Faced with the grim reality that millions of people globally are suffering in forms of modern slavery, the Federal Government announced in August 2017 that it would introduce a "Modern Slavery in Supply Chains Reporting Requirement" in Australia to combat modern slavery. As part of that process, it released a Consultation Paper which posed various questions for businesses and civil society organisations to consider to assist in refining the Government's proposal for the legislation.
We now have (at least some) of the answers to those questions, arising from a series of consultation roundtables with more than 100 businesses and civil society organisations in September and October, conducted by the Commonwealth Attorney-General's Department (AGD). They focused on the proposed requirement for businesses above an annual turnover threshold to publish an annual Modern Slavery Statement, outlining the steps they have taken to combat modern slavery within their supply chains and operations.
Although we do not yet know what was said in over 90 written submissions (they'll be published online soon) or in direct meetings with the AGD, we can discern businesses' views generally from feedback received by the AGD, which could be reflected in the Bill when it is introduced into Federal Parliament.
Definition of "modern slavery"
Participants broadly supported the proposed approach to defining modern slavery. Some participants suggested the definition should explicitly include forced marriage, trafficking in persons, child labour and/or the worst forms of child labour.
Definition of a reporting "entity"
A majority of participants supported defining a reporting entity broadly to encompass a range of entities in addition to legal corporations. Some participants supported covering groups of entities where the group’s aggregate revenue meets the threshold, although this view was not universal.
$100 million turnover threshold
Views differed across business and civil society attendees as to the appropriate threshold. Generally, business participants supported an initial threshold of around $100 million total global revenue, while civil society attendees generally supported a lower threshold equivalent to the current figure under UK legislation (£36 million).
Definition of "operations" and "supply chains"
Participants supported the proposal to require entities to report on both their operations and supply chains. A majority of business participants supported flexible definitions of operations and supply chains linked to existing international standards where possible, alongside clear government guidance.
Regulatory impact on entities
The majority of business participants did not express concerns about managing the regulatory costs of the legislation as currently proposed, but suggested regulatory impacts would likely vary depending on an entity’s structure, industry and readiness to report on modern slavery. Options to reduce the regulatory burden could include the harmonisation of UK and Australian reporting requirements; clear government guidance; and recommended (rather than mandatory) reporting criteria.
Four mandatory criteria for entities to report against
A majority of participants supported clear mandatory criteria aligned with other international standards where possible. Business participants also supported simple criteria to enable flexible, risk-based reporting and suggested some criteria could be recommended rather than mandatory to facilitate a continuous improvement approach. There was general consensus from business participants that the focus of the criteria should be on the identification and resolution of modern slavery risks, rather than the specific number of incidences.
Five month reporting deadline for a Modern Slavery Statement
A majority of participants agreed that a five month deadline for publishing a Modern Slavery Statement was appropriate and it should be linked to the end of a reporting entity's financial year. A minority of business participants suggested setting a recommended deadline, while other participants suggested a mandatory deadline would assist business to set objectives and provide clarity for consumers about reporting timeframes.
Modern Slavery Statements to be approved by boards and signed by directors
Participants supported the approval requirements and noted that board approval and director sign-off of Modern Slavery Statements are important accountability measures and drivers of corporate awareness of modern slavery risks.
Central repository of Modern Slavery Statements
A majority of participants agreed a central repository of Modern Slavery Statements is important and should include a list of entities required to report. A majority of participants recommended the Government should be responsible for establishing and maintaining the repository. Participants suggested that the repository should include easily searchable data fields covering industry sector, trading and brand names and other relevant data.
Penalties for non-compliance
Business and civil society participants highlighted the importance of detailed government guidance to provide clarity to business about their obligations. There was broad agreement that guidance should include:
- case studies;
- high-risk industries and goods;
- how to remedy and respond to cases; and
- suggested minimum standards.
A majority of business participants noted that penalties could create an unwelcome focus on compliance rather than sharing best-practice and suggested reputational risk and investor pressure are more effective drivers for compliance. Civil society participants generally supported penalties for non-compliance but expressed mixed views on their appropriateness during the first three years.
Independent oversight mechanism
A majority of participants agreed that a compliance-focused oversight mechanism may not be required over the first three years. Participants instead emphasised the importance of the Government (or an independent body) focusing initially on awareness-raising, providing guidance for business and facilitating best-practice sharing and collaboration between business and civil society.
Next steps to a final Modern Slavery Bill
The AGD is now working with other government agencies to consider the issues raised during public consultations and in written submissions. It also exploring possible options for further consultation on draft legislation.
As there is bipartisan support for the legislation, a Modern Slavery Bill is expected to be tabled in Parliament in the first quarter of 2018. At such time, the reporting requirements will be an unambiguous statutory obligation for which businesses should prepare.
If you have any further questions about how your business can prepare for the reporting requirements, or if you require assistance in preparing for this important development, Clayton Utz can help you.