On 1 January 2019, the Modern Slavery Act (Cth) (hereafter “federal Act”) came into force. What this means is that Australia, following in the UK’s footsteps, has federal legislation which requires, among other things, certain entities to report on the risks of modern slavery in their operation and supply chains. In addition to the federal Act, there is also similar legislation in force, at state level, in NSW.
What is Modern Slavery?
As the Joint Committee on Foreign Affairs, Defence and Trade noted, there is no globally agreed definition of modern slavery. The Joint Committee, in their 2017 inquiry into establishing a Modern Slavery Act in Australia, noted that the term is used to cover “a range of exploitative practices including human trafficking, slavery, forced labour, child labour, removal of organs and slavery-like practices”.
The International Labour Organisation (ILO) estimates that approximately 40.3 million people in the world live in modern slavery. This number includes approximately 10 million children. In Australia, approximately 15,000 people live in conditions akin to modern slavery.
About the Act
The federal Act requires large organisations with an annual consolidated revenue of $100 million or more to report annually on their efforts to assess and address the risk of modern slavery in their global supply chains. Organisations include businesses, charitable institutions, universities, Australian government, and corporate Commonwealth entities. All such entities are required to produce a Modern Slavery Statement.
This statement must include information about:
- structure, operations and supply chains;
- risks of modern slavery practices in the operations and supply chains of the reporting entity (and the entities it owns/controls);
- actions taken to assess and address those risks, including due diligence and remediation processes; and
- how the reporting entity assesses the effectiveness of such actions.
When is the first report due?
The first report will be due in 2020, within six months of your organisation’s financial year-end.
What are the consequences of not reporting?
While there are no financial penalties for non-compliance, the Minister has the authority to:
- compel entities that fail to comply to provide explanations on why they failed to provide a compliant Modern Slavery Statement; and
- publish details of an entity that fails to comply which poses a reputation risk to the entity.
An opportunity to be part of the solution
As noted above, a staggering 40.3 million people live in modern slavery. For organisations driven by integrity and corporate social responsibility, the Act gives Australian organisations (and organisations with a presence in Australia) an opportunity to be a leader in reducing and, over time, hopefully eliminating, modern slavery. The Act is responsive to public expectations around strong labour laws and corporate social responsibility.
Do you operate in NSW?
In addition to the federal Act, there is also the Modern Slavery Act 2018 (NSW) (“NSW Act”). Key differences between the federal Act and the NSW Act include:
1. The NSW Act applies to organisations with a total annual turnover of over AUD $50 million.
2. Unlike the federal Act, the NSW Act imposes penalties for non-compliance, up to 10,000 penalty units ($1.1 million). This can be for:
- failing to prepare a modern slavery statement;
- failing to make the statement public; and/or
- providing false or misleading information.
Steps to take if the federal Act or NSW Act applies to you
Here are some actions you could take now, well before the report is due if the Act applies to you:
1. Determine the areas in your organisation that may expose you to modern slavery-related risks;
2. Review your overall operations and supply chains to identify systems and processes that are deficient;
3. Develop a plan to address the deficiencies;
4. Review relationships with your suppliers to ensure they understand their obligations under the Act and ensure contracts with your suppliers formally capture your expectations; and
5. Provide training to staff to ensure they are aware of the Act, including how to identify potential issues and how to report any issues discovered.
How can RSM assist?
We can assist in the following ways:
- review of your processes and controls;
- risk assessment of your operations and supply chains;
- assessing your supply chain’s compliance with the legislation;
- conducting supply chain audits; and
- review of your critical policies against best practice, including assistance with the development of policies.
For more information
If you require further information or have any questions regarding the Modern Slavery Act, please contact your local RSM office today.