The Consultation Paper indicates that
this would require entities operating in Australia with total annual revenues of at least $100 million to report annually on their efforts to address modern slavery in their operations and supply chains. ...This regulatory action will be supported by comprehensive Government guidance and awareness-raising materials for the business community. This guidance and awareness-raising material will help build the business community’s capacity to respond to modern slavery. The Australian Government will also work collaboratively with the business community and civil society to refine the reporting requirement model. This consultation process will enable Government to leverage business and civil society expertise and ensure the reporting requirement is as simple, sensible and effective as possible.
Targeted regulation through a Modern Slavery in Supply Chains Reporting Requirement would address the Australian Government’s primary objective for reform, which is to equip and enable the business community, led by large business, to respond effectively to modern slavery and develop and maintain responsible and transparent supply chains. This type of regulation would have a number of key benefits. Importantly, a reporting requirement would provide certainty and consistency for the business community because it would set clear standards that apply to all entities above the set revenue threshold. This will create a level playing field for large business and ensure that sections of the business community are not disadvantaged by taking action to disclose and address modern slavery risks. This form of regulation will also send a clear message to the business community that the Australian Government will work with them to address modern slavery and will not tolerate Australian businesses benefiting from modern slavery in their operations and supply chains.
The Australian Government considers that direct government regulation is appropriate in this context rather than industry self-regulation. This is consistent with the community’s expectation that Government will lead on this issue and will ensure that the reporting requirement applies to all appropriate entities and not just specific industries. Taking targeted regulatory action is also consistent with the Australian Government’s response to other supply chain-related or social issues, including illegal logging and gender equality. The Commonwealth Illegal Logging Prohibition Act 2012 requires importers to implement risk management systems to address the risk of illegally harvested wood being used in imported products. More broadly, the Commonwealth Workplace Gender Equality Act 2012 requires certain non-public sector entities to submit annual reports to the Workplace Gender Equality Agency under a range of gender equality indicators.
Targeted regulation through a Modern Slavery in Supply Chains Reporting Requirement will have a regulatory impact on the business community. It may also have a financial cost for the Australian Government if it develops and maintains a central repository of statements. The Australian Government recognises the importance of ensuring that there is no undue regulatory impact on the business community and is committed to finding an appropriate balance between regulation and flexibility. The Australian Government has developed preliminary regulatory cost estimates for a Modern Slavery in Supply Chains Reporting Requirement using the Government’s Regulatory Burden Measurement framework. These costings are based on a reporting requirement being imposed on entities with total annual revenue in excess of $100 million (approximately 2,000 large corporations and entities operating in Australia). The Australian Government’s preliminary estimate is that this reporting requirement model could impose an annual regulatory burden of up to $23 million (or approximately $11,500 per entity). We will engage closely with business during the consultation process to refine this estimate.The Paper states
The Australian Government’s preferred option is to develop and implement a Modern Slavery in Supply Chains Reporting Requirement after a period of public consultation. We believe this is on balance the best and most effective way for us to equip and enable the business community to respond effectively to modern slavery and develop and maintain responsible and transparent supply chains. We also believe that the cost of regulating is in proportion to the real-world risk. Modern slavery involves grave abuses of human rights and serous criminal misconduct and it is appropriate that Government takes regulatory action to support the business community to combat this issue.
The Australian Government has carefully considered current international best-practice and the type of regulation required in the Australian context. As part of this process, the Commonwealth Attorney-General’s Department undertook a detailed review of the effectiveness of the UK modern slavery reporting requirement and other key international regulatory mechanisms between December 2016 and June 2017. Subject to feedback received throughout the course of the consultation process, the Australian Government proposes to establish a reporting requirement based on the key features set out below. This reporting requirement builds on the UK reporting requirement to create a simple, sensible and effective reporting requirement, suitable for the Australian context. Where appropriate, the Australian Government proposes to adopt similar requirements to the UK model to minimise the need for the business community to comply with inconsistent regulation across jurisdictions.
