The Guide aims to clarify exactly what entities need to do to comply with the Act, providing some much needed guidance on the following key questions:
The Guide sets out the key issues and concepts for entities to ensure compliance with the reporting requirements under the Act. The reporting requirements under the Act require certain large businesses and other entities (with an annual turnover of $100 million or more) to prepare annual Modern Slavery Statements (which will be publically available via an online register) that identifies modern slavery risks in their supply chains and the actions taken to address those risks.
The Act is a product of extensive consultation from the Australian business community, and other relevant stakeholders, and the Guide is being similarly developed, with submissions on the Guide closing on 19 May 2019. Following the consultation process, the final Guide will be released, however this date is yet to be announced.
The Guide does not cover Commonwealth entities - a separate Guide will be provided for these entities.
Do I need to report and can I report voluntarily?
An entity is a reporting entity and will be required to report under the Act if it:
An entity’s consolidated revenue is:
It does not include revenue of entities that own or control it, or revenue from intercompany transactions between entities of the same consolidated group.
A reporting period is classified either as the financial year (1 July to 30 June) or may be another annual accounting period used by that entity.
An Australian entity is:
A foreign entity carrying out business in Australia is one which meets the requirements under section 21 of the Corporations Act 2001 (Cth) and has obtained ASIC registration.
In circumstances where multiple entities in the same corporate group are required to report, a joint statement that covers each reporting entity may be submitted (refer below for more information on joint statements). Alternatively, each reporting entity may report separately.
Certain entities may also be required to report under separate modern slavery legislation (UK or NSW). In that case, the same statement can be used under different jurisdictions, provided it meets all the requirements under the Act.
If an entity does not meet the reporting requirements, and it is an Australian entity, or carries on business in Australia, it may report voluntarily.
To report voluntarily, an entity must first notify the Department of Home Affairs of its intention to do so, and then prepare and submit a statement that complies with the requirements for statements set out in the Act.
‘Opting in’ to the modern slavery regimes offers benefits in terms of demonstrating good corporate governance and leadership. However, the Guide does not provide specific guidance on whether an entity that opts in will be subject to consequences for non-compliance.
When do I report?
The Act requires annual statements for the entity’s reporting period (either the financial year or another 12 month accounting period) to be submitted to the Department of Home Affairs six months after the end of the reporting period.
Most entities will operate to the Australian financial year, meaning:
How do I prepare a statement?
Detailed guidance on the mandatory criteria for a statement is provided in Chapter 5 of the Guide, including information on the following key terms under the Act:
The seven mandatory criteria for a statement are set out below.
1. Identify the reporting entity
This criteria requires the identity of the reporting entity covered by the statement to be clearly identified, for example by name, ACN and registered office.
2. Describe the reporting entity’s structure, operations and supply chains
The reporting entity’s structure, operations and supply chains must then be described with reference to the following term descriptors in the Guide:
To assist in describing supply chains, the Guide states that the entity should:
3. Describe the risks of modern slavery practices in the operations and supply chains of the reporting entity and any entities it owns or controls
Reporting entities need to identify risks of modern slavery practices that may be present in their operations and supply chains, including any entities owned and controlled by the reporting entity.
The ‘risks of modern slavery practices’ means the potential of an entity, through its supply chains, to:
This criteria does not require a certification that all operations or supply chains are slavery free, or an exhaustive list of all specific risks, but must include sufficient detail to clearly show the types of products and services in the entity’s operations and supply chains that may involve risks of modern slavery.
For example, the statement may explain that the reporting entity has identified risks relating to its sourcing of a product from particular countries which may be produced using modern slavery, but does not need to specify the particular factories these risks relate to.
Entities may provide examples of specific individual risks or actual cases of modern slavery, provided that they do not put victims at risk of further harm.
4. Describe the actions taken by the reporting entity and any entities it owns or controls to assess and address these risks, including due diligence and remediation processes
This criteria requires the statement to include:
Much needed guidance on the terms ‘remediation’ and ‘due diligence processes’ has been provided, both with reference to the UN Guiding Principles.
Due diligence means ongoing management processes to identify, prevent, mitigate and account for how an entity addresses actual and potential adverse human rights impacts in their operations and supply chains, including modern slavery.
There are four key parts to due diligence:
Remediation may take many forms including steps to ensure the harm cannot recur (e.g. changing suppliers), formal apologies, compensation, stopping certain activities or introducing a grievance mechanism providing suppliers, employees or the community an easy avenue to raise modern slavery concerns.
The Guide does not explicitly state how far down a supply chain an entity needs to investigate. However, the Guide does state that entities that do not have direct visibility of long or complex supply chains can still assess high risk parts of supply chains by:
Appendix Two of the Guide provides further guidance on how entities can engage with suppliers.
5. Describe how the reporting entity assesses the effectiveness of these actions
The Act only requires entities to explain the method of assessing the effectiveness of an entity’s actions, not how effective those actions are.
The assessment of the effectiveness of an entity’s actions should be by both qualitative and quantitative methods, for example, by developing Key Performance Indicators on training and awareness-raising programs, the proportion or number of complaints resolved by a grievance mechanism, or the number of contracts that include modern slavery clauses.
6. Describe the process of consultation with any entities the reporting entity owns or controls (a joint statement must also describe consultation with the entity giving the statement)
This criteria only needs to be addressed if the reporting entity owns or controls any other entities.
The level of consultation undertaken by the reporting entity should:
7. Any other relevant information
Reporting entities may include any other information on a topic which may not fit into the other criteria, but it is not essential if all other six criteria have been satisfied.
How do I approve and publish a statement?
For a statement to be approved, it must be:
Delegation of these responsibilities is not permitted under the Act. For most entities, the principal governing body will be the board of the reporting entity.
Following approval, the statement must be submitted to the Department of Home Affairs for publication within six months after the end of the reporting period.
Failure to do so may lead to ministerial remedial action, including public identification as a non-complying entity.
Generally, once a statement has been submitted, an entity will not be permitted to revise or alter it other than in exceptional circumstances (e.g. to correct false or misleading or market sensitive information).
Can I prepare a joint statement?
For entities within a corporate group, joint statements may be prepared if that statement:
Notably, a foreign parent entity may report on behalf of multiple subsidiary reporting entities, even though the parent entity itself may not be required to report. A parent reporting entity of a corporate group is also required to report on all subsidiary entities, even if not all subsidiaries are required to report.
A joint statement may be approved by the principal governing body of each reporting entity covered by the joint statement so long as a ‘responsible member’ of each of those reporting entities also signs the statement.
The Guide is a welcome tool to the modern slavery regime, providing detailed and plain-English guidance for entities to ensure they understand their compliance requirements, in particular in relation to what a Modern Slavery Statement must include.
Further guidance is required in relation to:
We will continue to report on this exciting development in the procurement space, in particular providing updates as soon as the following are released:
Authors: Scott Alden, Victoria Gordon & Julia Wyatt
Scott Alden, Partner & National Head of Procurement
T: +61 2 8083 0419
Stephen Natoli, Partner
T: +61 3 9321 9796
Troy Lewis, Partner & National Head of Construction and Infrastructure
T: +61 7 3135 0614
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.
Published by Scott Alden, Victoria Gordon