- Recently introduced legislation at State (NSW) and Commonwealth levels is designed to force certain large organisations (Reporting Entities) to comprehensively audit and publicly report on modern slavery risks in their supply chains.
- In practice, the legislation will require those who supply to Reporting Entities to go through much the same process.
- If you supply to a Reporting Entity you should prepare for the changes and have a plan in place to conduct your own audit.
A bit of context
The Modern Slavery Bill (Cth) (MS Bill) and the Modern Slavery Act 2018 (NSW) (NSW Act) are Australia’s response to a recent global movement to better address modern slavery. It follows similar legislation in the UK and the US. The basic idea is that governments can prevent human rights abuses by forcing large organisations to proactively report on their actions to address modern slavery risks in their operations and supply chains.
‘Modern slavery’ in this context includes not only slavery itself, but:
- human trafficking;
- forced labour;
- debt bondage;
- deceptive recruiting; and
- the worst forms of child labour and abuse.
Who and what it targets
The effect of the MS Bill and the NSW Act will be to require organisations (called Reporting Entities) that meet certain threshold requirements to produce a Modern Slavery Statement (MS Statement). MS Statements will be published in public registers.
The location of your employees and the size of your business will affect where you have to report (if at all). If you have an employee in NSW and an annual turnover between $50 million and $100 million you will have to report to the yet-to-be-appointed Anti-slavery Commissioner in NSW.
If your consolidated annual revenue is ≥$100 million you will have to report to the Commonwealth Minister for Home Affairs (regardless of where you do business). Businesses who do not meet these criteria will not, currently, have to directly report anywhere, but see ‘SME’s caught in the crossfire’, below.
There’s still a fair bit of detail to be provided by government about what goes into a MS Statement. However, we can say with confidence that, at a minimum, MS Statements will require businesses to describe:
- the risks of modern slavery found in their organisations and supply chains;
- actions taken to address those risks;
- an assessment of the effectiveness of those actions, and;
- the process of consultation with other entities in preparing their MS Statements.
Somewhat strangely, the NSW Act contains fines of up to $1.1million for non-compliance, while the MS Bill contains no fines at all.
SMEs caught in the crossfire
In practice, Reporting Entities will have to perform due diligence on the entities within their supply chains, who in turn are likely to have to do the same with their supply chains. This places a potentially onerous obligation on smaller business that might not have the resources to quickly conduct extensive supply chain audits. Further issues arise for smaller businesses who might receive requests for different information from multiple Reporting Entities.
The five P’s
The old saying that proper planning prevents poor performance will almost certainly ring true here. If:
- you are a Reporting Entity; or
- sit in the supply chain of one;
some sort of supply chain audit is inevitable.
Knowing what is required of your business and having a plan in place will save time and effort in complying. It will also provide a potential comparative advantage in a competitive market, noting that a failure to properly respond could result in a client or customer taking their business elsewhere.