Modern Slavery Act and human rights in supply chains: What business-es in Australia need to know

published on 15 September 2022 | reading time approx. 4 minutes

by Silke Kornicke and Philip Mitchell

The website of the Australian Department of Home Affairs contains the following state­ment: “There is no place for modern slavery in the Australian community or in the global supply chains of Australian goods and services.” This official statement sum­marises Australia's commitment to introducing modern slavery reporting requirements regarding human rights in supply chains and was implemented by the passing of the Modern Slavery Act 2018 (Cth) which aims at combating modern slavery risks and includes mandatory modern slavery reporting and due diligence requirements.

Background to the Australian legislation

The Modern Slavery Act 2018 (Act) entered into force on 1.2019. The Act established an Australian. Modern Slavery Reporting Requirement (Reporting Requirement) and was the first national legislation in the world to define the term modern slavery.

Since the Act's enactment, more than 8,000 entities have submitted their modern slavery statements to the Australian Government's online modern slavery register which is required by the Act to be publicly accessible.

Reporting duty under the Act

Reporting under the Act by way of an annual Modern Slavery Statement is required for entities that:

• have consolidated revenue of at least AU$100 million for the relevant reporting period (a financial year), and which
• are Australian entities,
• or undertake business in Australia in that financial year.

Entities that do not meet these requirements can choose to voluntarily comply with the Act. The term “entity” is not limited to corporations. The Act anticipates inclusion of trust structures within the reporting regime, where relevant reporting for such an entity will fall to the “responsible member”, which may be a trustee party.

Consolidated revenue is defined as the total revenue of the entity, or, if the entity controls other entities, then the total revenue of those entities collectively as a group. The concept of consolidated revenue, and more generally control, is to be determined based on relevant Australian accounting standards.

What the statement must include

Modern Slavery Statements must identify the reporting entity and address the following mandatory criteria:

• The reporting entity’s structure, operations and supply chains;
• Modern slavery risks in the reporting entity’s operations and supply chains (including those of subsidiary entities);
• Actions taken (including by subsidiary entities) to assess and address those modern slavery risks, including due diligence and remediation processes;
• How the reporting entity assesses the effectiveness of actions taken; and
• The process of consultation with subsidiary entities in preparing the Modern Slavery Statement.

The Australian Government has released a 96 page guidance document on Modern Slavery Statements which assists entities with preparing their statement.

Supply chains

The Reporting Requirement aims to support the Australian business community to identify and address its modern slavery risks and maintain responsible and transparent supply chains.

Entities should map key parts of their operations and supply chains to improve their understanding about what is happening in their supply chains. They should then use this information to undertake a detailed risk assess­ment, including a process to assess particular suppliers using enhanced checks where necessary. A Modern Slavery Statement must explain what the entity is doing to assess and address the risks that modern slavery practices may be occurring in its global and domestic operations and supply chains.

A description of global and Australian supply chains as well as any modern slavery risks associated with those supply chains are two of the mandatory matters which must be included in a Modern Slavery Statement. Supply chain means the products and services (including labour) that contribute to the entity’s own products and services. This includes products and services provided by suppliers in Australia or overseas and extends beyond direct suppliers.

As part of the statement, the entity needs to describe its actions to address modern slavery risks, including due diligence and remediation processes. Due diligence refers to an ongoing management process to identify, prevent, mitigate and account for how an entity addresses actual and potential adverse human rights impacts in their operations and supply chains, including modern slavery. Ways to assess the risk include requesting information from the entity's direct suppliers (e.g. by way of a questionnaire to be completed by the supplier) and engaging with key suppliers to understand how they are addressing their modern slavery risks, such as charging recruitment fees payable by workers, tying workers’ accommodation to their employment status, sham contracting, unmanageable lead times and purchasing practices, unlawful wage deductions or underpayment

Using the Modern Slavery Statement to report in Australia and the United Kingdom

If your entity needs to report under both the Australian and UK Modern Slavery Acts then you can choose to submit the same statement in both the UK and Australia. However, you must ensure that your statement meets all the requirements in the Australian Act. The Australian Act sets out a number of requirements for statements that are not included in the UK Modern Slavery Act, including mandatory criteria for the content of statements and options to provide joint statements. This means that statements submitted in accordance with the UK Modern Slavery Act will not necessarily be compliant with the Australian Act.