What is modern slavery?

Modern slavery is where coercion, threats or deception are used to exploit a person and undermine their freedom. The Commonwealth Modern Slavery Act 2018 (“Commonwealth Act”) includes the following types of exploitation in its definition of modern slavery:

• Trafficking in people
• Slavery
• Servitude
• Forced labour
• Forced marriage
• Debt bondage
• The worst forms of child labour
• Deceptive recruiting for labour or services

Modern Slavery Legislation in Australia and NSW

Australia has recognised the need for organisations to address modern slavery in their operations and supply chains. Our publication on Managing the Risk of Modern Slavery provides general information on modern slavery and the requirements of the Commonwealth Act.

New South Wales passed the Modern Slavery Act (NSW) (“NSW Act”) in 2018 prior to the Commonwealth Act being passed. The NSW Act was inconsistent with the Commonwealth Act in a number of aspects and for this reason the NSW Government delayed its commencement. After several years of review, debate and public consultation, on 19 November 2021, the New South Wales Parliament passed the Modern Slavery Amendment Act 2021 (NSW) (“Amendment Act”) which made amendments to the NSW Act and several others including the Crimes Act 1900 and the Local Government Act 1993. The amended NSW Act came into force on 1 January 2022.

For most NSW organisations the NSW Act will not make any difference to their modern slavery reporting obligations. However, NSW state and local governments and government agencies that are explicitly excluded from the reporting requirements of the Commonwealth Act will be affected by the NSW Act. The NSW Act applies to NSW “government agencies” and councils are specifically included in the definition of a “government agency” along with government sector agencies, NSW government agencies and public or local authorities.

Unlike the Commonwealth, NSW will appoint an Anti-slavery Commissioner. Their powers and responsibilities include monitoring government policies and action in combating modern slavery, issuing codes of practice, referring information relating to instances or suspected instances of modern slavery to the police or other agencies and maintaining a public register that identifies government agencies failing to comply.

As the Anti-slavery Commissioner monitors the effectiveness of the legislation in addressing modern slavery and recommends NSW policy and legislative changes, and with the 2022 review of the Commonwealth Act, the obligations on local councils (and other reporting entities) could change.

NSW Modern Slavery Reporting Obligations

State and local governments, and government agencies have new modern slavery reporting obligations as a result of the NSW Act and amendments to other legislation.

The amendments to the Local Government Act 1993 will require local councils, after July 2022, to include statements in their annual reports detailing:

1. the action taken in relation to any significant modern slavery issue raised by the Anti-slavery Commissioner during the year concerning council operations; and
2. the steps taken to ensure that goods and services procured by and for the council during the year were not the product of modern slavery.

Under the NSW Act, Government Sector Finance (GSF) agencies under the Government Sector Finance Act (2018) must include similar statements in their annual reports, and NSW State owned corporations are required to publish a Modern Slavery Statement under the Commonwealth Act.

Government agencies may also be required to provide the Commissioner with specific information to include in the modern slavery register. We will need to wait until the government produces Modern Slavery Regulations to know what these may entail.

Councils’ obligations in Circular 22-09

In April 2022, the Office of Local Government released additional guidelines – Circular 22-09 Councils’ obligations under the Modern Slavery Act 2018 to provide additional guidelines to councils.

It states that from 1 July 2022, councils will be required to take reasonable steps to ensure that goods and services procured by and for the council are not the product of modern slavery within the meaning of the Modern Slavery Act 2018 (NSW).

In addition, commencing from the 2022/23 financial year, each council will be required to publish in their annual reports:

• a statement of the action taken by the council in relation to any issue raised by the Anti-slavery Commissioner during the year concerning the operations of the council and identified by the Commissioner as being a significant issue, and
• a statement of steps taken to ensure that goods and services procured by and for the council during the year were not the product of modern slavery within the meaning of the Modern Slavery Act 2018 (NSW).

NSW Modern Slavery Due Diligence

The Auditor General has a role under the NSW Act, to conduct risk-based audits of activities of government agencies to determine if the government agency is ensuring that goods and services procured by and for it are not the product of modern slavery. The Auditor-General will consider if the agency has exercised due diligence in relation to the procurement of goods and services. This will entail a determination of how reasonable the steps taken by the agency were to ensure the primary supplier of goods and services is responsible for implementing processes to eliminate or minimise the risks of goods and services being produced by modern slavery.

Businesses that deal with local councils and the NSW government will need to ensure that they also have stringent due diligence processes in place to satisfy NSW councils’ due diligence obligations.

Modern Slavery Due Diligence

Modern slavery supply chain due diligence will require having a robust framework comprising of key elements to address modern slavery risks. The following diagram describes such a framework.

Actions Councils Should be Starting Now

Councils will need to begin to develop their modern slavery risk governance framework, develop risk strategies and assess their modern slavery risks now, to ensure that they are in a position to satisfy the reporting requirements for the 2022-2023 period and to meet any audit requirements of the Auditor-General.

