The Modern Slavery Act 2018: More than a statement

When the Modern Slavery Act 2018 (Cth) (the Act) came into force on 1 January 2019, the 31 December 2020 deadline seemed reasonable.

While most organisations have been completely consumed with COVID-19, they may have missed that the deadline for the submission of modern slavery statements has been extended by three months for organisations with a financial year end of 30 June 2020.

While the three-month reprieve is a relief to most, meeting the requirements of the Act should not be seen as something that will be done by the submission of your modern slavery statement alone. Planning, if it has not already begun, needs to start now – even if at least to understand how your organisation is impacted.

The intent of the Act is to identify and assess the modern slavery risks in global operations and supply chains to drive change and increase business awareness of modern slavery and the 40 million victims who are impacted by it each year. The Act requires organisations with a consolidated revenue over $100 million to prepare a modern slavery statement which addresses the following:

• identity of the reporting entity
• the reporting entity’s structure, operations and supply chains
• risks of modern slavery practices as a result of the entity’s operations or supply chains, and entities that the reporting entity owns or controls
• actions taken by the reporting entity and any entity the reporting entity owns or controls to assess and address modern slavery risks
• how the reporting entity assesses the effectiveness of these actions
• how the reporting entity consults with entities that the reporting entity owns or controls to submit a joint modern slavery statement
• other information the reporting entity considers relevant.

More than a statement: your organisation needs a compliance framework

The list of requirements that need to be addressed in a modern slavery statement may seem straight forward, though, for many organisations, policies, processes, and procedures will be need to be developed to underpin your statement. Further, given the Act requires entities not just to describe their modern slavery risks but also the actions taken to assess and address its risks, you need a robust and coordinated approach. Developing a framework which documents the risks you have identified and the activities you have implemented to address these risks should help ensure your risks are appropriately identified, and suitable mitigating actions are outlined.

As the Act also requires organisations to report on how they assess the effectiveness of these actions, and demonstrate continuous improvement, your organisation will also need to determine how it will evaluate the efficacy of its policies and procedures. For most organisations, the management of the activities it undertakes is likely to require some degree of coordination. Again, having a framework should help define roles, responsibilities and expectations, including who drafts the statement and what your organisation will do in the event of being exposed to incidences of modern slavery.

Priorities: What do I need to do first?

Below are some key questions your organisation should consider when it’s putting together frameworks to comply with the Act.

Does the Act apply to my organisation?

Check your consolidated revenue to see if the Act applies (note: the Act does not apply to Local Government or certain parts of State Government).

What’s my exposure?

You need to assess your supply chain risk if your organisation procures a significant amount of goods and services. Your approach to assessing your risks should consider causes, contributions or direct links to modern slavery practices. The risk assessment stage is just as important as the risks you identify, as it may take your organisation some time to complete the assessment to determine the goods and services or investments which are most at risk to incidences of modern slavery.

What governance do I need?

Establishing responsibilities early may assist in working through what needs to be done, who should do it, and what you might already be doing. Governance extends to the ongoing management of the framework and assessment of risks as your organisation’s business activities evolve. You should consider assigning roles for overseeing the framework, preparing and approving the modern slavery statement, and submission to the Department of Homeland Affairs.

What can I do now to reduce my exposure in the future?

Look at your contracts and determine whether there are existing provisions for modern slavery. Also, consider what processes are in place to assess potential suppliers and business investments. Incorporating questions associated with modern slavery in due diligence procedures may also help to reduce your exposure to modern slavery risks.

Developing an effective modern slavery risk management framework

We recently worked with a client in the health sector which has a significant exposure to modern slavery on the basis of the products and equipment they procure via their local and overseas supply chains. In assisting them with the development of their framework, there were a number of takeaways which may help to facilitate this process in your organisation:

The framework needs to be integrated into your organisation

The requirements associated with not causing, contributing to or being linked with modern slavery, will mean that you may have to update other policies in your organisation (e.g. Code of Conduct, Procurement Policy, Investment Policy) to ensure your modern slavery framework is effectively integrated into your organisation.

Prioritise, prioritise, prioritise

As our client had a significant number of suppliers, it was not feasible to fully evaluate the modern slavery risks within their supply chain. We worked with them to develop a risk-based strategy for them to assess the modern slavery risks in their supply chain over the next 18 months. Having an annual plan which includes all activities across your organisation will help you to improve the management of your modern slavery risks continuously.

You can’t plan too early

Having advised a number of clients on the preparation of the Modern Slavery Statements, it is clear that many organisations are yet to consider, let alone start to plan for how to comply with the modern slavery requirements when these take effect.

Collaboration is key

Success with your suppliers will come from collaborating with them in mitigating, identifying and addressing modern slavery risks. This means working with these organisations to provide you with comfort around how their modern slavery risks are managed and working with them if they identify occurrences of modern slavery. Terminating your agreement with them may lead to these practices going unaddressed.

Weighing the risks if you’re not required to report

If your organisation is not required to submit a modern slavery statement as you either do not meet the $100 million turnover criteria or are in Local Government or part of the State Government which is exempt, you should at least assess the potential of modern slavery risks to your organisation. The growing community and stakeholder interest in ethical conduct highlights the potential reputational damage that could be caused if you uncover instances of modern slavery in your supply chain. This may be particularly relevant if your organisation engages in high levels of procurement and has large supply chain dealings. Further, beginning to understand your potential modern slavery risks may at least put you in a better position should you be questioned by your board, your stakeholders or the community.

Assessing your modern slavery risks can provide business partners, communities and your employees with assurance that there are processes in place to mitigate potential risks and take action where necessary. This might be particularly useful for small companies, given larger firms are increasingly going to be wanting assurances and reporting from their suppliers about the controls that they have established to mitigate and identify incidences of modern slavery.

If your organisation would like to understand more about how to establish best practices to comply with the Act, including the preparation of a modern slavery statement and relevant governance and reporting frameworks, contact one of our specialists below.