Australia's Modern Slavery Act 2018 created a regime requiring large companies to report annually on what they have done to assess and address modern slavery risks in their operations and supply chains. On 25 May 2023, the Federal Government tabled a report on a review of this Act. This review covered the first 3 years of the Act's operation.
Here are the main recommendations:
- Mandatory due diligence - reporting entities should be required to have a due diligence system that goes beyond just reporting and instead implements a duty to take effective action to identify and assess modern slavery risks and to report on the activities undertaken in accordance with that system
- Penalties should be available for:
- Failing to put in place a due diligence system
- Failing to report
- Submitting a report that includes false information
- Failing to comply with a request to take remedial action to comply with the Act;
- The reporting threshold should be lowered so that businesses with annual revenue of $50M or more must report (currently the threshold is $100M)
- The office of an Anti-Slavery Commissioner should be established (funds for which were set aside in the latest Federal Budget)
In more detail
Following is a summary of the report.
The report began by noting that modern slavery is a substantial global problem. Walk Free's 2021 Global Estimate indicates that 49.6 million people are living in situations of modern slavery on any given day, either forced to work against their will (AUD 27.6 million) or in a marriage into which they were forced (AUD 22 million). And the problem is getting worse. The 2021 figures show that about 10 million more men, women and children have been forced to work or marry since the previous estimates were released in 2017.
Modern slavery presents complex and difficult challenges. The drivers of modern slavery are numerous - poverty, economic shocks, gender inequality, exploitative business practices, weak governance and regulatory inadequacy. These drivers are embedded in our global economy and are often hidden in informal economies. The premise of our Act is that it can help meet this challenge by requiring large businesses to examine their operations and supply chains to gauge if there is a risk they are building on or harbouring modern slavery practices.
But can a transparency regime like this one actually confront the crises? The conclusion of this review is that there is no hard evidence that the Act has caused any meaningful change for the people living in conditions of modern slavery - the drivers of modern slavery are not being turned around by this reporting regime.
There has been a lot of criticism of the quality of many, perhaps most, Modern Slavery Statements. There seems to be a "tick the box" mentality with regard to reporting which is driving "a race to the middle", rather than the anticipated, and necessary, "race to the top".
It is true there has been a cultural change in Australia - business is, by and large, taking the Act seriously. We see evidence of this with the widespread adoption of modern slavery policies and supplier codes of conduct; modern slavery training for executives and staff; the appointment of specialist staff; supply chain mapping; auditing of supply chains; deeper interaction with and interrogation of suppliers; revision of contractual arrangements; adoption of grievance procedures; and greater multi-stakeholder collaboration. Investors are also paying closer attention to modern slavery reporting and the procurement processes of their targets. But is this making much of a difference on the ground? The answer seems to be no.
This failure is propelling criticism of the transparency reporting mechanism itself. It is argued that a mechanism like this is not enough to overcome the business imperative to be commercially competitive. Further, it might be a mistake to think that consumers will adjust their buying preferences based on modern slavery reporting. Raising awareness is not enough - we also need a strategy for dealing with the problem. A related point is that there are inherent limitations in how far a reporting process can go in combatting modern slavery risks. Some large businesses have tens of thousands of tier 1 suppliers and, beyond those suppliers, the business environment can be opaque, with real difficulties often experienced in extracting information from suppliers about their supply chains. Geopolitical considerations can also be a limitation on both supply chain mapping and the disclosure of questionable practices.
In light of this debate, the report makes 30 recommendations with a view to making the Act more effective. These recommendations target what are seen to be the three main weaknesses of the Act - the standard of reporting is variable; the reporting obligation is not properly enforceable; and the reporting process is being drowned by a sea of large and incompatible statements.
The main recommendations are set out above. Some other important recommendations are:
- The Minister or Anti-Slavery Commissioner make declarations of regions, locations, industries, products, suppliers and supply chains that carry a high risk of modern slavery practices and then prescribe the extent to which reporting entities must have regard to these declarations when preparing their Modern Slavery Statements
- Changes to several of the mandatory reporting requirements:
- Revising criteria 1 (describe structure, operations and supply chains) by referring to "supply networks" rather than "supply chains"
- Revising criteria 3 (describe the risks of modern slavery practices), perhaps with the benefit of sector specific guidance and by having regard to declarations that designate high risk areas
- Revising criteria 4 (describe actions taken to assess and address modern slavery risks), perhaps by describing "due diligence" and "remediation processes"
- Revising criteria 5 (describe the effectiveness of actions taken), perhaps by providing a framework for undertaking qualitative and quantitative measurements
- Revising criteria 6 (consultation), perhaps by requiring that where a Statement covers more than one entity it should describe the governance processes adopted by the reporting entity to manage modern slavery risks, including a group wide diligence framework and internal consultation
- Add new criteria requiring reporting on:
- The modern slavery risks and incidents identified by the reporting entity
- Grievance and complaints mechanisms
- Internal and external consultation on modern slavery risk management
- Introducing an obligation on an entity that has lodged a Modern Slavery Statement to explain why, in a subsequent year, it has not done so
Other interesting recommendations are:
- Giving reporting entities the option of submitting a Modern Slavery Statement every three years and, in the intervening two years, submitting a report that just updates the information in the full Statement;
- Revising of the current Guidelines to help with the understanding of:
- Who is a "reporting entity" and what is "consolidated revenue", the latter of which is particularly relevant for trusts
- What is "modern slavery"
- The meaning of terms such as "operations" and "supply chains"; and
- How reporting entities can meet the (technical) approval and signing requirements for Modern Slavery Statements
- The annual publication of a list of entities that have submitted Statements
- Modifying the exacting rules surrounding submission of Voluntary Statements
- Investigating the practicality of a procedure for the receipt and investigation of complaints by members of the public regarding reporting under the Act
Some ideas that were canvassed but rejected or deferred for further consideration were:
- Imposing a duty to prevent modern slavery
- Adopting a broader human rights focus in the Act
- Expanding the reach of the Act to other practices, including less severe forms of "worker exploitation"
- Removing forced marriage from the scheme
- Adopting a tiered reporting regime with different obligations depending on the size of the reporting entity
- Publishing of a list of entities required to report, but who have failed to do so
- Implementing an active review program to assess and improve the quality of Statements
- Adopting a single reporting date for all entities, regardless of their financial years
While the Report acknowledges both the difficulties faced by business in meeting their reporting obligations, particularly in the initial stages of the regime, and the genuine efforts made by most businesses to embrace the regime, it is indisputable that much needs to change if meaningful progress is to be made to actually help the victims of modern slavery practices. Most of the proposed reforms, if enacted into legislation, will be an added burden to business, but, hopefully, they will help the Act fulfil its potential and achieve its intended goals.