This means:

• identifying and assessing the risks of modern slavery in their supply chains, and their operations – at minimum, focussing on higher risk categories such as clothing;
• ensuring whistleblowing and grievance policies and practices cover modern slavery and allow anonymous reporting of human rights violations;
• developing and implementing effective due diligence procedures to ensure that the goods and services that they procure are not the product of modern slavery;
• updating procurement policies and practices to address modern slavery and embedding ethical purchasing into the council’s business processes;
• updating council’s statement of business ethics to address modern slavery;
• reviewing supply contracts and including appropriate clauses to deal with the ethical performance of suppliers, expressly prohibiting modern slavery;
• ensuring contracts also include other contractual provisions such as the right to audit suppliers and/or request additional information;
• working with suppliers to ensure they understand their obligations to implement processes to eliminate or minimise the risks of goods and services being produced by modern slavery;
• provide training and awareness of modern slavery to staff and suppliers;
• co-operating with the Anti-slavery Commissioner in disclosing information and providing assistance and support in respect to modern slavery and its victims.

How we can help

We have hands-on experience in helping organisations understand and minimise modern slavery risks.

We are here to help you comply with your council’s modern slavery obligations. For example we can assist with:

• conducting staff and supplier awareness training and briefings on modern slavery in Australia;
• conducting a modern slavery risk assessment of your supply chains and operations;
• developing due diligence procedures to minimise the risks that council is procuring goods or services that are produced by modern slavery practices;
• conducting supplier surveys to gain visibility into their practices;
• integrating modern slavery risk management into your existing risk and procurement policies and practices;
• reviewing your contracts and policies and recommending changes to address modern slavery risks; and
• conducting internal audit / independent reviews of your modern slavery practices.

Want to know more? Contact us to discuss your needs.

According to Fuzz Kitto (Co-Director, Stop the Traffik), the only way we can stop modern slavery is together.

This guide provides an overview of the Australian legislation designed to minimise modern slavery practices and improve transparency through reporting.  We outline the steps your business can take to reduce the risk and help stop modern slavery.

What is modern slavery?

Modern slavery is an umbrella term used to cover slavery, servitude, forced or compulsory labour and human trafficking, which are defined by several international standards.

Modern slavery is serious exploitation of people.  It includes trafficking in persons (including organ removal), slavery, servitude, sexual exploitation, forced marriage, forced labour, debt bondage, deceptive recruiting for labour or services, and the worst forms of child labour. Forced labour is common in industries such as hospitality, construction, forestry, mining or agriculture, as well as in intimate relationships.

Modern slavery in Australia

In Australia, human trafficking and slavery are against the law.

However, Australia is not immune from modern slavery. The Australian Government estimates there were 1,567 modern slavery victims in Australia between 2015 and 2017.

There is also a risk that Australian businesses are buying goods and services from third parties in their supply chain (suppliers, vendors, importers) engaged either directly or indirectly in modern slavery.

Combating modern slavery through legislation

To help combat both local and global modern slavery, the Australian Federal Government introduced The Commonwealth Modern Slavery Act in 2018 (the Act). The Act was passed on 29 November 2018 and commenced operation from 1 January 2019.

The Act creates compulsory reporting obligations for large entities. Why? Strengthening the reporting obligations is one part of Australia’s broader response to modern slavery domestically and overseas.

The description on the Bill to enact the legislation describes the bill as “A Bill for an Act to require some entities to report on the risks of modern slavery in their operations and supply chains and actions to address those risks, and for related purposes.

The Act puts the responsibility on the Australian business community to identify and address their modern slavery risks and maintain responsible and transparent supply chains.  Boards are now responsible for providing public statements about their organisation’s practices to managing the risk of modern slavery within their operations and supply chains.

The Act does not set a minimum requirement for how many tiers of the supply chain entities must consider. Organisations should consider modern slavery risks that can be present anywhere in the entity’s global and local activities and supply chains.

Who must comply with the Act?

The Modern Slavery Act 2018 creates reporting obligations for entities that have:

• consolidated revenue of at least $100 million for the relevant reporting period (a financial year), and which
• are Australian entities, or
• undertake business in Australia in that financial year.

The Act applies to over 3,000 entities including individuals, partnerships, associations and legal entities such as companies, trusts, superannuation funds and other types of investment organisations.  The Act covers  commercial entities and not-for-profit entities, such as charities. It covers an Australian entity or a foreign entity carrying on business in Australia. In some cases, multiple entities in the same corporate group may be reporting entities.

If an entity undertakes business activities overseas, it may also need to comply with foreign laws relating to responsible business conduct, for example the United Kingdom’s (UK) Modern Slavery Act 2015.

Entities that are required to report under the Act are called ‘reporting entities’.

Separate legislation has also been passed in New South Wales and is in line with the Federal regime and applies to companies with revenue above $50 million.  This means that organisations with employees in NSW and an annual turnover of between $50 million and $100 million will report only in NSW.

