The Modern Slavery Act 2018 (Cth) (Act) was developed with the intention to drive a ‘race to the top’ by organisations to properly identify, address and report modern slavery risks in global supply chains.
However, our review of the modern slavery Statements submitted to date and consideration of various reports commentating on these issues (including from the Australian Council of Superannuation Investors (ACSI) and Monash University) indicate a large proportion of organisations are taking a ‘race to the middle’ approach – only meeting the bare minimum of the Act’s requirements and failing to undertake an in-depth analysis of the issues.
In the second part of our series on modern slavery reporting, we share our insights on what leading businesses are doing to meet their obligations under the Act and to implement robust modern slavery reporting frameworks.
What are the reporting requirements?
The Act sets out strict criteria that must be reported in a Statement. Unlike in other jurisdictions (such as the UK) the reporting criteria in Australia are mandatory. The reporting criteria are:
(i) the identity of the reporting entity
(ii) the structure, operations and supply chains of the reporting entity
(iii) the risks of modern slavery practices in the operations and supply chains of the reporting entity, and any entities that the reporting entity owns or controls
(iv) the actions taken by the reporting entity and any entity that the reporting entity owns or controls, to assess and address those risks
(v) how the reporting entity assesses the effectiveness of such actions
(vi) the process of consultation with any entities the reporting entity owns or controls or is issuing a joint modern slavery statement with, and
(vii) any other information that the reporting entity, or the entity giving the Statement, considers relevant.
What are the leaders reporting?
A noticeable group of organisations are leading the pack, going above and beyond the minimum requirements under the Act to understand their supply chains and the modern slavery risks within, and taking measured steps to identify and mitigate these risks.
Below, we set out our insights on how the “leaders” comply with the Act’s mandatory reporting criteria.
Structure, operations and supply chains
The strongest Statements:
- described the nature of their business, provided detail of their workforce arrangements and types of business relationships;
- provided details as to the specific number of employees, direct hires, labour-hire contracts and the coverage of Enterprise Agreements, and
- importantly, identified the steps they are taking to obtain greater visibility beyond tier 1 in addition to explaining their tier 1 supply chain.
The leaders provided a clear description of their supply chains in terms of the suppliers by number, their specific regions/countries and the dollar spend.
Actions taken to assess and address modern slavery risks
The leaders disclosed how they are assessing and addressing modern slavery risks within their own operations (such as thorough recruitment, procurement, investments etc.), not just within their supply chains.
Only a small portion of organisations provided sufficient detail around the implementation of key actions to minimise modern slavery risks faced by their organisations and how these key actions are implemented. The majority of statements simply identified the categories of risk and high-risk countries in their supply chain, which is not sufficient.
The best Statements were those which drew on case studies and specific examples to illustrate how the company was mitigating risks, their efforts to engage with and educate suppliers, highly detailed risk assessments and transparent disclosure of policies and an assessment of the effectiveness of these policies. They followed the Government Guidance in disclosing their detailed risk assessment of individual suppliers and risk assessments deeper into supply chains.
Many organisations provided details of training programs, internal committees and working groups relating to human rights and modern slavery; however, the most comprehensive Statements provided details of the specific steps these groups were taking to identify and monitor modern slavery risks and specific details of the training provided (to whom, how many people etc.)
Assessing the effectiveness of actions
The leaders not only set out the steps they have implemented to oversee, monitor and report on their actions (such as internal reporting channels and working groups), but also disclosed the results of these processes. They set out their specific key performance indicators and how they assess these KPIs to determine whether they decreased the risk of exposure to modern slavery.
Consultation with owned and controlled entities
The leading Statements showed meaningful collaboration between the reporting entity and each entity it owns or controls (such as regular meetings between each entity’s procurement teams and working groups and cross-board briefings).
The best Statements used this section as an opportunity to report on other collaborations, beyond the Act’s minimum requirements, such as industry and strategic partnerships. The better Statements also set out what progress had been made in the previous reporting period and outlined their commitments and focus for the following year. Usefully, some organisations also annexed an index that cross-referenced the mandatory reporting criteria to references within the modern slavery statement and attached other reports containing useful information (such as sustainability reports).
Only a few organisations are actively engaging with stakeholders in a way that informs their modern slavery risk management approach to go beyond just asking suppliers to fill out a one page survey. The leaders demonstrated how they regularly engage with their stakeholders and suppliers and use the feedback from these external sources to assess effectiveness.
Our analysis of the leading entities’ first two Statements indicates they are carrying out detailed risk assessments and due diligence across their entire organisation and supply chain operations – not just producing the same bare-bones Statement each year. The leaders are those who are actively ensuring modern slavery risk management processes are embedded into their end-to-end supply chain process and across their organisation.
In the next part of our series on modern slavery reporting, we will be sharing our insights on the disclosure gaps we have identified and what Australian businesses can learn from the first two reporting seasons.