The reporting requirement will be established through a new Act of Parliament and would not be implemented by amending existing legislation. Terminology Every entity covered by the reporting requirement will be required to report on their actions to address modern slavery by publishing annual Modern Slavery Statements. For the purposes of the reporting requirement, the Australian Government proposes that modern slavery will be defined in the Act to incorporate conduct that would constitute a relevant offence under the existing human trafficking, slavery and slavery-like offence provisions set out in Divisions 270 and 271 of the Commonwealth Criminal Code. This means modern slavery will encompass slavery, servitude, forced labour, debt bondage, and deceptive recruiting for labour or services. The definition of modern slavery will exclude practices such as forced marriage that are unlikely to be present in business operations and supply chains.
As part of the public consultation process, the Australian Government will collaborate with business and civil society to appropriately define the types of entities that the reporting requirement will apply to and to clarify how the proposed revenue threshold will apply. At this stage, the Australian Government proposes to define entity broadly to include a range of entity types, including bodies corporate, unincorporated associations or bodies of persons, superannuation funds and approved deposit funds. The Australian Government does not propose to limit the application of the reporting requirement to high risk sectors or importers because modern slavery can occur in a range of domestic and international industries and many large entities operate across multiple sectors.
The Australian Government also proposes the revenue threshold for the reporting requirement will be set no lower than $100 million total annual revenue. This is broadly consistent with other thresholds, such as the threshold used for public companies in the Australian Taxation Office’s corporate tax transparency report. This will help to provide clarity for the business community about which entities will be covered by the reporting requirement. The Australian Government proposes that the threshold be set through regulation to allow for periodic adjustments if required. The Australian Government recognises that some entities below the threshold may also wish to comply with the reporting requirement and will allow these entities to ‘opt in’ to the reporting requirement.
Timeframe for reporting
The Australian Government proposes that entities will be required to publish Modern Slavery Statements under the reporting requirement within five months after the end of the Australian financial year. This will provide certainty for the business community by ensuring that entities cannot seek any competitive advantage by delaying publication of Modern Slavery Statements. It will also ensure that Government, the business community and civil society can more accurately assess compliance with the reporting requirement. If necessary, the Australian Government will provide for a phased introduction of the reporting requirement to ensure the business community has sufficient preparation time.
Focus of reporting
Subject to consultation with the business community and civil society, the Australian Government anticipates the reporting requirement will apply to all entities headquartered in Australia, or entities that have any part of their operations in Australia, and meet the revenue threshold. All entities covered by the reporting requirement will be required to report on their actions to address modern slavery in both their operations and their supply chains. The Australian Government will provide detailed guidance for the business community about the definition of operations and supply chains and will develop this definition in collaboration with the business community and civil society. The Australian Government proposes that the definition of supply chains extend beyond first tier suppliers.
At this stage, the Australian Government does not propose that the reporting requirement apply to Commonwealth or state and territory procurement. Commonwealth procurement is already governed by a legislative framework that sets out rules for spending public money, including in relation to ethical sourcing. The Australian Government is considering ways to demonstrate leadership on modern slavery through procurement, including through consideration of an appropriate Procurement Connected Policy on Human Rights.
To ensure the business community does not need to comply with inconsistent regulation across jurisdictions, the Australian reporting requirement will require entities to report against substantially the same criteria set by the UK reporting requirement. In the UK, reporting against criteria is optional. Subject to feedback received through this consultation process, the Australian Government proposes that entities will be required to report against a consolidated set of four criteria. These four criteria cover all of the optional criteria set out in the UK and mean an entity’s Modern Slavery Statement must, at a minimum, include information about:
1. The entity’s structure, its operations and its supply chains
2. The modern slavery risks present in the entity’s operations and supply chains
3. The entity’s policies and process 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), and
4. The entity’s due diligence processes relating to modern slavery in its operations and supply chains and their effectiveness.
Requiring entities to report against each of these criteria will ensure that the content of statements is consistent and more easily comparable. It will also provide certainty to entities about what to include in Modern Slavery Statements. To ensure this requirement will not impose an additional burden on the business community, the Australian Government proposes to provide detailed guidance about the nature and extent of the information that should be included in statements. Entities will also have the flexibility to determine what, if any, information they provide against each of the four criteria and whether to include any additional information.
