By Elizabeth Ticehurst
It is hard to reconcile slavery – mostly thought of as a barbaric ancient practice – with the modern Australian workplace. Our employment laws and regulations are amongst the strictest in the world and our minimum wage is easily one of the highest. However, the reality is that practices such as forced labour and debt servitude still exist, even in developed countries, and can likely be found in the operations or supply chains of most businesses. Reliance on imported goods from regions such as South East Asia means that Australian companies are significantly exposed.
Until now, these connections to slavery and exploitation were hidden behind complex global distribution networks. But new legislation will force Australian businesses to inquire into and report on modern slavery risks in their operations and supply chains.
WHO WILL BE AFFECTED?
Two modern slavery laws have now been passed in Australia – the Modern Slavery Act 2018 (Cth) and the Modern Slavery Act 2018 (NSW). While both laws have a similar aim and content, the NSW law covers organisations carrying on business in the state with an annual revenue of A$50 million or more. The Federal Act has a higher annual revenue threshold of A$100 million but applies nationwide. Larger companies will not have to report under both schemes, as companies who report under the federal scheme will be exempt from making reports under the NSW scheme.
It is also worth noting that New Zealand organisations with revenues in Australia of more than A$100 million will be also subject to the federal requirements too.
WHAT ARE COMPANIES REQUIRED TO DO?
Under both laws, a company must produce an annual report on modern slavery in their operations and supply chains. The reports must be approved by the board of directors and will be made public by the respective governments. Broadly, the reports must cover six main criteria:
- The entity’s structure, operations and supply chain
- Risks of modern slavery practices in the entity’s supply chain (including any entities owned or controlled by the reporting entity)
- Actions taken to assess and address modern slavery risks, including due diligence and remediation processes
- How the entity assesses the effectiveness of its actions
- The process of consultation with entities owned and/or controlled by the entity
- Any other relevant information.
IS REPORTING THE ONLY OBLIGATION?
The short answer is yes. At present, neither law requires any entity to take concrete steps to prevent or eliminate modern slavery in its supply chain. However, because the reports will be made public, it seems pertinent to ask what you want your report to look like.
Organisations that value their public image will want to produce a report that paints the company in a positive light and highlights the efforts they have made to ensure ethical practices in their operations and supply chains. The federal reporting system in particular will enable a direct comparison between entities in the same industries. It is intended that this will create public pressure on organisations to improve their practices. However, care needs to be taken to ensure that reports are accurate – misleading information in reports can be subject to significant penalties.
WHICH INDUSTRIES ARE LIKELY TO BE IMPACTED?
Fashion and apparel is an industry where modern slavery risks are apparent. Oxfam Australia’s #whatshemakes campaign is placing significant pressure on apparel retailers to ensure higher wages for garment workers in developing countries. However, modern slavery risks have also been identified in financial services, property, food and beverage, agriculture, mining and healthcare. When looking at supply chains, factors include where products are produced in high risk geographies (countries experiencing conflict or high corruption levels); or where there are vulnerable populations (migrants or unskilled workers). Reporting entities will need to examine these ‘hot spots’ and consider what controls and due diligence measures they have in place at the procurement stage.
Even within Australia, increased scrutiny is required. Building services, cleaning, travel, security and maintenance services have all been identified as sectors with a high risk of worker exploitation. Surveys conducted by the Fair Work Ombudsman have identified persistent underpayment of wages and other legal and ethical issues in these sectors. Organisations affected by these new laws will need to report on the actions they have taken to address modern slavery from 1 January 2019 onwards. Whilst some organisations will take a ‘tick the box’ attitude, a more constructive view is to see this as an extension of the company’s corporate social responsibility, and an opportunity to provide investors, employees and customers with insight into how the company is managing its modern slavery risks.
Elizabeth Ticehurst is Special Counsel – Employment at KPMG.
This article originally appeared in the September 2019 print edition of Leadership Matters, IML ANZ’s quarterly magazine. For editorial suggestions and enquiries, please contact email@example.com.