Government’s Act on Modern Slavery: How will it affect your business?

//Government’s Act on Modern Slavery: How will it affect your business?

July 2018

Government’s Act on Modern Slavery

The New South Wales Government, followed by the Federal Government, have created legislation to try and stamp out the endemic abuses of human rights throughout Australian industry, and encourage organisations to put remedies in place, improving labour standards at every length of business operations and supply chains.

Summary: How will the new legislation affect your business?

NSW Bill

  • If your annual turnover is more than $50 million, your business will be covered by the NSW Bill and your business will have reporting requirements as specified under the NSW legislation.
  • Your business will be subject to fines of up to $1.1 million for breaches of the Act.
  • Your business will have to review and monitor its supply chain to identify any risks and stamp out any forms of modern slavery in its supply chain.

Cth Bill

  • If your businesses is based in or operating in Australia (including foreign entities carrying on a business in Australia) and has an annual consolidated revenue of $100 million, your business will have reporting requirements as specified under the Cth legislation.
  • If you don’t fall within this threshold, you may wish to report voluntarily.

What is the Modern Slavery Act and who does it affect?

New South Wales has been the frontrunner for legislation of this type, with NSW parliament having passed the Modern Slavery Bill 2018 (NSW Bill) on 21 June 2018.

The Federal Government introduced the Modern Slavery Bill 2018 (Cth) (Cth Bill) into the House of Representatives on 28 June 2018, and it has been referred to the Senate Legal Constitutional Affairs Legislation Committee for report by 24 August 2018.  The Bill may or may not be amended prior to its proclamation.

Modern Slavery legislation is aimed at any conduct involving the use of any form of slavery, servitude or forced labour to exploit children or other persons taking place in the supply chains of government agencies or non-government agencies.  This includes (but is not limited to) human trafficking, wage exploitation, debt bondage and deceptive recruiting for labour or services.

Businesses that are to be affected by this legislation are:

In the NSW Bill: all commercial entities that supply goods and services with a total revenue of $50 million and an employee in New South Wales.

In the Cth Bill: those businesses based or operating in Australia (including foreign entities carrying on a business in Australia) with an annual consolidated revenue of $100 million.  Businesses not within this threshold can also opt in voluntarily.

There is an exemption in the NSW Bill for commercial entities to report under the NSW legislation, if that entity is subject to a corresponding Commonwealth or State Law.  It is not yet known whether the Cth Bill will be treated as a “corresponding” law for the purposes of the NSW Bill.

What do the State and Federal Acts hope to achieve?

In essence, the object of the legislation is to ensure both national and multi-national entities are aware of, and responsible for, what is happening at every stage of its operation and supply chain.  It addresses the need for entities to operate not just profitably, but responsibly and ethically.

It also seeks, amongst other things, to encourage collaborative action to combat modern slavery, provide assistance and support for victims of modern slavery, provide detection and exposure of modern slavery that may have occurred, be occurring or is likely to occur, raise community awareness of modern slavery, and provide education and training about modern slavery.

What’s involved in the mandatory reporting process?

Both the NSW Bill and the Cth Bill include a requirement for businesses to report annually on the actions they have undertaken to address modern slavery, against a set of minimum criteria, in their own operations and supply chains.

State

The NSW Bill: establishes the role of an Anti-Slavery Commissioner that will be responsible for maintaining a public register of modern slavery statements, such statements to be submitted by a reporting entity within a period (set by the regulations) after the end of each financial year.

The requirements for these modern slavery statements will be set by the regulations, but may include:

(a)        the organisation’s structure, its business and its supply chains;

(b)        its due diligence processes in relation to modern slavery in its business and supply chains;

(c)        the parts of its business and supply chains where there is a risk of modern slavery taking place, and the steps it has taken to assess and manage that risk; and

(d)        the training about modern slavery available to its employees.

Federal

The Cth Bill: establishes a public register of modern slavery statements to be run by the Commonwealth Government and be made freely available on the internet, such statements to be submitted by a reporting entity annually.  The mandatory criteria for these annual reports, obligate the entity to:

  • Identify the reporting entity;
  • Describe the structure, operations and supply chain of the reporting entity;
  • 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 it owns or controls, to assess and address those risks, including due diligence and remediation processes (for example, the development of policies and processes to address modern slavery risks and providing training for staff about modern slavery);
  • Describe the process of consultation with:
    • Any entities that the reporting entity owns or controls; and
    • In the case of a reporting entity covered by a joint statement, the entity giving the statement; and
  • Include any other information that the reporting entity or the entity giving the statement, considers relevant.

This statement must be approved by the ‘principal governing body’ of each reporting entity, or an entity in a position to influence or control each reporting entity, which for a company would be its board of directors.  It must then be signed electronically by a ‘responsible member’ of the approving entity, which would normally be a director or secretary.

Key difference

A key difference between State and Federal reporting, is that the NSW Bill provides for penalties of up to $1.1 million to be issued to reporting entities who provide false or misleading statements, or who fail to comply with the reporting requirements altogether.  The proposed Cth Bill is not expected to provide any penalties.

What impact does this reporting have on a business?

With this new reporting regime, comes significant impacts on the way businesses in Australia will deal with their suppliers, contractors, subcontractors and customers.

The reporting requirements will impose a regulatory burden on businesses, forcing them to review their procurement and risk management processes to ensure they are effective in identifying and addressing modern slavery risks, as well as legal, commercial and reputational risks to their operations and supply chains.

It will be a complex undertaking, and one which will involve businesses coming up with new and innovative strategies to better manage their affairs – from developing new internal policies and properly mapping business structure, to considering direct in-house employment over out-sourcing and developing staff training on the risks and impacts of modern slavery.

Case studies

Nestle

Nestle, one of the biggest food companies in the world, was involved in an investigation back in 2015, after media reports alleged labourers in the fishing industry in Thailand were being treated inhumanely.

Nestle had been supplied seafood, which it then sold to consumers in its Fancy Feast catfood brand, by Thai fishery entities who were alleged to have physically abused workers, many of whom were from Myanmar and Cambodia.  In some cases, workers were enslaved, literally chained to the fishing boats, for six or eight years at a time, given little to no pay and subjected to “horrendous violence”.

From the beginning of Nestle’s investigation into the allegations, it released its findings publicly, as well as all of the actions it took over a number of years to address the issue, a move that was heavily praised by anti-slavery groups.

Fortescue Metals Group

Andrew ‘Twiggy’ Forrest, well known mining magnate and former CEO of the mining company Fortescue Metals Group, has been a huge advocate for the anti-slavery movement, having founded the Walk Free Foundation in 2010 with his daughter, Grace.

Unfortunately, after suspicions were raised, he too found modern slavery to be occurring in the supply chains of his own mining company, and took action to rectify the issue immediately.

Speaking with ABC Radio National Breakfast back in August 2017, Mr Forrest said:

We got a suspicion that labour welfare in the Middle East wasn’t up to the mark and we sent in a team to go and check it out, and that’s when we discovered thousands of East Indian and Asian workers being treated much worse than you’d ever see a farm animal.

Using evidence gathered by his team during the investigation, Mr Forrest put pressure on the company at the very top of the supply chain, insisting they put an end to the inhumane and brutal treatment of its workers.  Mr Forrest went on to say in his interview that the company has since “been impeccable in its labour standards”.

Craig Higginbotham and Lynette Prichard
20 July 2018

By | 2018-07-20T15:00:42+00:00 July 20th, 2018|Business|Comments Off on Government’s Act on Modern Slavery: How will it affect your business?