In its interim report, the Committee expressed its strong support for the introduction of a mandatory modern slavery supply chain reporting requirement for entities operating in Australia. The Committee made a series of recommendations and in-principle statements, along with identifying a number of areas for further investigation.
Following the preparation of the Committee’s interim report, the Australian Government announced its support for a reporting requirement and released a consultation paper seeking comment on a proposed model.
This chapter presents the Committee’s views on the Australian Government’s proposed model and makes recommendations for improvements.
The Committee notes that since the release of its interim report, the Australian Government has continued to contribute to global efforts to address modern slavery in supply chains, particularly through the Bali Process.
Bali Process Government and Business Forum
On 24-25 August 2017, Australia Co-Chaired the Bali Process Government and Business Forum (Forum) in Perth, the ‘world’s first significant regional public-private partnership aimed at creating policies to tackle forced labour, modern slavery and human trafficking’.
The Forum was attended by 37 Bali Process members, including 24 Ministers and over 30 business leaders, and adopted a work plan for governments and businesses to work together to develop strategies and policies to eliminate modern slavery in the region.
Australian Government proposed model
On 16 August 2017, the Minister for Justice, the Hon Michael Keenan MP, released a consultation paper on the Australian Government’s proposed Modern Slavery in Supply Chains Reporting Requirement (consultation paper). The consultation paper states that the Australian Government’s primary objective is to:
… equip and enable the business community to respond effectively to modern slavery and develop and maintain responsible and transparent supply chains.
In the consultation paper, the Australian Government proposed targeted regulatory action by introducing a Modern Slavery in Supply Chains Reporting Requirement and providing supporting guidance to the business community. The consultation paper asserts that this approach would best address the Australian Government’s objective and have a number of key benefits, being that it would:
provide certainty and consistency for the business community ‘because it would set clear standards that apply to all entities above the set revenue threshold’;
create a level playing field for large business and ‘ensure that sections of the business community are not disadvantaged by taking action to disclose and address modern slavery risks’; and
send a clear message to the business community that the Australian Government will ‘work with them to address modern slavery and will not tolerate Australian businesses benefiting from modern slavery in their operations and supply chains’.
The proposed model outlined in the consultation paper is examined in detail below.
Committee views on the proposed model
The following section presents the Committee’s views on the model proposed by the Australian Government. The sections below correspond with the sections in the consultation paper. The Committee notes that the model is subject to consultation with the community and civil society.
The Committee notes that the proposed model largely aligns with the principles set out in the Committee’s interim report. The recommendations in this chapter highlight issues the Committee considers should be included in the proposed model related to a threshold, focus of reporting, reporting areas, guidance for business, monitoring, evaluation and compliance mechanisms.
As noted in its interim report, the Committee strongly supports the proposal for a mandated modern slavery supply chain reporting requirement to be established through new legislation. As outlined in Recommendation 1, the Committee recommends that this reporting requirement be included in the proposed Modern Slavery Act.
In its consultation paper, the Australian Government proposed that modern slavery be defined in the reporting requirement to:
… incorporate conduct that would constitute a relevant offence under the existing human trafficking, slavery and slavery-like offence provisions set out in Divisions 270 and 271 of the Commonwealth Criminal Code. This means modern slavery will encompass slavery, servitude, forced labour, debt bondage, and deceptive recruiting for labour or services.
In its consultation paper, the Australian Government proposed that the definition of modern slavery exclude practices such as forced marriage that are ‘unlikely to be present’ in business practices and supply chains.
In its interim report, the Committee noted that it supports a broad definition of modern slavery to capture the full range of exploitative practices outlined in the Criminal Code.
As outlined in Chapter 3, submitters highlighted the importance of including particular reference to child labour in the definition of modern slavery. Ms Alison Elliott from UNICEF Australia told the Committee that, consistent with Australia’s commitment to Sustainable Development Goal 8.7, entities should be required to report on child labour and the worst forms of child labour ‘so that children are better protected through the supply chains of Australian businesses’.
Evidence also highlighted the importance of ensuring that entities, including charities and other organisations, are not contributing to orphanage trafficking and the exploitation of children in residential institutions overseas. The Committee heard concerns that organisations facilitating ‘orphanage tourism’ visits may be unknowingly contributing to the trafficking and abuse of children in overseas orphanages.
The Committee recognises the importance of including a clear definition of modern slavery to assist entities in preparing reports. In their submissions to this inquiry, businesses highlighted the importance of a clear definition, supported by guidance provided by the Australian Government.
As outlined in Recommendation 3, the Committee agrees that the definition of modern slavery should refer to the human trafficking and slavery offences set out in the Criminal Code, which are consistent with international law.
The Committee also considers that the definition should include reference to child labour and the worst forms of child labour, as well as child exploitation through orphanage trafficking. Further measures to address child exploitation through orphanage tourism will be addressed in Chapter 8.
In its consultation paper, the Australian Government proposed that the reporting threshold apply to a broad definition of ‘entities’ to include bodies corporate, unincorporated associations or bodies of persons, superannuation funds and approved deposit funds.
In its interim report, the Committee supported a broad definition of ‘entities’ required to report, subject to a certain revenue threshold (discussed below). The Committee reaffirms that ‘entities’ should have a broad definition to cover companies, businesses, organisations, governments and other bodies as outlined in the consultation paper.
The Committee recommends that the Australian Government define entities that will be subject to the mandatory supply chain reporting requirement broadly to include, but not be limited to: companies; businesses; organisations (including religious bodies); Commonwealth government agencies and public bodies; the Australian Government; bodies corporate; unincorporated associations or bodies of persons; sole traders; partnerships; trusts; superannuation funds; and approved deposit funds.
Consistency with international jurisdictions and best practice
As noted in its interim report, the Committee considers that any supply chain reporting requirement should be consistent with international jurisdictions and best practice, including Australia’s obligations under international law.
In particular, the Committee considers that the reporting requirement should be consistent with the UN Guiding Principles on Business and Human Rights (UN Guiding Principles). The Committee recognises that many Australian businesses, working with the UN Global Compact Australia, have already implemented practices consistent with the UN Guiding Principles to address human rights risks, including modern slavery.
The Committee notes the Australian Government’s commitment to implement the UN Guiding Principles through its current consultations and its establishment of an expert, multi-stakeholder advisory group.
The Committee notes that some submitters suggested that reporting should not exclusively focus on modern slavery, but on all human rights risks, consistent with the UN Guiding Principles. Shift, the world’s leading centre of expertise on the UN Guiding Principles, recommended that the Committee ‘consider the ways in the proposed Act could incentivise companies to undertake human rights due diligence across all human rights risks’.
In addition to human rights, Ms Felicity Gerry QC suggested that addressing modern slavery should be coordinated with other economic crimes such as corruption and bribery, highlighting that there is:
… an inevitable intersection between corruption, bribery and other economic crime that arises in the context of human trafficking which demonstrates that Australia needs a proactive and structured approach.
