Proposed modern slavery in supply chains reporting requirement
Attorney-General’s Department (AGD) has recently consulted about a proposed modern slavery reporting requirement following release of the Joint Standing Committee of Foreign Affairs, Defence and Trade August 2017 report Modern slavery and global supply chains.
The proposal is based on the UK Modern Slavery Act 2015 and would require entities headquartered in Australia or entities that have any part of their operations in Australia with total annual revenues of $100 million or more to report annually on their efforts to address modern slavery in their supply chains (the UK threshold is £36 million annual turnover). The requirement would apply to larger listed entities and proprietary companies, large charities and co-operatives, aged and healthcare providers and educational institutions. It would not apply to Commonwealth or state government procurement. The proposed definition of modern slavery encompasses slavery, servitude, forced labour, debt bondage and deceptive recruiting for labour or services, but would exclude practices such as forced marriage which AGD considers are unlikely to be present in business operations and supply chains.
An entity would be required to report against the following mandatory criteria:
- its structure, operations and supply chains
- the modern slavery risks present in its operations and supply chains
- its policies and processes to address modern slavery in its operations and supply chains and their effectiveness (such as codes of conduct, supplier contract terms and training for staff)
- its due diligence processes relating to modern slavery in its operations and supply chains and their effectiveness.
Other proposed features include: the ability to opt-in to the reporting requirement, guidance for business about reporting under the legislation, a freely publicly accessible central repository of modern slavery reports and board sign-off on modern slavery reports. There would be no punitive penalties for non-compliance.
Governance Institute has made a submission expressing support for the proposed reporting requirement but considers that, where possible, the Australian legislation should align with the requirement for UK domestic companies and should also apply to Commonwealth and state government procurement. Governance Institute also considers that any mandatory modern slavery supply chain reporting requirement should be non-prescriptive about what steps entities should take to address modern slavery in their supply chains and allow flexibility in disclosure. Similarly, any guidance should be illustrative and principles-based. Entities should not be required to report on the number and nature of any incidences of modern slavery detected during the reporting period because of the potential exposure to legal liability. Our members expressed a preference for entities to report once in any year and for there to be a six-month deadline for publishing Modern Slavery Statements tied to the end of entities’ financial years. The reporting requirements should be phased in over a two-year period which would enable entities to prepare and issue their first report and take any further action required.
Governance Institute will continue to keep members updated on this matter.