By Brendan Coady (Partner), Brendan Tomlinson (Partner), Sonia Sharma (Special Counsel) and Emily Lau (Associate) of Maddocks.
The Department of Home Affairs recently released the final Commonwealth Guidance for Modern Slavery Act Reporting Entities (final Commonwealth Guidelines).
The release of the Final Commonwealth Guidelines means there are no excuses for reporting entities not to be taking active steps (such as those set out in our Practical Guide) to ensure they are ready to submit a compliant modern slavery statement.
To recap, the Modern Slavery Act 2018 (Cth) (Modern Slavery Act) requires all reporting entities to submit a modern slavery statement which covers seven mandatory criteria which explain the reporting entity’s actions to assess and address modern slavery risks in its operations and supply chain.
Since the Modern Slavery Act came into force and the Draft Commonwealth Guidelines were released, a number of issues have come into question. These non-binding Final Commonwealth Guidelines help to clarify and address those issues.
Key additions in final Commonwealth Guidelines
THE MODERN SLAVERY ACT IS A CONTINUOUS IMPROVEMENT REGIME
During the first reporting period, the Commonwealth Government will focus on working with reporting entities to make sure they understand their obligations under the Modern Slavery Act. However, the final Commonwealth Guidelines confirm that reporting entities are expected to take a ‘continuous improvement’ approach to compliance as their understanding of modern slavery improves. When preparing the Modern Slavery Statement, a reporting entity should consider how it will continue to improve its response to modern slavery in future.
REPORTING ENTITIES NEED TO ‘DIG DEEP’
One of the key concerns many organisations have been grappling with is how far down the supply chain an organisation needs to go. The final Draft Guidelines state there is no minimum requirement in terms of how many tiers of its supply chain an organisation needs to examine, and confirm a prioritised approach is required. An organisation will need to consider the modern slavery risks that may be present in its global and domestic operations and supply chains. This includes risks that may be present deep in supply chains e.g. the mining of conflict minerals. The final Draft Guidelines acknowledge an organisation may initially only be able to assess and address modern slavery risks related to its direct suppliers but an organisation should have a plan to engage with suppliers deeper down the supply chain in future.
The final Draft Guidelines provide examples of what a reporting entity can do where it does not have direct relationships with sub-suppliers further down its supply chain (such as joining a multi-stakeholder mechanism or working with an industry body to assess risk or drive change).
IT IS POSSIBLE TO TAKE A ‘GLOBAL APPROACH’ BUT CARE SHOULD BE TAKEN
The final Commonwealth Guidelines address the question that numerous organisations have raised of whether for the purposes of the Modern Slavery Act, they can use the same statement as they have submitted to comply with the UK Modern Slavery Act 2015. The final Commonwealth Guidelines state if your organisation must report under the Modern Slavery Act and the UK Modern Slavery Act, it can submit the same statement but must ensure it meets all of the mandatory criteria to comply with the Modern Slavery Act. It is worth remembering the Australian regime is considered a step-up from the UK regime. A UK modern slavery statement may be missing some of the mandatory elements required under the Australian regime if the organisation has not turned its mind to them.
TIPS FOR THRESHOLD ASSESSMENT
There is additional information to help organisations to determine if they meet the threshold to be a reporting entity under the Modern Slavery Act. As previously reported, a ‘reporting entity’ for the purposes of the Modern Slavery Act is (1) an Australian entity or a foreign entity carrying on business in Australia; and (2) has a consolidated revenue of at least $100 million over its reporting period. The final Commonwealth Guidelines include tips on how to calculate the consolidated revenue of an organisation and how to decide if an organisation is an Australian entity or a foreign entity carrying on business in Australia.
EXERCISE CAUTION BEFORE ELECTING TO VOLUNTARILY REPORT
Organisations should carefully consider whether providing a voluntary Modern Slavery Statement is appropriate. Once you have decided to report voluntarily, you cannot withdraw the decision once your reporting period has begun and must provide a statement like every other reporting entity. Entities that have volunteered to report but fail to report will be treated the same way as other non-compliant reporting entities. For example, if your entity does not comply, the Minister may publicly identify your entity as being non-compliant.
SO WHEN EXACTLY IS MY STATEMENT DUE?
Reporting entities are required to submit their Modern Slavery Statements six months after the first financial year that commenced after 1 January 2019. This requirement has had many scratching their heads as to when precisely Modern Slavery Statements are due.
The final Commonwealth Guidelines clarify this confusion with the following handy table:
WHERE TO FROM HERE?
The release of the Final Commonwealth Guidelines means that time is running out for reporting entities to prepare to comply with the Modern Slavery Act.
We have seen some organisations taking a sophisticated approach that is consistent with the Final Commonwealth Guidelines. This requires an organisation to incorporate modern slavery law compliance into its business operations, communicate what it is doing to the public and take a ‘whole of business’ approach.
While the Modern Slavery Act does not contain financial penalties for non-compliance, other organisations with a less comprehensive response are at risk of:
- failing to meet the deadline to file a Modern Slavery Statement
- being unable to cover all of the mandatory criteria prescribed under the Modern Slavery Act
- suffering reputational loss such as being viewed less favourably by their customers and the market when it comes to important human rights issues.
This article was originally published on the Maddocks website and has been reproduced with permission.