02 July 2018
7 min read
#Transport, Shipping & Logistics
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Part 2 – Implications for businesses in the supply chain
In Part 1 of this article, we looked at the content of the Australian Modern Slavery in Supply Chain Reporting Requirements (Reporting Requirements) proposed by the Commonwealth Government in the near future. In Part 2, we look at some practical and commercial implications likely to arise from the introduction of the Reporting Requirements.
Being aware and considering the implications of the new Reporting Requirements is incredibly important, given the outcomes of the ‘Australian Modern Slavery Survey’ recently conducted by The Chartered Institute of Procurement and Supply, which showed that:
Businesses in the supply chain which meet the $100 million revenue threshold may be used to reporting on compliance activities in other areas. Nonetheless, there are unique features of the proposed modern slavery reporting scheme which businesses should be mindful of when the Reporting Requirements are implemented.
A bigger supply chain than first meets the eye
The term ‘supply chain’ is commonly used in the context of transport and road safety laws to mark out the responsibilities of drivers, prime contractors for vehicles, vehicle operators, schedulers, loaders, loading managers, consignors and consignees. In the context of a Modern Slavery Act, this term takes on vastly different meaning.
Those expected to be directly affected by the Reporting Requirements also include businesses at the end of the supply chain, businesses in labour intensive industries and businesses employing foreign labour – businesses who have not historically considered themselves part of the supply chain.
Still, there is more than meets the eye.
Undoubtedly there will be a flow-on effect from entities required to comply with the Reporting Requirements to smaller entities below the threshold.
An effective measure to avoid modern slavery in supply chains and to demonstrate positive steps towards dealing with modern slavery risks is to include terms addressing such matters in contracts with supply chain partners. Terms which identify mutual obligations to implement policies to address modern slavery risks, provide warranties that operations do not involve modern slavery and contractual mechanisms for a failure to monitor modern slavery in supply chains are expected to arise in contracts between entities of all sizes upon the introduction of the scheme. This means that the Reporting Requirements will filter through to entities below the threshold and indirectly involved in the supply chain.
Specific high risk business activities
Industries with high risks of modern slavery are the retail, agriculture, construction and transport industries. Certain business models and conditions which are common to these industries make them more prone to modern slavery and slavery-like practices. They include:
These conditions:
Cross-border implications
Businesses operating internationally and even in multiple Australian states may be required to comply with numerous reporting requirements.
Examples of divergent reporting requirements include:
The Modern Slavery Act 2005 (UK) recommends reporting areas for Modern Slavery Statements but they are not mandatory. Australia’s Modern Slavery Bill 2018 (Bill) contains mandatory reporting areas. Entities used to providing Modern Slavery Statements under the UK law may assume that the reporting areas on modern slavery in Australia are optional and therefore may not comply with the Australian requirements. Given the substantial overlap between the requirements of the UK law and proposed Australian Reporting Requirements, entities subject to both laws may choose to publish and submit one Modern Slavery Statement covering all requirements for both jurisdictions to the relevant registries and on their websites.
There are significant differences between the Commonwealth Bill and the New South Wales Modern Slavery Act 2018. For example, the New South Wales scheme imposes penalties for failure to prepare and publish modern slavery statements in the order of up to 10,000 penalty units or $1.1 million. The Commonwealth scheme does not propose to introduce punitive measures. There are also separate administrative bodies under each scheme.
In their current proposed form the Federal and NSW Reporting Requirements may lead to entities being required to report to separate administrative bodies and also being subject to different penalty schemes. If the requirements are not coordinated, entities subject to both schemes should be aware of the discrepancies.
The key take-away is that businesses operating in multiple jurisdictions will need to ensure that their statements comply with all statutory requirements in each jurisdiction. Where there is an overlap this may be best addressed through providing one statement. Where this is not possible, some entities may need to produce more than one statement.
Conclusion
The Modern Slavery Bill was introduced in Federal Parliament on 28 June 2018. While it may be subject to further amendment, it would be prudent for entities to keep their eyes peeled for the risks of modern slavery in their businesses and to start laying the ground work for their reporting obligations under the Commonwealth and, where applicable, State schemes.
To ensure that entities are prepared for the Reporting Requirements and to avoid reputational risks to their business, they should consider:
Authors: Nathan Cecil
Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this publication is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources.
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