(Commonwealth Bill) was passed by Federal Parliament.
While the Commonwealth Bill requires organisations to take a range of steps from a compliance perspective, it also provides an opportunity for organisations more broadly to consider their approach to—and structures and processes for—identifying and minimising the risks of slavery and labour exploitation within their supply chains.
Key requirements under the Commonwealth Bill
The reporting requirements under the Commonwealth Bill will commence within six months of it receiving assent by the Governor-General and becoming an Act of Parliament. This is anticipated to occur by the end of 2018.
The Commonwealth Bill requires the following entities with revenue over $100 million per financial year to provide a ‘modern slavery statement’ to the Minister for Home Affairs (Minister) within six months of the end of each financial year:
- companies that are Australian residents;
- trusts, where the trust entity is a resident trust estate;
- corporate limited partnerships that are Australian residents; and
- other partnerships or entities that are either:
- formed or incorporated within Australia; or
- the central management or control of the entity is in Australia.
The Minister will maintain an online, public register of these statements.
The Commonwealth Bill requires that the modern slavery statement describe:
- the entity’s structure, operations and supply chains;
- the risks of modern slavery practices in the entity’s operations and supply chains, and those of any entities that the reporting entity owns or controls;
- 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;
- the effectiveness of the actions taken;
- the consultation process with other entities that the reporting entity owns or controls; and
- any other relevant information.
The statement must be approved by the principal governing body of the entity (i.e. a company’s board of directors) and signed by a responsible member of the entity.
A ‘joint modern slavery statement’ may be prepared that reports on a number of entities.
Approval for the joint modern slavery statement must be given by the principal governing body of either:
- each reporting entity covered by the statement;
- an entity (higher entity) which is in a position to influence or control each reporting entity covered by the statement, whether or not the higher entity is itself covered by the statement; or
- if it is not practicable to comply with either of the above points, at least one reporting entity covered by the statement.
Non-compliance with the Commonwealth Bill
Under the Commonwealth Bill, the Minister may request an explanation for an entity’s failure to provide a modern slavery statement and/or request that the entity undertake remedial action, including to provide a modern slavery statement.
If the Minister’s request is not complied with, the Minister may publish information about the non-complying entity on the Modern Slavery Statements Register, or in any other way considered appropriate.
By contrast, the Modern Slavery Act 2018 (NSW Act), whichpassed through NSW Parliament earlier this year, contains a $1.1 million penalty provision for various non-compliance. This creates the striking situation where entities covered by the NSW Act, but not the Commonwealth Bill (i.e. those with a NSW presence and a turnover between $50m and $100m) are subject to penalties, but entities with a turnover of $100m or more are not.
Commercial organisations should start preparing now to ensure they comply with the new requirements.
Further, while the due diligence required to enable accurate and reliable reporting in a modern slavery statement will identify potential or actual modern slavery risks, businesses will be required to assess, prevent and mitigate identified exploitative activities and ensure grievance mechanisms and access to remedy is in place.
It is expected that most businesses who will be affected by the Act will find modern slavery in their supply chains. Addressing these potential and actual adverse impacts is the pressing challenge.
In order to address this, the following steps should be considered:
- Identify someone to be responsible for leading the process and establish a cross functional team including the corporate social responsibility, operations management, procurement/supply chain management or human resources teams.
- Map the structure, operations and supply chain of your organisation.
- Develop a modern slavery policy and ensure existing policies (procurement, recruitment, risk management etc.) are consistent.
- Notify suppliers of the reporting requirements and the steps your organisation will be taking to conduct due diligence and consider implementing new contractual requirements.
- Implement a due diligence process that investigates and monitors modern slavery within the organisation and its supply chains.
- Assess and manage any identified risks and, where necessary, provide grievance mechanisms and access to remedy.
- Train employees and key or high risk suppliers on modern slavery.
- Determine an approach to addressing modern slavery obligations in supplier contracts.
- Design a monitoring framework to assess effectiveness.
- Allocate resources to fund the above steps.