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Modern Slavery Act 2018 Summary of the Draft Guidance for Reporting Entities

What you need to do to comply (and how we can help)

Modern Slavery Act 2018 Summary: Draft Guidance for Reporting Entities

Why was the Guidance material developed? The guidance was developed to assist ‘large entities’ captured by the reporting requirement (that is businesses with a consolidated revenue of more than $100million) understand what they need to do to comply with the Commonwealth Modern Slavery Act 2018 Modern Slavery Reporting Requirement. NSW has a similar reporting requirement capturing businesses with annual turnover of between $50million and $100million over the 12-month reporting period and it is expected that entities required to report under this act will also benefit from the Commonwealth Guidance material.

Defining modern slavery The Guidance defines ‘modern slavery’ as situations where coercion, threats or deception are used to exploit victims and undermine their freedom. It highlights that coercion, threats and deception in situations of modern slavery can sometimes involve clear physical indicators, such as physical confinement or confiscation of identity and travel documents. The guidance acknowledges however that often coercion, threats and deception are more subtle and harder to identify. The Commonwealth Modern Slavery Act 2018 defines modern slavery as including: 1. Trafficking in persons 2. Slavery 3. Servitude 4. Forced marriage 5. Forced labour 6. Debt bondage 7. The worst forms of child labour 8. Deceptive recruiting for labour or services The Guidance reminds us that modern slavery can happen in any industry and in any country. Modern slavery victims are often vulnerable to exploitation due to their background, migration status or other factors like poverty. Both adults and children can be victims of modern slavery. Women and children are often especially vulnerable. Importantly, the Guidance highlights that modern slavery does not include practices like substandard working conditions or underpayment of workers (although these practices are still illegal and harmful). For detailed definitions of modern slavery and information on risk indicators, see pages 5964 of the Guidance material.

How SD Strategies can help your team understand modern slavery: • •

Provide staff training on modern slavery and its relevance to your business or industry sector Assist with identifying your key modern slavery risks and potential impacts – who are the vulnerable workers in your operations and supply chain? 2|Page © SD Strategies 2019. All rights reserved.

Modern Slavery Act 2018 Summary: Draft Guidance for Reporting Entities

How does modern slavery impact your entity? The Guidance emphasises that modern slavery may be present in your operations and supply chains and refers to key international principles and goals aimed at combating modern slavery. It highlights the intersection between business and human rights and the responsibilities of Australian entities to understand and mitigate modern slavery and human rights impacts. The UN Guiding Principles on Business and Human Rights (UNGPs) outlines that: • •

an entity has responsibility to protect human rights; and an entity must take action to prevent, mitigate and remedy modern slavery in operations and supply chains.

The UN Sustainable Development Goals (SDGs), to which Australia is a signatory, highlight the international community’s commitment to ending modern slavery and human trafficking by 2030.

How SD Strategies can help: • • • •

Work with you to operationalise the UN Guiding Principles Align your company’s values and strategies to the SDGs Work with you to identify your salient human rights issues Develop action plans to prevent, mitigate and remedy modern slavery in your operations and supply chain.

Do I need to report? According to the Guidance, your entity is a reporting entity and will need to report under the Act if it: • • •

has a consolidated revenue of at least AUD$100 million over its twelve-month reporting period; AND is an Australian entity at any time in that reporting period; OR is a foreign entity carrying on business in Australia at any time in that reporting period.

If your entity does not meet these requirements you are not required to report under the Act. The definition of reporting entity ensures that the reporting requirement covers large entities that have the capacity to meaningfully comply with the reporting requirement and the leverage to influence change in their supply chains. The Act applies to a wide range of entity types, including individuals, partnerships, associations and legal entities such as companies, trusts, superannuation funds and other types of investment organisations. This includes both commercial entities and not-for-profit entities, such as charities. Australian entity vs foreign entity carrying on business in Australia The Guidance explains that your entity is an Australian entity if it is a company, trust, or corporate limited partnership that is resident in Australia for income tax purposes. By

Modern Slavery Act 2018 Summary: Draft Guidance for Reporting Entities

definition, your entity carries on business in Australia if its activities meet the legal threshold for carrying on business set by section 21 of the Commonwealth Corporations Act 2001.

Can I report voluntarily? Any Australian entity or entity carrying on a business in Australia can provide a voluntary statement. The guidance suggests that voluntarily providing a statement can benefit your entity, including by helping you to respond to questions from your customers and investors. It may also help you to attract customers, access new business opportunities, provide a competitive advantage and build your reputation. For more details on reporting see pages 15-21 of the Guidance material.

How SD Strategies can help: • • •

Provide guidance on whether your entity is required by law to report or is eligible to submit a voluntary statement Develop a clear business case for your organisation’s Board to ensure your modern slavery risk management plan is well-resourced Prepare a detailed road-map for managing risks and reporting outcomes

When do I report? The Act requires you to prepare annual statements covering your entity’s reporting period. Your reporting period means the financial year or other annual accounting period used by your entity. See page 21 for more details. You will need to prepare a statement for every reporting period for your entity and submit to Department of Home Affairs within 6 months of the end of your reporting period. You need to begin reporting on your first full reporting period after 1 January 2019.