The Committee considers that the supply chain reporting requirement should focus on modern slavery risks in the first instance given the prevalence of these crimes in global supply chains. The Committee notes that the requirement could be expanded to address other human rights issues once the reporting mechanism becomes established.
Timeframe for reporting
In its consultation paper, the Australian Government proposed the following timeframe for reporting:
within five months after the end of the Australian financial year; and
if necessary, a phased introduction to ensure the business community has sufficient preparation time.
As noted in its interim report, the Committee heard that many larger Australian businesses already have established processes in place to address supply chain risks. Some businesses are already required to report under the UK Act and would be well placed to report under an Australian reporting requirement.
However, submitters suggested that smaller entities would need more time and support to develop processes to identify and address supply chain risks. Ms Alana Matheson from the Australian Chamber of Commerce and Industry told the Committee that ‘if we go down the path of reporting’ it should be:
… appropriately measured to ensure that it is not creating a framework that … small businesses are not reasonably placed to manage. It should be targeted at businesses that are able to make the greatest impact in this area.
Some submitters to this inquiry supported a phased introduction of a reporting requirement, particularly for smaller entities. The Business Council of Australia noted that the introduction of a requirement would be a ‘significant and resource-intensive change’ and that transitional arrangements should be put in place to provide businesses and their suppliers ‘with a sufficient amount of time to adjust (two years) to reduce the costs and administrative burden caused by the change’.
The Committee agrees that entities above the threshold should be required to provide modern slavery statements within five months after the end of the financial year, consistent with the timeframe outlined in the consultation paper. The Committee is of the view entities should have the option of making a supplementary statement at any stage to address any changes in circumstances.
The Committee supports a phased introduction of any penalties or compliance measures to ensure smaller entities have adequate time to develop processes to map, assess and address supply chain risks.
The Committee recommends that the Australian Government require annual modern slavery statements to be provided within five months after the end of the Australian financial year.
Approval of modern slavery statements
In its public consultation paper, the Australian Government proposed that modern slavery statements must be approved at the equivalent of board level and be signed by a director, similar to the UK Act.
As noted in its interim report, the Committee supports the requirement for modern slavery statements to be approved at the board level (or equivalent) and signed by a director (or equivalent). The Committee considers that board-level approval would assist in elevating awareness of modern slavery risks, and drive positive cultural change within businesses and organisations.
The Committee recommends that the Australian Government require modern slavery statements to be approved at the equivalent of board level and signed by the equivalent of a director.
In its consultation paper, the Australian Government proposed that there should be a threshold to determine which entities should report. The proposed threshold should:
not be limited to high risk sectors or importers;
apply to entities with a total annual revenue of at least $100 million;
be set through regulation to allow for periodic adjustment if required; and
allow entities below the threshold to ‘opt in’ to the reporting requirement.
As noted in its interim report, the Committee supports the introduction of a threshold for a broad range of entities required to report and an opt-in option which would allow entities below the threshold to report. The interim report outlines the range of threshold options suggested by submitters and witnesses.
The Committee notes that some submitters suggest that the threshold should be higher than $100 million (similar to legislation in California) and $50 million (similar to the UK) to capture only large businesses. The Business Council of Australia suggested these threshold amounts are ‘unsuitable’ because they are ‘likely to capture a number of medium sized enterprises’:
… the MSA [Modern Slavery Act] will be most effective if the threshold is set at a level that targets large businesses with a substantial presence in Australia and extensive supply chains. These types of businesses have purchasing power that enables them to bring about change throughout their supply chain, including influencing businesses who are their domestic suppliers.
The Committee notes that a number of submitters suggested that the threshold should be lower than $100 million. For example, the Law Council of Australia suggested that the threshold should be $25 million to align with the definition of large companies under the Corporations Act 2001.
Others suggested the threshold should be around $50 million to align with the UK threshold (£36 million). The Walk Free Foundation suggested that a $50 million to $60 million reporting threshold would be ‘appropriate’ to capture most large businesses in Australia.
A small number of submitters suggested there should be no threshold at all. For example, Fairtrade Australia and New Zealand told the Committee that having a lower threshold would not disadvantage smaller businesses. Ms Molly Olson from Fairtrade Australia and New Zealand told the Committee that based on their experience with the Fairtrade system of accreditation:
… if the standards are clear and transparent, if the expectations are clear and if the playing field is level, then the size of the operation is not relevant. The point is really that everyone is expected to play by the same rules. We do not find in the Fairtrade system that the small players are disabled by it. In fact, the small players tend to be the most innovative and the most aggressive with adhering to these kinds of rules.
The Committee notes that some business groups suggested that the reporting requirement should be limited to large companies in high risk sectors or importers. The Australian Chamber of Commerce and Industry suggested that obligations should only apply to Australia’s largest 100 to 200 companies that are most exposed to modern slavery risks in their supply chains.
As noted in its interim report, the Committee notes that the UK Government determined its threshold amount following a consultation process. The Committee notes support from Australian businesses, including the Business Council of Australia, for further consultation with entities required to report.
The Committee supports the introduction of a minimum threshold to determine which entities should be required to report. The Committee considers that a threshold amount of $50 million would be most appropriate to capture large entities in Australia and align with the existing requirements under the UK Act, providing for international consistency, particularly for global companies already reporting under the UK's £36 million threshold. The Committee agrees that small entities should have the option to ‘opt-in’ and voluntarily report.
The Committee recommends that the Australian Government set the total revenue threshold for the mandatory supply chain reporting requirement at $50 million to capture most large entities operating in Australia, and to be internationally consistent with the UK threshold under the Modern Slavery Act 2015.
The Committee recommends that there be a legislated ‘opt-in’ option for smaller entities below the threshold that wish to voluntarily submit a modern slavery statement.
Focus of reporting
In its consultation paper, the Australian Government proposed that ‘all entities headquartered in Australia, or entities that have any part of their operations in Australia, and meet the revenue threshold’ be required to ‘report on their actions to address modern slavery in both their operations and their supply chains’.
Entities required to report
As outlined in its interim report, the Committee supports requiring entities operating in Australia, regardless of where they are headquartered, being required to report. The Committee considers this will ensure that multinational companies based overseas and operating in Australia are required to report. The Committee agrees that reports should address modern slavery in both the operations and supply chains of entities.
The Committee notes that most submitters supported the application of the reporting requirement to any entities operating in Australia, regardless of their footprint in Australia or where they are headquartered.
Anti-Slavery Australia recommended the requirement should go further and extend to all wholly owned subsidiaries of parent companies operating in Australia that meet the minimum threshold. Anti-Slavery Australia suggested this would ensure that reporting obligations could not be circumvented or limited through business structuring.
Chapter 8 examines measures to ensure that foreign aid, as well as giving and donations by entities, do not contribute to modern slavery practices, such as child exploitation in residential institutions.
