The end of certainty

On 29 November 2018 the Modern Slavery Bill passed both houses of Parliament and introduces reporting requirements that must be approved by the Board of Directors, or equivalent, and signed by an individual director. The Modern Slavery Act 2018 (the Act) received Royal Assent on 10 December 2018 and will commence at a day to be fixed by Proclamation or the day after six months from Royal Assent (whichever is the earlier).

According to the 2016 Global Slavery Index, modern slavery is estimated to affect approximately 46 million people across the world. Much of this is based in Asian markets, where Australia source numerous products and services through the complex and inter-connected nature of supply chains.

As previously reported the Act will be applicable to all entities (commercial, not-for-profits and government) with total revenue of at least $100 million per annum. It is estimated that 3,000 entities will be required to submit a ‘modern slavery statement’ to the Minister for Home Affairs. However, the NSW legislation will apply at a lower threshold, as indicated below.

The modern slavery statement will be required to detail the following:

  • The identity of the entity
  • The structure, operations and supply chains
  • The risks of modern slavery practices in the operations and supply chains
  • The actions taken by the entity to assess and address those risks
  • How the entity assesses the effectiveness of such actions
  • The process of consultation with any entities in the group or that is covered by a joint modern slavery statement.

No penalties exist in the legislation for not complying with the Act. However, in order to strengthen compliance rates, amendments to the Senate introduced a mechanism by which the Minister for Home Affairs can send companies a please explain if they fail to report. Further, if the Minister considers an entity has failed to comply with the requirements they may name and shame the entity in Parliament. If compliance rates are low, the need for penalties will be considered again as part of a 3-year review of the legislation.

Australian Governance Summit 2019

NSW regime

NSW legislation is already in place and is awaiting proclamation and regulation before commencement. The main differences between the NSW and Commonwealth regimes are detailed in our previous article, namely:

  • NSW legislation will apply to organisations with employees in NSW and an annual turnover between $50 million and $100 million; and
  • Penalties exist in the NSW regime for non-compliance.

Two reporting regimes will now exist on this topic – the Commonwealth legislation and NSW legislation. If the NSW government prescribes the Commonwealth legislation as a corresponding law for the purpose of their reporting requirement, no duplicate requirements will exist. However, two parallel reporting regimes will exist – entities with a minimum of $100 million consolidated revenue will report to the Commonwealth, and organisations with annual turnover between $50million and $100 million will report only in NSW.

How to prepare

The Commonwealth Act requires the modern slavery statement to be approved by the board of directors. This was included in the Act to ensure senior level accountability, leadership and responsibility for modern slavery, and gives it the serious attention it deserves.

Before approving the modern slavery statement the board should challenge management appropriately on the contents of the statement and the organisation processes and policies that exist. They may choose to do this through the Board directly or a sub-committee of the Board. The following questions might be useful in this regard:

  • To what extent has the organisation documented its structure, businesses and supply chains?
  • What policies exist in relation to modern slavery and how have these been communicated?
  • What due diligence has the company undertaken regarding its supply chains?
  • How are the risks of modern slavery identified, assessed and managed?
  • How are modern slavery risks considered when developing organisational key performance indicators?
  • How are staff made aware of the importance of the identification, assessment and management of modern slavery risks and the impacts?
  • Has modern slavery been identified and what remedial action has the company taken, if any?
  • How does the entity assess the effectiveness of such remediation efforts?

The Government is currently developing guidance to assist in implementation. Look out for AICD events and webinars on this topic in 2019.