Insights / September 6th, 2022

Changes to the ‘S’ in ESG - The Modern Slavery Act Issues Paper

We are seeing an increased focus on the social considerations of ESG including slavery in the modern world. Modern slavery risks require understanding of operational risks as well as supply chain risks.

 Recently the Australian Government has released an Issues Paper reviewing the Modern Slavery Act 2018 (Cth) (‘the Act’).

 Modern slavery statistics estimate that over 40 million people were victims in 2016. The Issues Paper reviews how effective the Act has been in addressing slavery in the modern world and highlights opportunities for reform. 

 The highlighted opportunities for reform require organisations to prepare for increasing due diligence requirements and potential enforcement actions.

Expanding reporting obligations

Organisations that have at least $100 million in annual consolidated revenue must, amongst other mandatory criteria, lodge a statement outlining their due diligence and remediation processes to assess modern slavery risks in organisations and supply chains. The Issues Paper contemplates whether these due diligence obligations should be strengthened.

 To increase transparency, the Issues Paper considers whether the concept of due diligence should be more deeply embedded into the Act, explicitly setting out the steps required to conduct due diligence. 

 The Issues Paper also contemplates lowering the reporting threshold for organisations with consideration to thresholds such as $50 million annual consolidated revenue. This would place compliance obligations on an additional 2,400 companies.

Improving compliance

Some organisations have struggled to comply with the Act, so the Issues Paper questions whether the reporting criteria needs to change or more guidance is needed to help organisations understand their obligations.

 Options include adding a definition of ‘operations and supply chains’ or changing the definition of modern slavery. Modern slavery examples in the Act currently include debt bondage, organ trafficking and child labour. While some are found in an organisation’s supply chains others, like forced marriage for example, could be removed. 

Introducing enforcement 

One area where change is imminent is in the enforcement of the Act. There are currently no penalties for non-compliance, contributing to compliance and reporting quality issues. Options under consideration include financial penalties or excluding non-complying organisations from government contracts. In the US, goods produced with forced labour are prohibited from entering the country.

Establishing an Anti-Slavery Commission

During the election the government committed to establishing an Anti-Slavery Commissioner, the Issues Paper questions what their role and powers should be. 

What you should do now

Organisations should prepare for increased due diligence requirements and enforcement in this area. You can do this by reviewing your reporting and risk management framework to determine if they need to be strengthened.

 The consultation period for the review closes on 22 November, so there is also still an opportunity for you to make a submission. The final review is due to be completed by 31 March 2023.

 If you need help developing a plan or process to address these issues, please reach out to a member of our ESG team.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice.  You should not act upon the information contained in this publication without obtaining specific professional legal advice.  No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.