In its consultation paper, the Australian Government proposed that Commonwealth or state and territory procurement be exempt from the reporting requirement. The consultation paper argued that:
Commonwealth procurement is already governed by a legislative framework that sets out rules for spending public money, including in relation to ethical sourcing. The Australian Government is considering ways to demonstrate leadership on modern slavery through procurement, including through consideration of an appropriate Procurement Connected Policy on Human Rights.
As outlined in its interim report, the Committee supports introducing a requirement that the Australian Government only procure goods and services from entities that comply with the modern slavery reporting requirement. The Committee notes that with annual procurement activities of over $56 billion, the Australian Government has a significant opportunity to influence private sector suppliers.
The Committee notes the strong support from submitters that public procurement be subjected to the modern slavery reporting requirement. For example, Ms Jo Pride, Chief Executive Officer of Hagar Australia, told the Committee:
There is an onus on the government to be the model citizen and to be demonstrating best practice in this area … the government has the opportunity to provide the incentive of being able to contract to government by including considerations of slavery in its procurement guidelines.
Submitters pointed out international best practice examples of including modern slavery considerations in public procurement, particularly in the United States (see Box 5.1).
Box 5.1: United States – Executive Order on public procurement
In September 2012, US President Barack Obama introduced Executive Order 13627 – Strengthening Protections Against Trafficking in Persons in Federal Contracts. The Order noted that as ‘the largest single purchaser of goods and services in the world, the United States Government bears a responsibility to ensure that taxpayer dollars do not contribute to trafficking in persons’.
The Order and subsequent changes to legislation and regulations required US government contractors to certify that they and their sub-contractors are not engaged in human trafficking activities, required larger suppliers to develop compliance plans, and gave powers to government to audit and investigate suppliers.
Submitters suggested that the Australian Government should amend its procurement rules to ensure that it can only procure goods and services from entities that comply with the reporting requirement. For example, Fairtrade Australia and New Zealand recommended that businesses that don’t prepare a statement should be excluded from bidding for government contracts.
Submitters also suggested that public bodies over the threshold amount be required to prepare modern slavery statements. The International Learning Lab on Public Procurement and Human Rights noted that, in the UK, some local authorities that are not required to report, such as City of London Corporation and Transport for London, have elected to publish statements to demonstrate the steps they have taken to address modern slavery risks.
The Committee agrees that the Australian Government has an important role to play in setting a positive example for businesses and other entities required to report. The Committee considers that the Australian Government should be required to only procure goods and services from companies that comply with the reporting requirement.
The Committee considers that governments and public bodies above the reporting threshold size be required to report to demonstrate the steps they have taken to address modern slavery risks in their operations and supply chains.
The Committee recommends that the Australian Government introduce a requirement to only procure from entities that complete a modern slavery statement.
The Committee further recommends that Commonwealth public bodies over the prescribed threshold amount, including the Australian Government, be required to provide a modern slavery statement.
The Committee recommends that the Australian Government, through the Council of Australian Governments (COAG) and local government associations, encourage state, territory and local governments to introduce requirements to only procure from entities that comply with the modern slavery supply chain reporting requirement, as well as to submit modern slavery statements.
In its consultation paper, the Australian Government proposed that entities will be required to report against the following four criteria to ‘ensure that the content of statements is consistent and more easily comparable’:
The entity’s structure, its operations and its supply chains
The modern slavery risks present in the entity’s operations and supply chains
The entity’s policies and process to address modern slavery in its operations and supply chains and their effectiveness (such as codes of conduct, supplier contract terms and training for staff), and
The entity’s due diligence processes relating to modern slavery in its operations and supply chains and their effectiveness.
As noted in its interim report, the Committee supports prescribing criteria for what statements should include, consistent with requirements in other jurisdictions. The Committee notes that the proposed criteria broadly cover the six suggested areas outlined in section 54(5) of the UK Act.
The Committee notes that some businesses groups do not support prescriptive reporting requirements. For example, the Business Council of Australia submitted that to ‘limit the reporting burden’ of a modern slavery reporting requirement:
… legislation must be flexible, not mandating the areas a company must report against in its slavery statement or structure of the disclosure.
The Committee also shares concerns that introducing prescribed requirements would reduce the reporting requirement to a ‘tick box’ exercise. For example, South32 argued that:
Broad reporting requirements, such as those in the UK MSA [Modern Slavery Act], ensure that reporting is tailored, context-specific and practical. By contrast, prescriptive category-based reporting may be viewed as a ‘tick box’ exercise for businesses and their supply teams. This may limit the unique engagement and critical thinking required to meet the objective of identifying and addressing modern slavery risks and remediating any instances of slavery found.
However, evidence from businesses and NGOs suggested that prescriptive requirements would assist in improving consistency in reporting and assist in comparing and analysing statements. Ms Heather Moore from the Salvation Army Freedom Partnership told the Committee:
… the UK experience has also shown that without prescribed reporting requirements there is a lack of consistency in reporting and this makes it difficult to effectively evaluate company statements against one another. It essentially defeats the purpose of making the statements public. So statements have to be clear, consistent and comparable to enable civil society and government to effectively monitor company action and to enable consumers to make informed choices.
The Committee recognises concerns raised by submitters that the UK model of not prescribing minimum requirements has led to inconsistencies in the way entities report, making comparisons difficult. The Committee considers that prescribing minimum requirements will assist entities in preparing their reports, and enable reports to be compared more easily.
During its visit to the UK in April/May 2017, the delegation from the Committee heard concerns about the administrative burden for smaller suppliers, in particular, that are requested to report on their supply chains by multiple larger entities. The delegation heard concerns that due to the lack of consistency in reporting requirements and the way different entities choose to report, entities may be asked to provide different information to different requesting entities. For example, if a pen company was asked to provide supply chain reports to multiple requesting entities reporting under the Modern Slavery Act, it could be asked to provide different levels of detail to different entities, depending on how those clients chose to structure their reports.
The Committee agrees that the four reporting areas proposed by the Australian Government are consistent with the UK Act and provide a useful baseline to assist entities in preparing their reports. The Committee also notes the strong support for reporting against the six suggested areas in the UK Act. The Committee suggests that including an additional area inviting entities to report on any further action taken will encourage entities to develop further innovative approaches to reporting, helping to avoid a ‘tick box’ exercise.
The Committee considers that having prescribed reporting areas will result in more consistent reporting and reduce the administrative burden for smaller entities that supply to multiple larger entities. Consistency in reporting will ensure that smaller entities can prepare a single modern slavery statement that can be provided to multiple requesting entities.
The Committee recommends that the Australian Government include in the proposed Modern Slavery Act a provision to enable entities, in particular smaller entities, to provide a modern slavery statement to other requesting entities as evidence of them having found no modern slavery in their own supply chains, as opposed to having to provide different sets of information to multiple requesting entities. An entity should not have to provide further information to a requesting entity, unless the request covers specific information not addressed in their modern slavery statement.
Audits and quality assurance processes
The Committee heard that a range of industries have already developed frameworks to undertake supply chain audits and quality assurance processes. The CPA Australia submitted that ‘independent assurance’ is ‘vital’ to supply chain transparency and integrity.
