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What is modern slavery? Compliance for Australian organisations

CXC Global7 min read
CXC GlobalJanuary 18, 2024
CXC Global

Modern slavery affects millions of people worldwide and is tragically a multi-billion-dollar industry. ‘Modern slavery’ is a term used to describe the exploitation of workers.

Offenders of modern slavery, use threats, coercion, and deception to exploit workers and undermine their freedoms.

The practices that constitute modern slavery in Australia, can include the following:

  • Slavery
  • Human trafficking
  • Forced labour
  • Servitude
  • Forced marriage
  • Debt bondage
  • The worst forms of child labour

(In Australia, modern slavery doesn’t include practices like underpaying of workers, or poor working conditions. Although harmful, and in some contexts likely breaching the Modern Slavery Act, such workplace rights and obligations are instead, covered by Australia’s Fair Work Act and the Fair Work Ombudsman.)

Many Australian entities may be unaware that modern slavery practices are occurring in their business or supply chains. Under the Modern Slavery Act 2018, by managing and reporting on the risks of modern slavery in their operations and supply chains, Australian entities join the international effort to eliminate modern slavery. They also help to protect themselves from serious legal, reputational, operational and financial risks of being connected with modern slavery.

Australia’s Modern Slavery Act 2018 came into effect on January 1, 2019. In the four years since, there has been a review of the act, and recommendations for its improvement and updating to minimise the likelihood of offence, and to make more organisations in Australia compliant. More on this later.

Modern slavery has the potential to exist in any sector. And from a global perspective, widespread use of modern slavery impacts global markets through unfair price distortion, and by undercutting responsible business practices.  Modern slavery exists in every country on earth, encompassing many forms of exploitation.

According to the Global Estimates of Modern Slavery from Walk Free, the International Labour Organisation and the International Organisation for Migration:

  • 49.6 million people live in modern slavery – in forced labour and forced marriage.
  • Roughly a quarter of all victims of modern slavery are children.
  • 22 million people are in forced marriages. Two out of five of these people were children.
  • Of the 27.6 million people trapped in forced labour, 17.3 million are in forced labour exploitation in the private economy, 6.3 million are in commercial sexual exploitation, and nearly 4 million are in forced labour imposed by state authorities.
  • Collectively approximately US$193 billion per year is generated in the global private economy from forced labour alone.
  • The Covid-19 pandemic has exacerbated the conditions that lead to modern slavery.
  • Migrant workers are particularly vulnerable to forced labour.

The data for Australia is also sobering. From the 2023 Global Slavery Index, it was estimated that on any given day in 2021, there were 41,000 individuals living in modern slavery in Australia. And although we rank 26 out of 27 of all countries in the Asia Pacific region, the likelihood of underreporting is very real.

This is a deeply troubling statistic. It reinforces both the need for the federal government to strengthen Australia’s modern slavery response and for businesses to ensure that they are addressing modern slavery risks within their business. 

Australian Human Rights Commission

Today, we’ve provided a detailed explanation of modern slavery as a guide for Australian employers. With potential changes to the act likely to be enacted this year, the compliance requirements are more widespread, and taking action as a preventative measure is crucial.

Understanding modern slavery and compliance in Australia

Modern slavery in Australian: The Modern Slavery Act 2018

The Commonwealth Modern Slavery Act 2018 was enacted on the 1st January, 2019. The Act established a reporting requirement for Australian organisations and entities with annual consolidated revenue of at least A$100million.

The reporting allows the Australian business community and government to identify and address risks of modern slavery, and to maintain responsible and transparent supply chains.

Entities mandated to comply with the Act’s Reporting Requirement, including the Australian Government, must prepare annual Modern Slavery Statements.

Compliance strategies for businesses

Organisations and other entities in Australia, with a with a minimum annual consolidated revenue of $100 million, are required to provide an annual report about their risk of modern slavery in both their operations and their supply chains. This includes any owned or controlled entities of the organisation.

This reporting in Australia is for organisations that meet the revenue threshold and must be on the back of detailed risk assessment of their business and supply chains. The reporting criteria of the Act, are outlined below:

  1. The identity of the reporting entity.
  2. A description of the entity’s structure, operations, and supply chains, including information about the goods and services it provides and the countries in which it operates.
  3. 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.
  4. The actions taken by the reporting entity and any entity that the reporting entity owns or controls, to assess and address those risks.
  5. How the reporting entity assesses the effectiveness of such actions.
  6. The process of consultation with any entities the reporting entity owns or controls or is issuing a joint modern slavery statement with.
  7. The name of the person or persons who is/are responsible for ensuring that the entity complies with the reporting requirements under the Act and the contact details of the person or persons.
  8. Any other information that the reporting entity, or the entity giving the statement, considers relevant.
  9. A statement that the information provided in the report is accurate and complete to the best of the person’s knowledge and belief. The statement must be signed off by a director of the highest governing body and submitted to the Australian government for publication in a public registry.

