- Certain large businesses based or operating in Australia are now required to lodge a modern slavery statement (MSS) on an annual basis for each financial year, in a manner that is compliant with the Modern Slavery Act 2018 (Cth) (MSA) and associated guidance published by the Australian Government.
- Although the deadline to lodge a MSS is normally six months after the end of the reporting period, which would have seen many companies with 30 June year ends needing to lodge a MSS for the first time by 31 December 2020, the Australian Government has given such ‘reporting entities’ a temporary extension of a further three months to lodge their MSS, due to the impacts of COVID-19.
- We would expect the ongoing pandemic to be a relevant consideration in drafting a MSS for at least the most recent reporting period.
Modern slavery reporting requirement
Following on from an alert we published in 2018, where we discussed the-then Modern Slavery Bill and the Modern Slavery Act 2018 (NSW), Australian businesses, or foreign entities with business operations in Australia with a consolidated annual revenue of at least $100 million for their financial year (Reporting Entities) are now required to lodge a modern slavery statement on an annual basis no later than six months following the end of its reporting period (usually its financial year), pursuant to the MSA.
Modern slavery is regarded as a serious violation of an individual’s dignity and human rights. Exploitative practices including human trafficking, slavery, servitude, forced labour, debt bondage and forced marriage are all considered modern slavery and are serious crimes under Australian law, whether or not that crime occurs in Australia or overseas.
The MSS is a manifestation of a Reporting Entity’s reporting requirement under the MSA. It describes the Reporting Entity’s risks, actions, and assessment of the steps it is taking to tackle modern slavery. A Reporting Entity’s MSS will be a public document available on an online register for modern slavery statements operated by the Australian Border Force (ABF).
A MSS that is compliant with the MSA is one that:
- is prepared in a form approved by the relevant Minister. We note however, there is presently no set template for a MSS;
- will be approved by the principal governing body of the entity (e.g. the company’s board of directors);
- will be signed by a responsible member of the entity (best practice suggests the Chair of the Board should sign the MSS);
- will be given to the Minister within six months from the end of the entity’s reporting period in a manner approved by the Minister (noting the temporary COVID-19 related extension described below); and
- addresses the mandatory criteria.
The mandatory criteria require the MSS to:
- identify the Reporting Entity;
- describe the structure, operations and supply chains of the Reporting Entity;describe the risks of modern slavery practices in the operations and supply chains of the Reporting Entity, and any entities that the Reporting Entity owns or controls (subsidiary entities);
- describe the actions taken by the Reporting Entity and any of its subsidiary entities, to assess and address those risks, including due diligence and remediation processes;
- describe how the Reporting Entity assesses the effectiveness of such actions;
- describe the process of consultation with subsidiary entities; and
- include any other information that the Reporting Entity, or the entity giving the statement, considers relevant.
A MSS must also state that it has been approved by the principal governing body of the Reporting Entity, and specify the date that the governing body approved the MSS.
If a MSS is regarded as non-compliant, the Minister may request an explanation of the non-compliance, and may request the Reporting Entity remedy the non-compliance. Further, a failure to rectify the non-compliance may result in the Minister making the details of non-compliance public, including identifying the Reporting Entity.
The Australian Government has also released official guidance for Reporting Entities on how to comply with the MSA, including providing further colour to what is required to address each of the mandatory criteria listed above.
One of the more onerous consequences of needing to lodge a MSS will be conducting sufficient specific due diligence throughout a Reporting Entity’s supply chains with respect to modern slavery. It is important that suppliers and large businesses, both domestic and international, are across the MSA reporting requirement, share the commitment to eliminating modern slavery, and understand that they are likely to be audited as part of producing an annual MSS. Please get in touch if you think you are a Reporting Entity, or a supplier, that may require assistance in this regard.
Impacts of COVID-19 on the reporting requirement
As many Reporting Entities have now completed their first full financial year (on 30 June 2020) since the MSA came into force on 1 January 2019, they would normally be required to lodge an MSS for that financial year by no later than 31 December 2020.
The Australian Government has temporarily extended the deadline for compliance with the MSA to submit a MSS by three months, due to the impacts of COVID-19. Reporting Entities with reporting periods ending on 31 March 2020 have had their deadline extended to 31 December 2020. The extension also applies to Reporting Entities with reporting periods ending on 30 June 2020, with the deadline for that reporting period extended to 31 March 2021. This extension does not apply to the lodgement of a subsequent MSS for later reporting periods.
The ongoing pandemic can have numerous negative effects on vulnerable workers, many of whom may be in a Reporting Entity’s supply chain. The ABF cites that factory shutdowns, order cancellations, workforce reductions and sudden changes to a company’s operations can exacerbate the risk of modern slavery. The impact of the pandemic is likely to be seen as one of the material factors that a Reporting Entity should consider and report on in its MSS for the current reporting periods, and likely into the future.
It is important that all large businesses that think they might be covered by the MSA start considering whether they will be required to lodge an MSS, especially at a time when many entities are finalising their full year accounts for what will be their first reporting period under the MSA. Businesses properly classified as Reporting Entities should commence the process of preparing, auditing, and responding to Australia’s modern slavery requirements as soon as practicable.