Globally, the Committee heard that businesses share data on supply chain audits through the Supplier Ethical Data Exchange (Sedex). Ms Fiona Lawrie from Wesfarmers told the Committee that Sedex:
… is the world's largest collaborative platform for sharing responsible sourcing data on supply chains … This allows us to monitor suppliers extremely effectively.
During its visit to the UK in April/May 2017, the delegation from the Committee heard that many UK business, including Marks and Spencer, use Sedex to conduct and share supply chain audits. The Committee heard that many Australian businesses, such as Nestlé Australia, also use Sedex.
Domestically, the National Farmers’ Federation (NFF) noted that the agricultural sector has developed industry-led quality assurance processes, such as the Fair Farms Initiatives. Mr Ben Rogers from the NFF told the Committee:
The Fair Farms Initiative is being run by the peak representative body for horticulture in Queensland, Growcom. It comprises a national program proactively educating growers about their workplace obligations and a third party certification scheme, which allows growers to demonstrate they have best practice. It provides growers with an opportunity to participate in Hort360, a self-audit tool which reports back to them on the quality of their labour systems.
The Committee notes that the agricultural sector in Australia also utilises other supply chain quality assurance systems administered by third parties such as SGS, which delivers quality assurance and quality control services.
However, the Committee heard concerns that audits administered by organisations like Sedex may not be effective in driving cultural change in businesses to combat modern slavery. Mr Gershon Nimbalker from Baptist World Aid Australia told the Committee:
Having a shared world platform like Sedex is really positive, except there are varying qualities of audit and there is a huge problem with … the quality of audits that we get. Audits do a reasonable job of checking for slavery and forced labour but do a really poor job of driving change … I have no problems with Sedex as a health check system, but if you are expecting Sedex to drive substantial change, or a shared audit platform to do that, I do not think it will get there.
The Committee recognises the steps taken by some Australian entities to undertake supply chain audits and quality assurance processes. The Committee welcomes efforts by these entities to address a range of human rights risks in their supply chains.
The Committee is of the view that the Australian Government should encourage these audit and quality assurance providers to include specific reference to modern slavery risks in their processes.
The Committee notes that the Australian Government’s proposed reporting areas would require entities to report on due diligence processes and their effectiveness. Submitters to this inquiry suggested that ‘due diligence’ would require companies to identify how to address modern slavery risks. Mr Nick Grono from the Freedom Fund told the Committee:
My view on due diligence is that the philosophy should be that we identify where the major risks are and what steps we can take to reduce those. You have to look for it. You have to approach it with the mindset that we want to identify where those risks are and how best to address them.
As noted in its interim report, a number of submitters and witnesses, particularly NGOs, supported the introduction of due diligence requirements for entities. A number of submitters highlighted examples of due diligence reporting requirements in the US, the Netherlands and France as best practice examples (see Box 5.2).
Box 5.2: International due diligence requirements
Dodd-Frank Wall Street Reform and Consumer Protection Act
From 2010, Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act introduced due diligence reporting requirements for organisations in the United States that use conflict minerals originating in the Democratic Republic of Congo (DRC) and bordering countries. The Act requires organisations that source minerals from this area to submit a report to the US Securities and Exchange Commission on due diligence measures taken to determine whether the minerals directly or indirectly finance armed groups in the DRC, and must meet internationally recognised standards.
France – Duty of vigilance legislation
In February 2017, the French Parliament adopted a new law establishing a ‘duty of vigilance’ obligation for businesses. The legislation requires businesses to monitor their company and supply chains for human rights and environmental protection violations and to publish an annual risk report assessing the impact of these policies.
The Netherlands – Child labour due diligence legislation
In February 2017, the Dutch Government adopted the proposed Child Labour Due Diligence Bill. If approved by the Dutch Senate, the law would require companies to publicly report on efforts to identify whether child labour is present in their supply chains and, where this is found, to develop a plan to combat it.
European Union – Non-financial reporting directive
In December 2014, the EU Directive on disclosure of non-financial and diversity information (2014/95/EU) entered into force. The Directive requires companies with over 500 employees to report on relevant environmental, social, human rights and corruption risks and outcomes, which could include trafficking and slavery. The first reports under the Directive are due to be published in 2018.
These submitters suggested that the proposed Australian legislation should go further than requiring entities to report on any due diligence processes, and should require entities to implement due diligence processes to address modern slavery risks. For example, Mr Alison Elliott from UNICEF Australia told the Committee that ‘if we are serious about preventing slavery, we should legislate for prevention’.
A number of submitters highlighted the operation of the Illegal Logging Prohibition Act 2012 as an example of due diligence measures that have already been implemented in Australia (see Box 5.3).
Box 5.3: Illegal Logging Prohibition Act 2012
The Illegal Logging Prohibition Act 2012 aims to prevent the importation of illegally harvested timber products into Australia. The legislation was introduced to address the global problem of illegal logging and followed similar initiatives in the US and Europe.
The Act and regulations specify the due diligence processes timber importers and processors must have in place to minimise the risk of importing illegal timber, including civil penalties for non-compliance.
As noted in its interim report, the Committee recognises that many businesses have developed or are working to develop due diligence processes through the UN Global Compact Network Australia. The Committee notes that on 31 October 2017, the Global Compact Network Australia, together with the Australian Human Rights Commission, hosted the fourth Australian Dialogue on Business and Human Rights, which brought together business leaders to discuss effective human rights due diligence.
Some witnesses suggested a tiered approach with a trigger to escalate from mandatory reporting to mandatory due diligence reporting where risks are identified. Mr Gershon Nimbalker from Baptist World Aid Australia told the committee that a possible trigger for escalation could be:
… when you have a company … which is either choosing not to disclose what they are doing or perhaps not doing much at all, then you would have a case to say that, within the context of an industry, they have had a long time to work on this and have made multiple commitments to work on it and are still not doing enough, you may want to escalate at that point.
Similarly, Dr Mark Zirnsak from the Uniting Church in Australia told the Committee that, in the first instance entities should report against set criteria, with possible escalation to due diligence requirements (such as those outlined in the Illegal Logging Prohibition Act):
… if down the track in a five-year review, you find that a certain industry is just not treating this seriously, that there are serious allegations of forced labour and human trafficking in that industry, in those supply chains, and you are not seeing improvement, then the government of the day might think about tougher measures.
The Committee considers that including a requirement for entities to report on their due diligence processes is an appropriate first step. The Committee considers that this recognises the work already undertaken by many businesses to implement due diligence processes. The Committee considers that any further due diligence measures should be considered as part of the first three year review of the legislation by the Independent Anti-Slavery Commissioner.