Organisations must describe the risk of modern slavery in their operations, and the actions they have taken to mitigate and eliminate those risks, in the reporting year (but not in previous years).

How to report compliantly

The reporting requirements for the relevant organisations are multi-faceted. Here’s what you need to know to be able to report accurately and to avoid any risk of modern slavery in your business or supply chains:

  1. Establish a protocol and operational imperative to review your supply chains meaningfully and regularly, including regular due diligence checks.
  2. Design a framework for your operations that maintains management visibility to ensure zero potential for modern slavery.
  3. Where risks of modern slavery are identified – no matter how small – devise and implement strategies and actions to address, manage and eliminate those risks.
  4. Develop remediation measures should any elements of modern slavery be present.
  5. Establish regular reporting protocols throughout the year – for example monthly or quarterly – to ensure when annual reporting is required by the Act, your business is prepared and compliant.
  6. Each year, as a new report is required by the Act, if the organisation sees no new actions are required, they must check the descriptions, processes and operations to maintain a zero-to-low risk profile.

In maintaining a healthy workplace and operation, it’s critical to uphold a consistent review of the effectiveness of the modern slavery risk management framework and processes in your organisation and supply chains. Not only will this keep your business compliant, but it will also eliminate any surprises at reporting time.

Here’s a strategic action summary covering all the steps of a robust management framework.

Image of a robust management framework

In terms of timing, statements are due within six months after the organisation’s financial year end. This means, if your organisation’s reporting period is 1 January to 31 December, the due date for your report will be 30 June of the following year.

Reporting organisations must provide their approved modern slavery statement to the Attorney General’s Department for publication on an on-line public register, here.

Recent developments and proposed amendments

An independent review of the Modern Slavery Act has been undertaken by the Attorney General’s Department and conducted by Professor John McMillan AO. These changes were tabled in Parliament on 25 May 2023.

A total of 30 new recommendations were made for the Government to consider, many of which are in line with key pre-election commitments from the Albanese Government’s Tackling Modern Slavery package and overseas regulatory trends.

The review found little evidence that the Act has resulted in meaningful change for people living in conditions of modern slavery. It identified three key weaknesses in the existing structure of the Act. These were:

  1. The standard of modern slavery reporting is variable.
  2. The reporting obligation is not properly enforceable.
  3. The process is at risk of being drowned by a sea of large and incompatible statements.

As a result, many of the 30 recommendations made, are expected to be a fait accompli. These include, amongst others:

  • Lowering the reporting threshold for entities with annual consolidated revenue to A$50m, down from A$100m.
  • Expanding the mandatory reporting criteria to be more explicit, and inclusive of grievance and compliant mechanisms of the organisation, and external consultations taken for risk management.
  • Introducing a due diligence system obligation.
  • Penalties for non-compliance.
  • Flexibility to permit entities to report on a three-year cycle (with shorter updates in the intervening years).
  • A formal public complaints mechanism.
  • Establishing a Commonwealth Anti-Slavery Commissioner.
  • Several administrative changes.

The Government has not yet confirmed its position in relation to the recommendations. However, it has previously indicated that it supports the introduction of penalties and has expressed support for a mandatory due diligence obligation (in some form).

Conclusion

It’s hoped that the proposed alterations to the Modern Slavery Act will instil meaningful change in how Australian organisations, and multinationals with an Australian base, manage their operations and supply chains.

Most importantly, organisations in Australia must establish a framework of compliance as part of their baseline operations. This includes establishing proactive measures and checks to ensure every level of the organisation and its supply chains are compliant. And committing to taking quick, decisive action where non-compliance, or the risk of non-compliance, is apparent. Understanding the Act is the first step, and taking specialist counsel on this issue is a great idea, to ensure complete, ongoing compliance.

The legal and ethical repercussions of non-compliance can be devastating for organisations. Not only is modern slavery an abhorrent scourge on our – and every – country, but the inequity, exploitation and deception of other human beings is simply unfathomable. It needs to stop.

Now is the time to take action. Get your stakeholders, business leaders and operations informed. If you need to, take external advice. And establish a robust compliance framework to protect exploited workers, and to protect the commercial health of your organisation.


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