Modern slavery is a critical issue that affects millions of people globally, including in supply chains linked to Australian businesses. To combat this, the Australian government introduced the Modern Slavery Act 2018 (Cth), which requires large businesses and other entities to report annually on the risks of modern slavery in their operations and supply chains and the actions taken to address those risks. Modern slavery reporting is not only a legal obligation but also an ethical imperative that can enhance a business’s reputation, strengthen stakeholder trust, and contribute to the global fight against exploitation.
This article outlines the best process for completing modern slavery reporting in Australia, including the role of specialist external consultants in assisting businesses to meet their reporting obligations. The process encompasses understanding the legal requirements, assessing risks, developing policies and procedures, engaging with stakeholders, monitoring and improving practices, and preparing the modern slavery statement.
Understanding Modern Slavery Reporting Requirements
The first step in modern slavery reporting is understanding the legal framework and obligations under the Australian Modern Slavery Act 2018. The Act requires entities with an annual consolidated revenue of at least AUD 100 million to prepare a modern slavery statement, which must address seven mandatory reporting criteria:
Identify the Reporting Entity: Clearly state the entity required to report under the Act.
Describe the Structure, Operations, and Supply Chains: Provide an overview of the entity’s structure, operations, and supply chains.
Describe Risks of Modern Slavery Practices: Identify the risks of modern slavery in the operations and supply chains of the reporting entity and its controlled entities.
Actions Taken to Address Risks: Outline the actions taken by the reporting entity and its controlled entities to assess and address these risks, including due diligence and remediation processes.
Effectiveness of Actions: Describe how the entity assesses the effectiveness of these actions.
Process of Consultation: Detail the process of consultation with any entities owned or controlled by the reporting entity.
Any Other Relevant Information: Provide any additional information that may be relevant to the report.
Businesses must ensure that their modern slavery statement is approved by the board of directors (or equivalent) and signed by a responsible member of the entity before being submitted to the Australian Border Force (ABF) and published on the Modern Slavery Register.
Conducting a Risk Assessment
A thorough risk assessment is the foundation of effective modern slavery reporting. This process involves identifying, analyzing, and prioritizing the risks of modern slavery within a business’s operations and supply chains. The following steps outline a comprehensive risk assessment process:
1. Mapping Operations and Supply Chains
Begin by mapping the business’s operations and supply chains to understand where modern slavery risks may arise. This includes identifying all direct suppliers, subcontractors, and other entities involved in the production, distribution, and delivery of goods and services.
Mapping should cover all tiers of the supply chain, not just direct suppliers. Modern slavery risks are often higher in lower tiers, where there is less visibility and control. High-risk sectors and regions should be given particular attention, such as agriculture, construction, manufacturing, and regions with weak labor protections.
2. Identifying High-Risk Areas
Once the supply chains are mapped, identify high-risk areas for modern slavery. This can be done by analyzing factors such as:
Geographical Risk: Certain countries and regions have a higher prevalence of modern slavery due to factors like weak legal frameworks, corruption, and economic instability.
Sectoral Risk: Industries like textiles, electronics, agriculture, and mining are known for higher risks of forced labor, child labor, and other forms of modern slavery.
Supplier Risk: Assess the practices of suppliers and contractors, especially those in high-risk sectors or regions, to identify potential modern slavery risks.
External tools and resources, such as the Global Slavery Index, the U.S. Department of Labor’s List of Goods Produced by Child Labor or Forced Labor, and other human rights risk indices, can help in assessing these risks.
3. Engaging with Stakeholders
Stakeholder engagement is crucial in understanding and addressing modern slavery risks. Engage with key stakeholders, including employees, suppliers, industry groups, NGOs, and affected communities, to gather insights and perspectives on potential risks and challenges.
Consultation with stakeholders should be an ongoing process, providing valuable information that can inform risk assessments and the development of mitigation strategies. It also helps in building trust and ensuring that all voices are considered in the reporting process.
Developing Policies and Procedures
After identifying the risks of modern slavery, the next step is to develop or enhance policies and procedures to address these risks. These should be integrated into the business’s broader governance and risk management frameworks.
1. Creating a Modern Slavery Policy
A modern slavery policy should clearly outline the business’s commitment to preventing modern slavery in its operations and supply chains. The policy should:
Define modern slavery and its various forms, including forced labor, child labor, human trafficking, and debt bondage.
State the business’s zero-tolerance stance on modern slavery and its commitment to ethical business practices.
Describe the procedures for assessing and addressing modern slavery risks, including due diligence, supplier engagement, and remediation processes.
Outline the responsibilities of employees, managers, and suppliers in preventing modern slavery.
Provide guidance on how to report suspected cases of modern slavery, including whistleblower protections.
2. Implementing Due Diligence Processes
Due diligence processes are essential for identifying and mitigating modern slavery risks. These processes should include:
Supplier Assessments: Conduct regular assessments of suppliers to evaluate their compliance with the business’s modern slavery policy. This can include on-site audits, self-assessment questionnaires, and third-party certifications.
Contractual Obligations: Incorporate modern slavery clauses into supplier contracts, requiring suppliers to comply with the business’s modern slavery policy and to report any incidents of modern slavery in their operations.