The Committee recommends that the Australian Government prescribe the following specific areas for reporting under the proposed Modern Slavery Act, which takes in account the outcomes of the Australian Government’s consultation process, best practice in international jurisdictions and the suggested areas outlined in section 54(5) of the UK Modern Slavery Act 2015, being:
the organisation’s structure, its business and its supply chains;
its policies in relation to modern slavery;
its due diligence and remediation processes in relation to modern slavery in its business and supply chains;
the parts of its business and supply chains where there is a risk of modern slavery taking place, and the steps it has taken to assess and manage that risk;
its effectiveness in ensuring that modern slavery is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate;
the training about modern slavery available to its management and staff; and
The Committee recommends that the Australian Government encourage existing supply chain audit and quality assurance providers to include a specific requirement that their clients provide evidence that their suppliers, both in Australia and overseas, are paying workers piece rates or hourly wages in accordance with local laws, and are not perpetuating any forms of modern slavery.
The Committee recommends that the operation of the prescribed reporting requirements, including possible escalation to prescribed full or stepped due diligence reporting, be considered as part of a legislated review after three years undertaken by the Independent Anti-Slavery Commissioner.
Guidance for business
In its consultation paper, the Australian Government proposed to provide ‘clear and detailed guidance and awareness-raising materials for the business community’, which could include:
… a reporting template, best-practice examples and information about how the business community can remedy and report instances of modern slavery identified in their supply chains or operations.
As noted in its interim report, the Committee supports and recognises the importance of developing guidance for entities on how to report and the operation of the threshold mechanism. The interim report highlighted a number of areas the Committee considers should be included in this guidance, as outlined below.
Awareness raising and training
A recurring issue raised by submitters was the need to commit resources to raising awareness of modern slavery risks and to provide training and support for entities in how to address these. Ms Abigail McGregor, a Partner at Norton Rose Fulbright who works with clients on business and human rights issues, told the Committee that the government has a key role to play in raising awareness of modern slavery risks:
… that is one of the roles of government—to encourage businesses to attempt to look at their supply chain and look at their operations and understand what modern slavery is, understand what the red flags of modern slavery are.
The Supply Chain Sustainability School, an industry-funded body that provides training for companies in the construction and infrastructure industries on supply chain sustainability, highlighted the importance of ensuring that:
… time and resources be dedicated towards raising levels of awareness, engagement and support around the topic as early as possible. Awareness can be as simple as defining the topic, explaining its relevance, outlining what should be done differently, and directing the audience towards further resources. Engagement can include help for small, medium and large enterprises to start asking questions of their own supply chains, and to use more standardised methods of reporting objectives and outcomes. Support can include encouragement for small, medium and large enterprises, including government agencies, to make public and transparent commitments to the examination for and elimination of modern slavery across their national and international supply chains.
Submitters highlighted that awareness of modern slavery risks for Australian companies is low. Submitters highlighted a 2015 report by the Australian Centre for Corporate Social Responsibility, together with the Australian Human Rights Commission and Global Compact Network Australia, which identified that while some Australian businesses may aspire to address human rights impacts in their supply chains, most businesses lack clear strategies and processes to trace, monitor and address such risks.
Submitters suggested that the introduction of the requirement was not accompanied with adequate awareness raising and guidance on its implementation. The Committee notes that the UK Home Office updated its guidance for businesses in October 2017.
The Committee heard that in the UK, the Independent Anti-Slavery Commissioner also plays a role in providing guidance to businesses. In 2016, the Commissioner wrote to over 1,000 companies detailing his expectations in regard to the reporting requirement, led roundtable meetings with companies on supply chain transparency and worked with trade bodies to tackle modern slavery.
As noted in its interim report, the Committee considers that it is critical for any guidance material to be accompanied by resources for awareness raising and training to assist entities to understand their obligations under the requirement. This includes training for companies, businesses, front-line services, government departments and embassies.
The Committee considers that formally advising entities of their obligations under the proposed reporting requirement, as the UK Commissioner has done by writing directly to entities, would assist in raising awareness of the reporting requirement. This could include issuing reminders with tax return information.
Defining supply chains
Submitters highlighted the importance of defining ‘supply chains’ to assist entities in preparing their reports. The UK Act does not define supply chains under section 54. The statutory guidance for businesses prepared by the UK Home Office states that, for the purposes of the requirement, supply chain ‘has its everyday meaning’.
Some submitters raised concerns about the UK definition. Shift, the leading centre for expertise on the UN Guiding Principles, suggested that:
While the spirit of the law is that businesses should report on the steps they are taking throughout all tiers of their supply chain, this definition allows for reporting only on action within the top tiers of a company’s supply chain.
As outlined in Chapter 3, global businesses have extremely complex supply chains that extend beyond ‘tier 1’ suppliers of products, to ‘tier 2’ and ‘tier 3’ suppliers of raw materials used to make those products. The University of Melbourne submitted that legislation in other countries has not recognised the complexity of supply chains:
What appears to be a major misunderstanding where anti-slavery legislation has been introduced in other countries, is that it is assumed companies actually know who is in their supply chain. That is to say all of their suppliers, plus their suppliers’ suppliers and their suppliers’ suppliers’ suppliers. There can be thousands of firms who participate in the supply chain of a single product from extraction of raw materials to production and on to the ultimate consumer.
The Committee notes that, in the context of conflict minerals, the OECD Due Diligence Guidance defines supply chains as:
… the system of all the activities, organisations, actors, technology, information, resources and services involved in moving the mineral from the extraction site downstream to its incorporation in the final product for end consumers.
The Committee considers that a definition of supply chain consistent with the OECD Due Diligence Guidance should be developed to assist entities in identifying what parts of their supply chains to report on, including donations and giving by government and entities.
Publishing a list of at-risk industries, products, areas and people
As noted in its interim report, submitters suggested that the Australian Government should publish a list of at-risk industries, products, areas and people groups – both in Australia and overseas – to help raise awareness among consumers and businesses.
Some submitters noted that other jurisdictions, such as the US, publish lists of at-risk industries and products (see Box 5.4).
Box 5.4: US List of Goods Produced by Child Labour or Forced Labour
Under the Trafficking Victims Protection Reauthorisation Act of 2005, the US Department of Labor’s Bureau of International Labor Affairs (ILAB) is required to maintain a list of goods and their source countries which are understood to have been produced using child labour or forced labour. The ILAB notes that it maintains the list primarily to:
… raise public awareness about forced labor and child labor around the world and to promote efforts to combat them; it is not intended to be punitive, but rather to serve as a catalyst for more strategic and focused coordination and collaboration among those working to address these problems.
As of 30 September 2016, the List of Goods Produced by Child Labor or Forced Labor comprised 139 goods from 75 countries. The highest proportion of goods are in agriculture (sugarcane, coffee, tobacco, cotton), manufacturing (bricks, garments, textiles) and mining (gold, coal, diamonds).
The Committee notes that Australian NGOs, such as Baptist World Aid Australia, and other international NGOs, such as Anti-Slavery International, also publish similar resources to identify goods produced using slavery and child labour.
As outlined in Chapter 3, the Committee notes that as part of its work with the Supply Chain Working Group, the Attorney-General’s Department has already conducted a risk assessment of goods produced by forced labour entering Australia.