Voluntary participation

Entities who are not legally bound by the Act can voluntarily participate. Providing a voluntary statement will also help organisations respond to questions from their customers and investors. In some cases, business partners may ask organisations to provide a voluntary statement to provide them with additional assurance.

However, voluntary reporting can be a significant commitment. Carefully consider whether voluntary reporting is the correct course of action.

Entities who want to participate on a voluntary basis should develop a modern slavery statement as outlined in the Act and have the appropriate policies, systems and processes to mitigate modern slavery risks.  Voluntary participation should be made clear.

The voluntary statement is provided to the Australian Border Force. Voluntary statements must comply with all of the requirements for statements in the Commonwealth Modern Slavery Act 2018, including the mandatory criteria for content.

What must businesses do?

Simply, businesses must respect human right and remedy harm caused.  They must leverage their power to influence actions of other entities.

Under the reporting requirement, large entities with over AU$100 million annual consolidated revenue must prepare annual Modern Slavery Statements within 6 months of the end of their financial year to the Minister for Home Affairs. The statements must explain what the  entity is doing to assess and address modern slavery risks in its global operations and supply chains. The Act sets out seven mandatory criteria for the content of statements.

There is no set template for statements.  The ‘Modern Slavery Statement’ should detail the following:

• the identity of the reporting entity;
• the structure, operations and supply chains of the reporting entity;
• 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;
• the actions taken by the reporting entity and any entity that the reporting entity owns or controls, to asses and address those risks;
• how the reporting entity assesses the effectiveness of such actions;
• the process of consultation with any entities the reporting entity owns or controls or is issuing a joint modern slavery statement with; and
• any other information that the reporting entity, or the entity giving the statement, considers relevant.

Reporting modern slavery

Once the modern slavery statement is approved by the Board or governing body equivalent and a copy is provided to Home Affairs/Australian Border Force who will publish the statement on the online central register.

The Act does not require reporting on specific cases or allegations of modern slavery. However, entities can decide to voluntarily include information about specific modern slavery allegations or cases in your statement. Be sure to respect the privacy of victims.

Risk and compliance implications

Typically, if you’re a large organisation carrying on business in Australia, there is a strong chance you’ll need to report. The more complex your business operations and your supply chain, the more important it is to understand the legislation and be prepared to ensure you comply.

Failure to comply with the Act can significantly damage your entity’s reputation, undermine your ability to do business, and damage investor confidence. The Government has the power to publicly name entities that fail to comply with the reporting requirements.  In addition, the Government can also require noncompliant entities to take remedial action to ensure compliance, including requiring an entity to provide or revise a statement.

Who administers the Act?

The Act is administered by the Department of Home Affairs.  Specifically, the Modern Slavery Business Engagement Unit is responsible for implementing the Act. The Unit’s role includes providing general advice and support to entities about compliance with the reporting requirements.

Once the modern slavery statement is approved by the Board or governing body equivalent, a copy is provided to Home Affairs within six months after the end of the reporting entity’s reporting period.

How to reduce compliance risk?

At minimum, reporting entities should take the following steps:

• Map the organisation’s structure, businesses and supply chains;
• Formulate policies and procedures in relation to modern slavery – this will involve collating current policies, identifying gaps, adapting existing policies and formulating new policies, as needed;
• Carry out a risk assessment – identify and understand those parts of the business operations and supply chains where there is a risk of modern slavery taking place;
• Assess and manage identified risks – this may include carrying out further due diligence in the entity’s operations and supply chains and reviewing and adapting contract terms and codes of conduct with suppliers;
• Consider and establish processes and KPIs to monitor the effectiveness of the steps taken to ensure that modern slavery is not taking place in the business or supply chains;
• Carry out remedial steps where modern slavery is identified; and
• Develop training for staff on modern slavery risks and impacts.

How we can help

InConsult is committed to helping our clients eliminate modern slavery.  We have extensive experience in risk management, assurance, legal and third party risks.  We also take a phased approach to ensure value-for-money.  Some of the activities we can help our clients include:

• Conducting a risk assessment of modern slavery risks based on your activities, products and suppliers.
• Identifying potential gaps.
• Designing and implementing a modern slavery framework to support compliance with the Act – updated policies or a stand-alone policy, defined roles and responsibilities, updating whistleblowing, grievance and remediation procedures, updating supplier management arrangements.
• Establishing monitoring and reporting KPIs to meet legislative requirements.
• Stakeholder engagement to communicate modern slavery expectations – updating existing supplier contracts,  conducting supplier awareness communication and conducting internal staff awareness training.
• Reviewing and monitoring modern slavery compliance – conducting supplier questionnaires and/or supplier audits, internal audit of internal processes.
• Independent review of the Modern Slavery Statements to provide additional stakeholder assurance.

Want to know more? Contact us to discuss your needs.