A timely reminder for directors on modern slavery compliance

Australian Anti-Slavery Commissioner Chris Evans has recently highlighted the importance of complying with the reporting requirements of the Modern Slavery Act 2018. In this piece, he offers guidance for directors on understanding and meeting their obligations.

The Modern Slavery Act 2018 (Cth) requires certain entities to prepare and submit an annual statement outlining the risks of modern slavery in their operations and supply chains, and the actions they are taking to address those risks. This reporting obligation applies to large businesses and other entities operating in the Australian market with annual consolidated revenue of at least $100m.

Since the reporting requirements commenced, more than 12,500 modern slavery statements have been lodged with the Attorney-General’s Department. However, a significant number of entities required to report are still not meeting this obligation. Estimates of non-reporting entities range from several hundred to over a 1000. Some of these entities may be unaware of their obligations, but the compliance gap is significant.

In response to these concerns, the Department is working to improve its data-matching capabilities to detect and identify entities that have failed to comply with the reporting requirement. This capability will support more targeted action to address non-compliance, particularly in relation to lodgement obligations.

Directors should also be aware that significant reforms to the Act are currently under active consideration, following an independent statutory review of the legislation. That review made 30 recommendations aimed at strengthening the Act and its administration. Notably, the review proposed the introduction of penalties for specific reporting failures, including failure to submit a modern slavery statement. The government has agreed in principle with this recommendation and is now consulting on implementation.

The Department released a consultation paper outlining options to strengthen the Act’s mandatory reporting framework, simplify and improve reporting, and target non-compliance. This consultation presents an important opportunity for stakeholders to drive long-awaited changes to strengthen the Act. However, delivering real change on modern slavery requires a shift beyond just reporting to requiring genuine and sustained action by business.

The Department also plans to commence separate, targeted consultations on the introduction of due diligence measures and the use of high-risk declarations. Requiring due diligence would align Australia with international best practice and generate greater impact for people currently working in conditions of modern slavery, such as forced labour or debt bondage.

The Australian Government must act swiftly and engage meaningfully with the business community and other stakeholders on these important measures. While improving reporting is essential, it alone will not achieve the systemic change required to address modern slavery across complex supply chains. Reforms that drive more impactful action are long overdue. Following extensive consultations during my first six months in this role, it is clear that more ambitious reform is needed.

Now is a timely opportunity for directors to reassess whether their organisations are subject to the reporting obligation and if so, to ensure a modern slavery statement has been submitted in accordance with the Act. Where reporting obligations apply, failure to comply may soon carry consequences beyond reputational risk.

It is also an opportune moment to review whether appropriate systems and processes are in place to support ongoing compliance within your organisations. Following the recent consultation period on the Office’s strategic plan, several considerations remain top of mind: 

• Governance: Where does human rights and modern slavery risk management sit in your organisation? Is there an executive sponsor overseeing this work? Are processes embedded in commercial decision-making and is there adequate resourcing in place to help teams manage higher risk areas?
• How risks are identified and prioritised: Not all suppliers will require further action to be taken. I encourage directors to pressure test with their businesses how higher-risk products, commodities or services are identified, and what action is being taken to mitigate those risks.
• The effectiveness of key controls: Many practitioners are using a number of tools to help them manage risks. This includes contractual obligations, questionnaires and other supplier information requests, supply chain audits, worker engagement, raw material traceability programs and supplier capability building. Directors should consider if their companies are using the right tools to manage the level of risk.

I am committed to promoting compliance under section 20C(1)(a) of the Act. In doing so, I value the support of the director community in helping Australian businesses meet their obligations and lift our collective ambition. My Office will release a series of resources in the coming months to assist your teams to take practical measures. 

This article first appeared under the headline 'Modern slavery compliance: A timely reminder for directors’ in the September issue of Company Director magazine.