The Committee considers that as part of the reporting requirement, the Australian Government should publish and regularly update a list of at-risk products, industries, areas and people groups.
The Committee recommends that the Australian Government provide detailed, clear guidance on the operation and expectations of the supply chain reporting requirement to entities required to report. In preparing this guidance, the Australian Government should consult with the proposed Independent Anti-Slavery Commissioner.
The Committee recommends that this guidance be complemented through:
resources to raise awareness of the modern slavery reporting requirements;
training for entities on how to report;
advice on mapping supply chains;
writing to entities that are required to report;
raising public awareness about modern slavery;
funding training for entities required to report, as well as training for frontline services, government departments, NGOs and embassies;
including a definition of supply chains for goods and services (including financial services) that considers the OECD Due Diligence Guidance, and which covers aid, donations and giving by government and entities; and
publishing a list of products or services, people groups, areas and industries with a high risk of modern slavery, both within Australia and internationally.
Monitoring and evaluation
Consistent with the UK Act, in its consultation paper the Australian Government proposed that entities be required to publish Modern Slavery Statements on their websites.
As noted in its interim report, the Committee agrees that entities should be required to publish their modern slavery statements. The Committee considers that ensuring modern slavery statements are publicly available and accessible is integral to improving supply chain transparency.
The Committee recommends that the Australian Government legislate in the proposed Modern Slavery Act to require entities above the threshold to publish their modern slavery statement on their website, or otherwise make their statement available in their annual report or other public document if that entity does not have a website.
In its consultation paper, the Australian Government proposed to provide for a free, publicly accessible central repository. The repository would:
be searchable and include all statements published in compliance with the reporting requirements;
be run by either the Australian Government or a third party;
include a mechanism for the business community to provide feedback on the operation and effectiveness of the reporting requirement.
As noted in its interim report, the Committee strongly supports the establishment of a government-supported central repository of modern slavery statements. The Committee agrees with the Walk Free Foundation that:
An Australian Modern Slavery Act must include the provision of a repository as it would complement the proposed reporting laws by critically promoting public accountability; ensuring progress of businesses is measurable; and providing an efficient system to monitor progress and ultimately the impact of the laws.
Submitters to this inquiry highlighted that the lack of a government-supported central repository in the UK has limited the effectiveness of the legislation. Most submitters, including those from the UK, strongly recommended that Australia’s legislation should include provision for a central repository.
The Committee notes that the central repositories that have been established in the UK by the Business and Human Rights Resource Centre and TISC Report have enabled businesses, NGOs and consumers to access, compare and analyse modern slavery statements. These repositories, together with the analysis of data by the NGOs that administer them, are key to ensuring that entities required to report are held to account.
The Committee notes that submitters raised a number of options for how a central repository should be administered in Australia.
Some submitters suggested the repository should be administered directly by a government or statutory agency such as the Australian Securities and Investments Commission (ASIC). The Law Council of Australia suggested that ASIC:
… would have access to information on which companies were required to lodge statements under any MSA [Modern Slavery Act] based on their turnover.
Other submitters, such as the Walk Free Foundation, suggest that ASIC is not a suitable agency to host the repository:
While ASIC has experience in maintain public registers, infrastructure and personnel, it is the corporate regulator. ASIC has a policing function, a culture of fees and limited public accessibility.
Some submitters suggested that the repository be hosted by an Independent Anti-Slavery Commissioner. The Walk Free Foundation suggested the office of the Commissioner:
… may be the appropriate home for the repository, particularly given the Commissioner’s remit to work with the private sector. While the maintenance and management of a repository will require a different skill set and additional staff, the Office of the Commissioner would provide the required independence and ensure business and community confidence.
However, as noted in the Committee’s interim report, the UK Independent Anti-Slavery Commissioner expressed concern about his office hosting a central repository noting it could challenge his independence. Mr Hyland told the Committee:
I think perhaps funded and encouraged to have non-government organisations or educational entities or universities looking at it, managing it and being very innovative could actually drive the change and increase the interest of the public and people in academia and so on.
Other submitters suggest it should be administered by an NGO or NGOs with support from the Australian Government. Australia’s Ambassador for People Smuggling and Human Trafficking told the Committee that in the UK, the administration of repositories by NGOs:
… has worked rather better than people expected. Engaging a civil society entity to manage that has actually engaged the community more broadly than it would have done if it had been a government entity. That is not to say it would not have worked as well, but it did actually work out quite well.
Most submitters did not express a view on how the repository should be administered. The Committee notes that this question will be examined further through the Australian Government’s consultation process.
The Committee agrees that a central repository is integral to ensuring that the market-based reporting mechanism will encourage entities to report and, over time, improve their efforts to address modern slavery risks in their supply chains. The Committee supports the Australian Government’s proposal for including provision for a central repository.
The Committee considers that the repository may be best run by a civil society NGO or NGOs with support and funding from the Australian Government. The Committee considers that the Independent Anti- Slavery Commissioner should have the ability to make recommendations to improve this registry.
As outlined in its interim report, the Committee considers that the Australian Government should work with existing modern slavery registries to create a combined and consistent international registry to which statements can be submitted, in order to prevent unnecessary duplication.
The Committee recommends that the Australian Government establish and support a legislated and government funded central repository of modern slavery statements under the proposed Modern Slavery Act.
The Committee recommends that the Australian Government support and fund an independent civil society NGO or NGOs to run and administer the central repository, as well as to undertake benchmarking and analysis of modern slavery statements.
The Committee recommends that the Independent Anti-Slavery Commissioner have powers to make recommendations to improve the operation of the central repository.
The Committee recommends that, in developing this central repository, the Australian Government consult with organisations operating existing repositories in the UK, including the Business and Human Rights Resource Centre and TISC Report. The Committee strongly recommends the establishment of a combined international repository to provide for international consistency and to avoid unnecessary duplication, particularly for entities reporting in multiple jurisdictions.
Publish list of companies required to report
A number of submitters suggested that in addition to supporting a central repository, the Australian Government should publish a list of entities required to report. These submitters argued that the lack of such a list in the UK has undermined the effectiveness of the market-driven reporting requirement. The Walk Free Foundation submitted:
The UK MSA is designed to harness the power of the “court of popular opinion”. In the absence of knowledge of which businesses are required to report that objective is substantially undermined.
However, other submitters suggested that a list would not be practical or necessary. Norton Rose Fulbright, a law firm with many business clients in the UK, told the Committee:
Based on our experience, compiling a definitive list would not be practicable. At least, in the case of the MSA [Modern Slavery Act] UK, which has extraterritorial effect, insofar as it is not limited to companies incorporated in the UK, but extends to companies and groups of companies carrying on business in the UK, the process of assessing the need for compliance with the MSA [Modern Slavery Act] UK has in some cases required consideration of complex jurisdictional and organisational issues. In those circumstances, we doubt it would be feasible for anyone to compile a definitive list.
