This article is written by Matt Egerton-Warburton and Lawrence Normoyle.
As of 1 January 2019, Australian entities with global consolidated revenue exceeding $100 million per financial year (reporting entity) have an obligation to report on risks of modern slavery occurring as a result of their operations and supply chains and the action they have taken to assess and address those risks, and the effectiveness of their response.
Reporting entities include companies, partnerships, trusts, universities, charities and foreign entities carrying on business in Australia. Controlled subsidiaries are included when calculating the $100 million threshold.
Reporting entities must lodge an annual "Modern Slavery Statement" with an online public register administered by the Department of Home Affairs. The first statements are due either by 31 December 2020 (for financial-year-reporting entities) or 30 June 2021 (for calendar-year-reporting entities) for their respective reporting periods.
The report must :
- describe the entities structure, operations and supply chains;
- describe 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;
- describe the actions taken by the reporting entity and any entity the reporting entity controls, to assess and address those risks, including due diligence and remediation processes;
- describe how the reporting entity assesses the effectiveness of such actions; and
- be approved by the board (or equivalent) and signed by a director (or equivalent).
There are no financial penalties for non-compliance under the federal act. The Minister's powers are limited to:
- request an entity to explain a failure to comply;
- request remedial action be taken in relation to a non-compliant report; and
- publish information about the entity's failure to comply.
In 2017 it was ALP policy to include penalties for non-compliance and to establish an independent commissioner. If there is a change of government, the new government may seek to implement these changes.
The Minister will produce annual reports, which will include an overview of compliance by entities and identification of best practice reporting.
Running in parallel to the Commonwealth Regime is the Modern Slavery Act 2018 (NSW) that was assented to on 27 June 2018 and is expected to be proclaimed in July this year. The NSW act covers organisations with employees in NSW and annual turnover of $50 million or more. The NSW act includes penalties of up to $1,100,000 for non-compliance. While regulations are yet to be finalised, it is expected that companies that report under the federal act will not need to report under the NSW act.
Reporting entities should consider:
- mapping their supply chains and conduct a risk assessment and gap analysis;
- ways to reduce risk (including remedial actions);
- compliance risks when conducting M&A;
- reviewing and creating internal compliance programs; and
- reviewing supply contracts and contractor management programs.