Approval of Modern Slavery Statements
As with the UK reporting requirement, Modern Slavery Statements published by entities must be approved at the equivalent of board level. Statements will also need to be signed by a director. This will anchor the reporting requirement in corporate governance and ensure that modern slavery risks are considered at senior levels within each entity. Coupled with scrutiny from civil society, the approval process for modern slavery statements will also help ensure information provided by entities is accurate.
Guidance for business
The Australian Government will provide clear and detailed guidance and awareness-raising materials for the business community. The Australian Government anticipates this will include a reporting template, best-practice examples and information about how the business community can remedy and report instances of modern slavery identified in their supply chains or operations. The guidance will also support smaller entities to ‘opt in’ to the reporting requirement. Government will develop this guidance in consultation with the business community and civil society and will make the guidance available as soon as practicable, prior to the reporting requirement taking effect.
Monitoring and Evaluation Entities will be required to publish Modern Slavery Statements on their webpages. Subject to feedback obtained through this consultation process, the Australian Government also proposes to provide for a free, publicly accessible central repository. This repository will be searchable and will include all statements published in compliance with the reporting requirement. This repository will be run by either the Australian Government or a third party. The Australian Government will also establish a mechanism for the business community to provide feedback to Government about the operation and effectiveness of the reporting requirement. Consumers and civil society will also be consulted. The Australian Government will review the legislation three years after introduction, involving further public consultation, to ensure that the reporting requirement remains effective in the Australian context.
As in the UK, the Australian Government will not include punitive penalties for non-compliance. The Australian Government will monitor general compliance with the reporting requirement and entities that do not comply with the reporting requirement may be subject to public criticism.
The Australian Government is considering options for oversight of the reporting requirement, including the feasibility of and requirement for independent oversight. If implemented, any oversight mechanism could perform a number of functions, including: maintaining the central repository of statements, raising awareness about modern slavery risks, and/or providing a single point of contact for businesses seeking advice and assistance.
The Australian Government is also considering ways to support business groups and civil society to undertake analysis and benchmarking of Modern Slavery Statements. The Australian Government will assess compliance with the reporting requirement during the proposed post-implementation review of the legislation after three years.
The consultation questions are
• Is the proposed definition of ‘modern slavery’ appropriate and simple to understand?
• How should the Australian Government define a reporting ‘entity’ for the purposes of the reporting requirement? Should this definition include ‘groups of entities’ which may have aggregate revenue that exceeds the threshold?
• How should the Australian Government define an entity’s revenue for the reporting requirement? Is $100 million total annual revenue an appropriate threshold for the reporting requirement?
• How should the Australian Government define an entity’s ‘operations’ and ‘supply chains’ for the purposes of the reporting requirement?
• How will affected entities likely respond to the reporting requirement? As this is how the regulatory impact is calculated, do Government’s preliminary cost estimates require adjustment?
• What regulatory impact will this reporting requirement have on entities? Can this regulatory impact be further reduced without limiting the effectiveness of the reporting requirement?
• Are the proposed four mandatory criteria for entities to report against appropriate? Should other criteria be included, including a requirement to report on the number and nature of any incidences of modern slavery detected during the reporting period?
• How should a central repository for Modern Slavery Statements be established and what functions should it include? Should the repository be run by the Government or a third party?
• Noting the Government does not propose to provide for penalties for non-compliance, how can Government and civil society most effectively support entities to comply with the reporting requirement?
• Is the five month deadline for entities to publish Modern Slavery Statements appropriate? Should this deadline be linked to the end of the Australian financial year or to the end of entities’ financial years?
• Should the reporting requirement be ‘phased-in’ by allowing entities an initial grace period before they are required to publish Modern Slavery Statements?
• How can the Australian Government best monitor and evaluate the effectiveness of the reporting requirement? How should Government allow for the business community and civil society to provide feedback on the effectiveness of the reporting requirement?
• Is an independent oversight mechanism required, or could this oversight be provided by Government and civil society? If so, what functions should the oversight mechanism perform?
• Should Government reconsider the other options set out in this consultation paper (Options 1 and 2)? Would Option 2 impose any regulatory costs on the business community?