As noted in its interim report, the Committee heard that in the UK, of the 12 000 to 18 000 businesses required to report, less than 2 000 have statements published on the Modern Slavery Registry administered by the Business and Human Rights Resource Centre. Dr Nicole Bieske from Oxfam Australia highlighted the challenges in assessing modern slavery statements for NGOs and consumers in the UK without a central repository and list of entities:
… firstly, you have to go looking if you want to find it; secondly, it is not always easy to find, even if they've done it; and thirdly, it is very hard to then do a proper audit, an analysis of what the patterns or trends may be, what could be improved or challenges they may be encountering with reporting, or whatever that may be ... If you don't have that list, which we don't have in the United Kingdom, there is no way of knowing how many companies for certain are required to report, let alone which ones have.
The Committee agrees that publishing a list of entities required to report would both assist to clarify the obligations for those entities, and improve accountability and transparency.
The Committee recommends that the Australian Government publish a list of entities required to report under the proposed mandatory supply chain reporting requirement, as soon as possible after the commencement of the proposed Modern Slavery Act. The list should be published alongside the central repository of statements to improve accountability and transparency.
The Committee recommends that a separate list be published to indicate which entities have reported, and to indicate which entities below the threshold have reported voluntarily. This list should be published alongside the central repository of statements to improve accountability and transparency, and to reward compliance.
The UN Guidelines recommend that states should consider ways to facilitate access to non-judicial grievance mechanisms dealing with business related human rights harms. Global Compact Network Australia noted that a number of lead Australian businesses are already developing grievance mechanisms to address human rights harms.
Some submitters suggested that entities be required to report on their grievance mechanisms, which set out how they respond to concerns about modern slavery in their supply chains. The Australian Council of Trade Unions (ACTU) recommended that these grievance mechanisms and remedy processes should be ‘clear, transparent and accessible, and incident should be reported and monitored’.
Anti-Slavery Australia recommended that the reporting requirement should include a grievance pathway ‘whereby a complainant can, in good faith, notify a relevant body that an organisation has not complied with its reporting obligations’ and would ‘relieve the government of some of the burden of maintaining regular surveillance’ of modern slavery statements.
The Salvation Army Freedom Partnership noted that OECD National Contact Point already operates a complaints mechanism for complaints about breaches to the OECD Guidelines for Multinational Enterprises in Australia, including supply chain issues, and recommended the National Contact Point be strengthened to ‘create enhanced pathways to justice for those exploited by inequitable supply chain operations’.
The Committee considers that prescribing requirements to report on grievance mechanisms at this early stage may present significant challenges for entities. The Committee agrees with the Business Council of Australia that ‘more detailed reporting will develop over time, as businesses become familiar with the statement’s content and as business systems start to capture more data.’
The Committee considers that reporting on grievance mechanisms should be considered as part of the legislated three year review of the reporting requirement by the Independent Anti-Slavery Commissioner.
In its consultation paper, the Australian Government proposed a review of the legislation three years after introduction ‘involving further public consultation, to ensure that the reporting requirement remains effective in the Australian context’.
As outlined in Recommendation 7, the Committee supports a legislated review of the proposed Modern Slavery Act after a period of at least three years by the Independent Anti-Slavery Commissioner, with subsequent reviews every three years. The Committee agrees that this legislated review include a review of the proposed reporting requirement The Committee notes that submitters raised a number of additional issues that could be addressed in a legislative review of the proposed reporting requirement, including:
effectiveness of compliance measures, including possible penalties for entities that identify but don’t address modern slavery risks;
possible tax incentives to encourage compliance;
suitability of a compliance mark or label; and
publishing a list of entities that prepare non-compliant statements.
In its consultation paper, the Australian Government did not propose to include punitive penalties for non-compliance. The Government notes it will ‘monitor general compliance with the reporting requirement and entities that do not comply with the reporting requirement may be subject to public criticism’.
As outlined in its interim report, the Committee supports the introduction of compliance measures for those entities that don’t comply with the reporting requirement, after an interim transition period.
The Committee acknowledges that many submitters, particularly businesses, do not support the introduction of compliance measures or penalties. These submitters suggest the legislation should focus on promoting positive change rather than penalties. The Business Council of Australia submitted that:
Legislation that is punitive or has an excessive focus on compliance would be costly and it would fail to recognise the active role businesses have already taken in this area. It risks driving compliance behaviours (a ‘tick and flick’ approach to reporting) which will limit the effectiveness of the statements and would be counter to the intent of the legislation.
These submitters suggest that Australia’s model should be consistent with the UK and rely on market forces and public scrutiny to encourage entities to report. The Walk Free Foundation submitted that the reporting requirement in the UK Act seeks to:
… positively change corporate behaviour, not generate legal defences and fear of penalties. This approach recognises that financial penalties and legal risks may well drive the crime of modern slavery further underground and out of view, rather than promote transparent and free open communication about the risks. It also encourages businesses to collaborate, innovate and find new solutions, rather than treat modern slavery as a litigation risk to be responded to defensively by lawyers.
The UK Independent Anti-Slavery Commissioner, Mr Kevin Hyland, noted that the non-punitive nature of the UK Act has encouraged companies to engage in addressing the issue:
Companies are taking a moral responsibility and the act is not punitive in that area because we want companies to identify modern slavery, address it and do something about it. If it followed other legislation like corruption and bribery, companies would have to keep away from it. Seeing the change in the private sector has been a significant issue.
However, some NGOs suggested that the small number of companies that have so far reported in the UK indicates that compliance measures are needed. Dr Nicole Bieske from Oxfam Australia told the Committee:
… the reports after two years are startlingly low, when we know that between 12,000 and 17,000 companies should be making such statements, and we know that only about 2,000 have ... For companies that fail to report, the only penalty for them, as such, is injunctive relief, if that is sought by the Home Secretary, and it is probably unlikely that that is actually going to happen. From our perspective, there should be a penalty in place for noncompliance for the companies over the minimum threshold who are required to report.
These submitters suggested that stronger compliance measures should be included in Australia’s proposed legislation. Anti-Slavery Australia submitted:
… market-regulated disclosure legislation is not appropriate in situations where the risks associate with certain activities is not catastrophic or likely to give rise to grave consequences. Without an adequate penalty or sanction to deter non-compliance with reporting obligations, there is little incentive for organisations to engage with supply chain transparency. The serious risk of criminal slavery and human trafficking being supported and hidden by complex supply chains necessitates a stronger regulatory framework.
The different compliance measures suggested by submitters are examined below.
Penalties for non-compliance
Most submitters did not support punitive measures for entities that report and identify instances of modern slavery. These submitters suggested that penalties for entities that do report could discourage entities from looking into their supply chains and engaging in measures to address any modern slavery risks. The Business Council of Australia noted that:
… punitive measures for companies that have reported on the steps they have taken (for example, fines) would perversely punish organisations that have committed resources to investigate their supply chains and engage with suppliers, rather than those who have opted to do nothing.
During the Committee’s delegation visit to the UK in April/May 2017, some UK companies expressed concern that introducing penalties for identifying instances of modern slavery may lead to entities walking away from the supplier, rather than working with the supplier to address the issue.
