03/04/2023
Modern slavery is a complex global problem. It has been just over four years since the Australian Government introduced the landmark Modern Slavery Act 2018 (Cth) (MSA) in early 2019. Since that time, we have seen rapid changes in Australia and abroad when it comes to the approach of addressing the issue of modern slavery. Whether you are required to report under the MSA or not, taking steps to address modern slavery risks in your organisation’s operations and supply chain is an issue that requires proactive management with customers, consumers and investors, who are increasingly concerned about ethical procurement. The Australian Government is also considering a variety of new measures to bolster both the MSA and Australia’s reputation as a leader in anti-modern slavery compliance.
The current regulatory landscape and how did we get here
There have long been calls for modern slavery laws to be adopted in Australia. So, what is ‘modern slavery’ and how bad is it?
Modern slavery is where coercion, threats or deception are used to exploit victims, and undermine or deprive them of their freedom. It covers practices like slavery, servitude, human trafficking and forced labour. Unfortunately, modern slavery is both a global and local problem involving grave human rights abuses for victims and can occur in the operations or supply chains of any organisation.
Importantly, as supply chains and procurement become increasingly complex, so too does the prevalence of modern slavery. In fact, there are now more slaves in the world than ever before. To put it into perspective, the United Nations and Walk Free Foundation estimate there are approximately 40 million victims of modern slavery around the world, and approximately 1567 modern slavery victims in Australia between 2015 and 2017.
The MSA was introduced in 2019 and requires large organisations (those with a consolidated revenue of at least $100 million) and the Commonwealth to submit an annual modern slavery statement to a public register, which must cover seven key criteria. While these bare minimum legal requirements of the MSA are fairly simple, the Australian Government has released detailed guidance on what it expects organisations to be doing to assess and address modern slavery risks in their operations and supply chain.
When the MSA was first introduced, it was billed by the Australian Government as a ‘step-up’ from other reporting regimes, but, in the first few years both the MSA and reporting entities received criticism for mere ‘box ticking’.
However, four years on and attitudes have changed. Monash University has conducted an annual review of the Top 100 ASX Listed entities and their compliance with the MSA. While Monash originally described the performance of the Top 100 ASX Listed entities as a “race towards the middle”, in its last report it stated that a clear leader board is emerging.
We are now starting to see a ‘race towards the top’, which was the original intention of the legislation. We consider that some of the key drivers for this shift include:
- Increasing commentary by civil society groups and NGOs on reporting entities’ reporting quality and supply chain transparency; and
- Increased consumer, investor and regulatory scrutiny on reporting entities’ ESG efforts and ‘greenwashing’ – where modern slavery is a key part of the ‘S’ and the ‘G’.
Entities which fail to take a meaningful and robust approach are starting to face real criticism. However, concerns remain that the laws do not go far enough in making a real impact when it comes to victims of modern slavery.
What might change in Australia?
Australia is also following the trend (discussed below) of tougher modern slavery obligations. The Australian Government is expected to complete its review of the MSA by 31 March 2023 and is considering the following issues:
No. | Issue for consideration | Forecast and observations |
Lowering the reporting threshold | The Australian government is considering lowering the reporting threshold from $100 million to $50 million. This would capture approximately 19 per cent more reporting entities, however, there are concerns over whether this would drive meaningful change, as these entities may not have the capacity to meaningfully report. | |
| 2. | Introducing enforcement measures for non-compliance including financial penalties | The MSA does not have any financial penalties or enforcement measures for non-compliance other than a public ‘name and shame’. The Australian Government is exploring a range of enforcement measures to encourage compliance including:
|
| 3. | Due Diligence obligations | While the MSA requires entities to describe “due diligence and remediation processes”, this is not clearly defined in either the MSA or associated guidance. As such, there is some inconsistency with how entities report on this requirement. The Australian Government is exploring defining this term under the Act to encourage some consistency in the actions that reporting entities take to assess and address risks. |
4. | Definition of modern slavery | The current definition of Modern Slavery references the definition of Modern Slavery from the Criminal Code Act 1995 (Cth). The Issues Paper considers whether the definition should use more generic phrasing to be less technical so that more risks are possibly captured. |
In the past 2 years, we have seen a clear global trend towards tougher modern slavery laws that go beyond mere reporting obligations, with some laws or proposed laws requiring entities to take positive steps to ensure that their goods or services are not a product of modern slavery. These include:
No. | Country / State | Laws / Proposed Laws |
1. | United States of America | The Uyghur Forced Labor Prevention Act took effect on 21 June 2022. This is a hard import ban on goods mined or produced in Xinjiang, China. This Act is in addition to the existing Californian Transparency in Supply Chains Act 2010. |
2. | European Union | The European Commission published its proposal for a Corporate Sustainability Due Diligence Directive on 23 February 2022. This would require EU and relevant non-EU companies to identify and mitigate human rights and environmental impacts across their operations and value chains. |
| 3. | United Kingdom | The UK Government is looking to amend the UK Modern Slavery Act 2015 to strengthen its requirements around the annual modern slavery statement, including imposing civil penalties for non-compliance. |
| 4. | Canada | The Canadian Parliament has just concluded its parliamentary review of the Fighting Against Forced Labour and Child Labour in Supply Chains Bill. This imposes similar reporting obligations to the Australian and UK Regime. |
| 5. | New Zealand | The New Zealand government is similarly considering new legislation which aims to address modern slavery and worker exploitation in supply chains. |
What should you be doing?
The modern slavery landscape is changing quickly and we have seen clients using innovative technologies and digital solutions to drive business benefits. There are significant business benefits to taking a meaningful approach to anti-modern slavery compliance.
In addition, modern slavery is a core part of ESG strategy, which is increasingly a top concern for organisations.
Organisations which do not have a clear framework or governance structure will struggle to keep pace with the evolving landscape and will face increasing risks such as legal and reputational damage or the ability to do business with Government and other entities.
While each organisation has its own set of values and drivers, some practical questions to ask include:
|
|
Are these ‘operationalised’ within the business and our procurement processes? Given addressing modern slavery is a ‘continuous improvement’ issue, do we a long-term road map which sets out our priorities, KPIs and how we are going to assess the effectiveness of what we are doing? |
Are ELT actively involved to create a top-down culture? How does the Board monitor and review implementation? |
Have you allocated enough resources (including budget and people) to undertake anti-modern slavery compliance and ESG strategy more broadly? |
|
Sonia Sharma spoke at CEDA's Supply Chain Conference in April 2023.
