John McMillan AO has completed his independent review of the first three years of operation of the Modern Slavery Act 2018 (Cth) (the Act).
The report, tabled in Parliament on 25 May 2023, makes 30 recommendations aimed at strengthening the existing legislation and enhancing corporate Australia’s response to this pervasive issue.
The report acknowledges that a widely endorsed view during the consultations was there was ‘no hard evidence that the Modern Slavery Act in its early years has yet caused meaningful change for people living in conditions of modern slavery’. While noting there was a strong belief that overall business was taking the Act and its reporting requirements seriously, there was also a view that it was not being taken seriously enough.
Expanding reporting obligations
The Act currently mandates reporting obligations for entities with an annual consolidated revenue of A$100 million or more. The review recommends expanding reporting obligations under the Act to capture more businesses by lowering the current threshold to an annual consolidated revenue of A$50 million or more. It will bring Australia into line with developments in other countries and it is welcome recognition that modern slavery must be the concern of all business.
Significantly, the review also recommends that the Act require reporting entities to implement a due diligence system including a duty to take effective action to identify and assess risks and track performance in addressing them. The report observes that this accords with the global norm that ‘due diligence processes must be the core strategy for addressing human rights abuses’.
As expected, the introduction of penalties has been recommended, including for entities that have failed to put a due diligence system in place. Other recommendations for penalties include failing to report without reasonable excuse or submitting a report that knowingly includes materially false information. Complementary to this is a recommendation that the Attorney-General’s Department examine the practicability of a procedure for receipt and investigation of complaints from the public about an entity’s compliance with reporting requirements.
How to streamline reporting
The report also explores ways in which reporting may be streamlined, including recommending an option of submitting a full report every three years and updating reports in the intervening two. The review recommends, however, additional mandatory reporting criteria as follows:
- modern slavery incidents or risks identified by the entity during the reporting year;
- grievance and complaint mechanisms made available by the entity to staff members and other people; and
- internal and external consultation undertaken by the entity during the reporting year on modern slavery risk management.
The report highlights the significance of the Federal Government leading by example in setting a high standard for modern slavery reporting. To ensure best practice, the report recommends the Department put an annual review arrangement in place. Some submissions were also calling for a recommendation that the Government use its leverage to deny government contracts to businesses that did not properly comply with the Act. This was, however, seen as outside the review’s scope.
Although the potential powers and responsibilities of an Anti-Slavery Commissioner were discussed in the report, noting that the Government is undertaking a separate process for the establishment of this position, the only recommendation made was that one of the Commissioner’s functions should be to issue guidelines on special issues relating to reporting requirements in the Act. The report indicates that it was clear from the consultations undertaken that the establishment of an Anti-Slavery Commissioner has much support to play a leadership and regulatory role overseeing the operation of the Act.
Response to the review
The recommendations stemming from the review of the Act have been welcomed by civil society as providing a way forward for business to move beyond mere reporting to practical measures to identify and eradicate modern slavery in their supply chains.
While we await the Government’s response, it is a good time for businesses to review their compliance with the Act to ensure they have sufficient resources and expertise in place. Particular attention should be given to due diligence. In the not too distant future, the failure to have an effective due diligence system may lead to a penalty.