Some submitters suggested that punitive compliance measures should be introduced for entities that fail to report. Others suggested penalties for making a misleading or fraudulent statement. The Law Council of Australia recommended that ‘appropriate sanctions for non-compliance should be part of the reporting framework’. Ms Vanessa Zimmerman from the Law Council told the Committee:
The overarching point here is to know who you are working with, to understand what kind of suppliers you have and what types of risks they might have, which should ultimately improve the risk management of the company overall. If there are risks of noncompliance with reporting, overall it should make the directors more careful around these issues.
Similarly, the Salvation Army Freedom Partnership supported the introduction of penalties for non-compliance and recommended that the Australian Government should consult broadly when setting appropriate penalties. Ms Heather Moore from the Salvation Army told the Committee:
… if companies face no penalties for failing to report many companies will simply opt out or present superfluous statements that do not contribute meaningfully to enhancing corporate transparency.
Some submitters suggested introducing compliance measures for companies that identify but take no steps to address instances of modern slavery. Amnesty International recommended penalties for entities that fail to address modern slavery risks, including publishing a list of non-compliant entities. Mr Michael Hayworth from Amnesty International told the Committee it is important to strike a balance between encouraging companies to report and holding non-compliant companies to account:
We do not want any accountability mechanisms to prevent that disclosure, but at the same time it is also really important that, if there are these sorts of human rights abuses committed against people, that companies are held to account … if it goes beyond just knowing about it but actually continuing to use those suppliers, not managing those risks and not publicly identifying them, there certainly should be accountability for that.
The Committee agrees that entities should be encouraged and supported to identify and address modern slavery risks in their supply chains. The Committee shares the concerns of businesses that introducing compliance measures and penalties for identifying and addressing modern slavery risks would discourage businesses from reporting, or being open in their reporting.
The Committee therefore does not support penalties or compliance measures for companies that identify and report on steps taken to address modern slavery risks.
However, the Committee recommends that there should be accountability measures for entities above the threshold that fail to report. The Committee considers that such compliance measures and penalties should enter into force from the second year of reporting onwards, recognising that it may take some time for entities to develop and implement reporting policies and practices.
The Committee recommends that the Australian Government consult businesses widely on the appropriate level of penalty for failing to report.
The Committee agrees that compliance measures and penalties for not reporting in accordance with the prescribed requirements, or not adequately addressing discovered modern slavery risks, should not be brought in at this stage, but considered as part of the first three year review of the legislation.
The Committee recommends that the proceeds from any penalties collected under this measure be used to support victims of modern slavery.
The Committee recommends that the Australian Government, in mandating supply chain reporting, introduce penalties and compliance measures for entities that fail to report under the proposed Modern Slavery Act, applying to the second year of reporting onwards. This should include publishing a list of entities above the threshold that fail to report after the second year of reporting onwards, published alongside the central repository of statements.
The Committee recommends that the Australian Government consider the appropriate level of penalties in the proposed Modern Slavery Act and how penalties should be administered, including a possible role for the Australian Securities and Investment Commission (ASIC).
The Committee recommends that the proceeds from any penalties collected under this measure be used to support victims of modern slavery.
The Committee recommends that the first legislated three-year review by the Independent Anti-Slavery Commissioner consider penalties for entities above the threshold that fail to adequately report on the prescribed reporting areas, as well as publishing a list of such entities as a further compliance measure, and penalties for entities that fail to take action, or sufficient action, on modern slavery found within their supply chains.
In its consultation paper, the Australian Government noted that it is considering options for oversight of the reporting requirement, including the feasibility of and requirement for independent oversight.
Submitters noted that, under the UK Act, there is no body with oversight or enforcement powers for businesses that fail to comply with the reporting requirement.
Some submitters recommended that an independent body should be given oversight of the reporting requirement. For example, the Law Council of Australia suggested that ASIC would be best placed to take on this role:
ASIC is ideally situated to take on this role given it is already the corporate regulator, has experience with conducting investigations, and will have access to information on which companies are required to report but did not. ASIC should have the power to, either following complaint or of its own volition, investigate companies for non-compliance, and if it discovers non-compliance for the purposes of the act, issue sanctions against the offending company.
Other submitters suggested that an Independent Anti-Slavery Commissioner would be best placed to take on this role. Anti-Slavery Australia suggested that:
An Anti-Slavery Ombudsman could be empowered to issue a notice to non-compliant organisations, and instigate civil penalties in cases of continued non-cooperation or non-compliance.
As noted in its interim report, the Committee heard concerns from the UK Independent Anti-Slavery Commissioner about his office taking on responsibility for enforcing the supply chain reporting requirement. However, Mr Hyland told the Committee his office has been able to highlight examples of best practice and engage with CEOs to educate businesses on how to report.
As noted in its interim report and in Chapter 4, the Committee supports the establishment of an Independent Anti-Slavery Commissioner to provide oversight of the reporting requirement. The Committee notes that ASIC may also have an enforcement role with respect to entities that fail to report.
In its consultation paper, the Australian Government notes it is considering ways to support business groups and civil society to undertake analysis and benchmarking of Modern Slavery Statements.
The Committee notes the important work undertaken by the NGO sector in the UK in analysing and benchmarking modern slavery statements. As outlined in its interim report, reports by the Business and Human Rights Resource Centre, Ergon Associates and others highlight examples of best practice and rank statements in accordance with their compliance with the requirement.
As noted above, the Committee recommends that the Australian Government should support and fund the NGO or NGOs administering the central registry to undertake the benchmarking analysis of modern slavery statements.
Submitters also suggested that other measures to address modern slavery in supply chains should be considered, beyond a reporting requirement.
Some submitters highlighted the US example of restricting the importation of goods that may be produced using slave labour (see Box 5.5). For example, Human Rights Watch recommended introducing legislation that would:
… prohibit the import of any goods that were produced or manufactured, in whole or in part, using forced labor, slave labor, child labor, or labor of persons who have been trafficked.
Box 5.5: US Trade Facilitation and Trade Enforcement Act
The US Trade Facilitation and Trade Enforcement Act 2015 increases the powers of US Customs and Border Protection (CBP) officials to restrict the import of products manufactured using forced or child labour. CBP works closely with the Department of Labor to monitor the list goods likely to be produced by child or forced labour (see Box 5.4).
As of February 2017, CBP had issued Withhold Release Orders on several commodities from China, including soda ash, calcium chloride, potassium products, Stevia and its derivatives and peeled garlic.
The Committee is of the view that the Australian Government should give further consideration to such measures and that these measures should be considered as part of the legislated three year review by the Independent Anti-Slavery Commissioner, if not considered before then.
The Committee recommends that the Australian Government consider introducing other trade mechanisms to address modern slavery risks in the supply chains of goods entering Australia. In considering these mechanisms, the Committee suggests the Australian Government consider the US model of importation restrictions under the Trade Facilitation and Trade Enforcement Act 2015.