveness and meaningfulness of steps taken by businesses in these areas. Accordingly, prudent businesses need to begin working together with their advisers to implement effective measures to identify and manage ESG risks in their business now.
Author: Jo En Low, Partner.