How good is your modern slavery Statement?

A modern slavery statement (Statement) is necessary for all Australian entities or entities that carry on business in Australia with a minimum annual consolidated revenue of $100 million.[1] Reporting obligations relate to the risk of modern slavery in the operations and supply chain of a reporting entity (and its owned and controlled entities), as well as the steps the entity has taken to respond to the risks identified.   A significant number of Statements submitted in 2020 were found to be invalid or non-compliant by the Australian Border Force. Thus, reporting entities should ensure the quality of Statements to maintain compliance.

What is modern slavery?

The Modern Slavery Act 2018 (Cth) (Act) defines modern slavery to include trafficking in persons, slavery, servitude, forced marriage, forced labour, debt bondage, the worst forms of child labour and deceptive recruiting for labour or services.

What is involved in a Modern Slavery Statement?

A Statement must, in relation to each reporting entity, amongst other things:[2]

• 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;
• describe 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;
• describe how the reporting entity assesses the effectiveness of such actions;
• describe the process of consultation with:
  1. any entities that the reporting entity owns or controls; and
  2. in the case of a reporting entity covered by a Statement under section 14—the entity giving the Statement; and
• include any other information that the reporting entity, or the entity giving the Statement, considers relevant.

The Australian Border Force (ABF) encourages reporting entities to explain how COVID-19 has impacted their ability to assess or address modern slavery risks such as by delaying in-person training, planned audits or surveys, or disrupting supplier engagement activities.  ABF also recommends that entities consider how COVID-19 has increased the vulnerability of its workers in global operations and supply chains to modern slavery.

Non-Compliant Statements | Where it goes wrong

The most common areas of non-compliance, as considered by ABF, include the following issues:

• improper indication of approval and signatures;
• overseas Statements being submitted without amendment to address the Act’s mandatory criteria;
• failure to identify Australian reporting entity/ies covered by the Statement;
• failure to describe nature, context or extent of identified modern slavery risks; and
• failure to explain consultation method with owned or controlled entities.

What does this mean for your organisation? | Practical Responses

The modern slavery reporting requirement directs corporate responses in identifying and addressing modern slavery risks in global operations and supply chains. When entities fail to undertake their modern slavery responsibilities, they expose communities to harm and themselves to risk and detriment.

In order to increase the credibility and strength of your entities Statement, there are several measures and actions that we recommend you take and implement. The three main categories that these actions fall under are:

1. Identification;[3]
2. Response;[4] and
3. Evaluation of modern slavery risks[5].

Category 1: Identification

To identify modern slavery risks within your operations and supply chains, entities should:

• Identify factors which contribute to modern slavery, such as:
  • Industries (e.g. agriculture, retails, hospitality);
  • Employee background (e.g. literacy, education, low-socioeconomic status); and
  • Geographic location (e.g. political instability, government transparency).

You should investigate your operations and supply chains. Companies can assess the risk level by undertaking various reviews through formal and informal means. This may include the use of data analytics, direct enquiries with suppliers and analysis of indicators. An understanding of your areas of risk should be included as a section in your Statement, as well as through policy changes or public announcements.

• Methodically outlining and prioritising red flags in your business and develop an understanding of how these areas of risk may have common sources of causation. This stage should also include the planning and development of responses that will allow your entity to avoid, mitigate or manage these risks. The introduction of a reporting scheme to provide early warnings of situations indicating modern slavery risks may also be included in this action.
• Confirm your findings and conclusions of your entity’s areas of risk through consultation with relevant external stakeholders and suppliers.

These actions should be continually performed along the lifecycle of your business or any business relationship to ensure that new risks are identified as they arise.

Category 2: Response

In response to modern slavery risks in your operations and supply chains, entities should:

• Develop a clear plan to meet human rights and modern slavery responsibilities. (See also below section on: ‘Modern Slavery Policy | Should my entity have one?’).
• Include undertaking human rights due diligence to limit and combat any potential modern slavery. This may include a risk action plan implemented through employee training, duty delegation and changes to hiring processes. Entities should include these measures and publish their findings in the Statement.
• Use your entity’s social capital to prevent or mitigate the harm wherever an entity ‘causes’, ‘contributes to’ or is ‘directly linked to’ modern slavery risks. Social capital is the influence your entity has to affect change – namely wherever there are wrongful practices. This can include the use of board positions, direct engagement and correspondence with investors or collaboration with stakeholders.
• Redress modern slavery harms where the business has been involved in harmful practices.

All actions taken in response of modern slavery risks should be included as an independent section in your Statement.

Category 3: Evaluation of modern slavery risk

To evaluate responses to these modern slavery risks, entities should:

• Create a framework or internal reporting system that studies and evaluates commitment, risk management actions and capabilities. The findings of these reports should indicate the next step for further improvement of an entity’s modern slavery commitment.
• Compare identified areas at risk of modern slavery before and after period of response to develop understanding of the effectiveness and success of any actions taken.

Any findings in the evaluation of modern slavery risk responses should be reported in the Statement.

Modern Slavery Policy | Should my entity have one?

A modern slavery policy need not adhere to the same criteria nor undergo the same scrutiny as a Statement. Modern slavery policies are voluntary; however, it is highly recommended that one is produced for several reasons, including:

• for reporting entities, developing a modern slavery policy may provide substance to paragraph (d) of section 16 of the Act (which deals with the criteria of a Statement);
• for entities without a Statement, a policy affirms your commitment to ending all forms of modern slavery and would outline your approach to reducing the risk of modern slavery practices within your supply chain and operations;
• as a part of your ethical framework, a modern slavery policy would highlight your support for international conventions, treaties, and protocols relevant to combatting modern slavery; and
• by protecting against possible business harm and improving the integrity and quality of your supply chain, you may be able to increase profitability, investor confidence and access finance opportunities.[6]

Conclusion

Reporting entities must be aware that the preparation for their reporting requirements on modern slavery begins well before they start writing a Statement. The appropriate actions and steps need to be taken so that an entities’ Statement has substance enough to be credible and compliant with the requirements under the Act.

[1] A lower $50 million threshold may be introduced by the Modern Slavery Act 2018 (NSW), however this legislation has not yet commenced.

[2] s 16 Modern Slavery Act 2018 (Cth).

[3] s 16c Modern Slavery Act 2018 (Cth).

[4] s 16d Modern Slavery Act 2018 (Cth).

[5] s 16€ Modern Slavery Act 2018 (Cth).

[6] Modern Slavery, (Web Page, 11 December 2020) <https://www.homeaffairs.gov.au/criminal-justice/Pages/modern-slavery.aspx>.