Training and Capacity Building: Provide training to employees, suppliers, and contractors on modern slavery risks, the business’s policies, and how to identify and report potential cases.
3. Establishing Grievance Mechanisms
Effective grievance mechanisms are crucial for identifying and addressing modern slavery cases. These mechanisms should be accessible, confidential, and safe for all stakeholders, including employees, suppliers, and affected communities. They should allow for anonymous reporting and ensure that all reports are investigated and resolved promptly.
Grievance mechanisms should be regularly reviewed and updated to ensure they remain effective and responsive to the needs of stakeholders.
Monitoring and Improving Practices
Continuous monitoring and improvement are essential for ensuring that modern slavery risks are effectively managed over time. This involves regularly reviewing and updating policies, procedures, and risk assessments to reflect changes in the business’s operations, supply chains, and external environment.
1. Tracking Progress
Develop key performance indicators (KPIs) to track the effectiveness of the business’s modern slavery efforts. These may include:
The number of supplier assessments conducted and the results.
The number of incidents of modern slavery reported and resolved.
The level of engagement and training among employees and suppliers.
Improvements in supply chain transparency and visibility.
Regularly review and report on these KPIs to the board of directors and other relevant stakeholders.
2. Engaging in Continuous Improvement
Modern slavery reporting is not a one-time exercise but an ongoing process of improvement. Use the insights gained from monitoring and stakeholder engagement to refine and enhance policies, procedures, and practices. This may involve:
Expanding due diligence processes to cover more suppliers and lower tiers of the supply chain.
Strengthening supplier engagement and collaboration to address modern slavery risks.
Enhancing training programs to increase awareness and capacity among employees and suppliers.
Updating grievance mechanisms to ensure they remain accessible and effective.
Preparing the Modern Slavery Statement
The final step in the modern slavery reporting process is preparing the modern slavery statement, which must be submitted to the Australian Border Force (ABF) and published on the Modern Slavery Register. The statement should address the seven mandatory reporting criteria outlined by the Modern Slavery Act and provide a clear, transparent account of the business’s efforts to assess and address modern slavery risks.
1. Gathering Information
Collect and compile all relevant information from the risk assessment, policies and procedures, due diligence processes, stakeholder engagement, and monitoring activities. Ensure that the information is accurate, up-to-date, and reflective of the business’s efforts over the reporting period.
2. Drafting the Statement
Draft the modern slavery statement in a clear and concise manner, ensuring that it addresses all seven reporting criteria. The statement should:
Provide an overview of the business’s operations, supply chains, and governance structures.
Detail the risks of modern slavery identified in the business’s operations and supply chains.
Describe the actions taken to assess and address these risks, including due diligence processes, supplier engagement, and remediation efforts.
Explain how the business assesses the effectiveness of these actions, including the use of KPIs and other monitoring tools.
Outline the process of consultation with any entities owned or controlled by the business.
Include any other relevant information, such as future plans for improving modern slavery practices.
3. Obtaining Approval and Submission
Before submission, the modern slavery statement must be approved by the board of directors (or equivalent) and signed by a responsible member of the business. This ensures that the statement has the full support of the business’s leadership and reflects the organization’s commitment to addressing modern slavery.
Once approved, submit the statement to the Australian Border Force and publish it on the Modern Slavery Register, making it accessible to stakeholders and the public.
The Role of Specialist External Consultants
For many businesses, particularly those with complex supply chains or limited internal resources, engaging a specialist external consultant can be invaluable in the modern slavery reporting process. External consultants bring expertise, objectivity, and specialized knowledge that can enhance the effectiveness of the business’s modern slavery efforts. ESG Impact is a leader in advising businesses on how to improve their Modern Slavery reporting and meet annual reporting requirements.
Expertise and Knowledge
Specialist consultants have a deep understanding of modern slavery risks, regulatory requirements, and best practices in addressing these issues. They can provide tailored advice and support, helping businesses navigate the complexities of modern slavery reporting and ensure compliance with legal obligations.
Risk Assessment and Due Diligence
Consultants can assist with conducting comprehensive risk assessments, mapping supply chains, and identifying high-risk areas for modern slavery. They can also help develop and implement due diligence processes, including supplier assessments, audits, and training programs.
Policy Development and Implementation
External consultants can support businesses in developing and enhancing modern slavery policies and procedures, ensuring they are aligned with best practices and regulatory requirements. They can also assist with the implementation of these policies, including the integration of modern slavery considerations into broader governance and risk management frameworks.
Monitoring and Reporting
Consultants can help businesses establish effective monitoring and reporting processes, including the development of KPIs, tracking progress, and preparing the modern slavery statement. They can also provide ongoing support in refining and improving modern slavery practices over time.
Modern slavery reporting is a critical responsibility for businesses in Australia, both as a legal obligation and as a moral imperative. By following a structured and comprehensive process, businesses can effectively assess and address modern slavery risks, contribute to the global fight against exploitation, and enhance their reputation and stakeholder trust. Engaging a specialist external consultant can provide valuable expertise and support, helping businesses navigate the complexities of modern slavery reporting and achieve meaningful, lasting change.
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