Will Australian Entities Comply With the Modern Slavery Act?

With the first cycle of Modern Slavery reporting for Australian entities with a total revenue of at least $100 million per annum approaching rapidly, analysts stand to learn much from the process. Benchmarks will be established, new targets will be set and the curtain will be pulled back on complex supply chains with high risks of incorporating modern slavery.

But will many organisations actually submit a modern slavery statement to the Minister for Home Affairs? At present, no penalties exist in the legislation for failing to lodge a report or for lodging an incomplete report. The AICD reports that the Minister can send organisations a “please explain” if they fail to report, and name and shame non-compliant entities in Parliament.

The Modern Slavery Statement should identify the reporting entity and describe:

• its 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 it owns or controls;
• the actions the entity has taken – or that any entity it owns or controls has taken – to assess and address those risks, including due diligence and remediation processes. For example, this may include the development of policies and processes to address modern slavery risks, and providing training about modern slavery to staff;
• how the entity measures the effectiveness of those actions;
• a description of the entity’s consultation process with entities covered under the statement; and
• any other information that may be relevant.

The Commonwealth Act requires the modern slavery statement to be approved by the board of directors to ensure senior level accountability.

The creators of Australia’s Act would have benefited from a close examination of UK’s Modern Slavery Act, which – while an important step forward – has key shortcomings in terms of reporting compliance. In their 2018 analysis of this issue, Bloomfield and Lebaron commented:

“As it stands, companies have free rein when choosing what they report on (or even whether to report at all). Civil society coalition CORE estimates that 12,000 to 17,000 companies are within the scope of the Act and, at the time of writing, just over 6,000 companies had published statements on the Modern Slavery Registry website. Many of these statements are of low quality and a significant number of them do not even comply with the requirements of the Act. […] There is no financial or legal penalty for non-compliance and little evidence to suggest that consumers are using these statements to inform purchasing decisions.”

If Australian compliance rates are low, the need for penalties will be considered again as part of a 3-year review of the legislation.

NSW’s state-based Modern Slavery Act has three key differences to the Commonwealth Act:

• Lower threshold: it will apply to organisations with employees in NSW and an annual turnover between $50 million and $100 million.
• Penalties exist in the NSW regime for non-compliance of up to $1.1 million.
• The creation of the post of Independent Anti-Slavery Commissioner.

As Martijn Boersma reports, the existence of penalties and the presence of a dedicated Commissioner will mean the “NSW Modern Slavery Act is much more likely to be taken seriously” than its Commonwealth counterpart.