Insights / February 11th, 2022

Reputation on the line? Many Australian companies are failing to comply with Modern Slavery laws

Key takeaways

  • Compliance with modern slavery reporting requirements should not be viewed as a ‘tick-box’.

  • 50% of the world’s largest companies are failing to undertake human rights due diligence.

  • Non-compliant entities will continue to be called-out and scrutinised as the Australian Government enters discussions to reform the Act.

‘Modern slavery’ refers to practices such as forced labour, child labour, debt bondage, forced marriage and other slave-like practices used in the course of business. The Act requires any entity with annual consolidated revenue of over $100 million to prepare a modern slavery statement each reporting period, explaining the actions they are taking to assess and mitigate the risk of modern slavery within their operations and supply chains.

Since the end of the second reporting period in June 2021, numerous reports have been released on the quality of reporting by Australian companies. The reports released by universities, human rights groups and business advisors have garnered national media attention as they name and shame prominent Australian companies.

A report published by the Human Rights Law Centre (“HRLC”), analysing modern slavery statements published in the first reporting period, found that 77% of the companies reviewed had failed to comply with the basic reporting requirements.

The Australian Council of Superannuation Investors (“ACSI”) found that listed companies are not immune to poor modern slavery reporting despite their significant revenue compared to other reporting entities. The ACSI report reviewed statements lodged by ASX200 companies and found only 6% of statements explained how companies have or will respond to allegations or instances of modern slavery in their operations or supply chains.

In response to the issues identified in the HLRC report, four key actions were recommended to reporting entities:

  1. implement human rights due diligence to identify and address modern slavery risks;

  2. ensure a worker-centric approach informed by safe and meaningful engagement with workers and their representatives;

  3. embed responsible sourcing practices that support decent working conditions and avoid downward pressure onto suppliers and workers; and

  4. implement effective remediation processes and provide appropriate remedies for abuses.

Due diligence – what is it?

The HLRC report states that 50% of the world’s largest companies are failing to undertake human rights due diligence. This involves risk-based processes that identify, prevent and address human rights harmed by business.

Due diligence should involve multistakeholder engagement, from internal employees to supply chain workers. For entities with complex operational structures or supply chains, performing thorough due diligence is no easy feat. However, reporting entities of all shapes and sizes are expected to put due diligence measures in place.

Protecting your reputation

While there is currently no financial penalty for failing to report or meet the reporting requirements, non-compliant entities may suffer reputational damage for consistently ignoring their obligations. The impact of the Act relies on the power of public scrutiny by investors and civil society to encourage compliance.

With the Australian Government set to review the Act later this year, heavier scrutiny is being placed on reporting entities by the public and media.

Cowell Clarke’s ESG team is experienced in providing advice regarding modern slavery compliance including assisting entities to develop, implement and monitor ESG strategies. One of our solutions in this space is our Compliance Portal, which assists with streamlining these obligations.

To find out more about your ESG responsibilities or to discuss one of our ESG solutions, please contact a member of our team (Contact Us).

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.