How do I prepare a statement? The seven mandatory criteria require every statement to: 1. identify the reporting entity; 2. describe the reporting entity’s structure, operations and supply chains; 3. describe the risks of modern slavery practices in the operations and supply chains of the reporting entity and any entities it owns or controls; 4. describe the actions taken by the reporting entity and any entities it owns or controls to assess and address these risks, including due diligence and remediation processes; 5. describe how the reporting entity assesses the effectiveness of these actions; 6. describe the process of consultation with any entities the reporting entity owns or controls (a joint statement must also describe consultation with the entity giving the statement); and 7. any other relevant information.

Modern Slavery Act 2018 Summary: Draft Guidance for Reporting Entities

The Guidance recommends drawing on the UNGPs and highlights that businesses are not required to report on specific individual risks or actual cases of modern slavery. However, you are able to voluntarily include information about specific risks or cases if you wish to. Key tips included in the Guidance: 1. Use the statement process as a way to genuinely consider how you can improve your entity’s response to modern slavery. 2. Engage senior management, executives and board members as early as possible to ensure they understand the statement process. 3. Involve relevant areas of your entity and any entities your entity owns or controls in the drafting process (such as Human Resources, Finance, Procurement, Sourcing, Legal, Risk, Sustainability, Major Projects and Senior Leadership). Where possible, you should include your sourcing and/or procurement teams in all your countries of operation, especially any high-risk locations. 4. Avoid copying generic templates or statements from other entities. 5. Be honest about your entity’s situation and risks and what you have done to improve. 6. Consider what your next steps will be and how you will show improvement in your next statement. 7. Avoid aspirational statements that are not supported by action. 8. Consider how you can benefit from third-party expertise and partnerships to improve your overall response to modern slavery, including with industry bodies, international organisations and expert NGOs. 9. Check you have complied with all the legal requirements set out in the Act, including addressing all of the mandatory reporting criteria.

How SD Strategies can help: •

• •

• • •

Undertake a comprehensive gap analysis to document your current situation, identify gaps and list opportunities for better managing modern slavery risks across all areas of your operation. Develop a modern slavery risk management strategy and action plan. Work with you to prepare an internal stakeholder engagement strategy to ensure all parts of your business understand what modern slavery is and why it’s important for your business to address it. Help your organisation identify roles, responsibilities and accountabilities for managing modern slavery risk and link these to measurable KPIs. Identify your priority suppliers by spend and modern slavery risk factors, develop a supplier engagement/education strategy and undertake a deep dive into the highest priority suppliers. Prepare detailed risk reports and recommendations for your priority suppliers and work with you to ensure the recommendations are addressed. Identify strategic partnerships in Australia and internationally to improve your overall response to modern slavery risks. Help you capture relevant data, document actions taken and prepare a compliant Modern Slavery Statement. 5|Page © SD Strategies 2019. All rights reserved.

Modern Slavery Act 2018 Summary: Draft Guidance for Reporting Entities

Key terms & definitions: Term Structure

Operations

Supply Chain

Risks of modern slavery practices

Definition Any activity or business relationship undertaken by the entity to pursue its business objectives and strategy, including research and development, construction, production, arrangements with suppliers, distribution, purchasing, marketing, sales, provision and delivery of products or services, and financial lending and investments. This includes activities in Australia and overseas. Any activity or business relationship undertaken by the entity to pursue its business objectives and strategy, including research and development, construction, production, arrangements with suppliers, distribution, purchasing, marketing, sales, provision and delivery of products or services, and financial lending and investments. This includes activities in Australia and overseas. The products and services (including labour) that contribute to the entity’s own products and services. This includes products and services sourced in Australia or overseas and extends beyond direct suppliers. The potential for your entity to cause, contribute to, or be directly linked to modern slavery through its operations and supply chains – in other words the risks that your entity may be involved in modern slavery. This includes: Risks that you may cause modern slavery practices Risks that you may contribute to modern slavery practices Risks that you may be directly linked to modern slavery practices

How do I approve and publish a statement? The Guidance outlines two specific requirements for approval and emphasises that if your statement does not meet these requirements you will fail to comply with the Act. 1. The statement must be approved by the principal governing body of the reporting entity as a stand-alone document. 2. The statement must be signed by a responsible member of the reporting entity (in most cases, a responsible member means a member of the reporting entity’s principal governing body). You must provide your finalised statement to the Department of Home Affairs for publication on an online central register within six months from the end of your reporting period. You may also publish your statement in other ways, including on your website or in your annual report. This can be a way to demonstrate your entity’s leadership on modern slavery. It can also be a way to promote and share best practice between entities. The Guidance provides advice on publishing a joint statement which may be submitted by an entity on behalf of one or more reporting entities. For detailed information on approval of joint statements, see page 56 of Guidance document.

Modern Slavery Act 2018 Summary: Draft Guidance for Reporting Entities

How do I respond to a case of modern slavery? It is highly recommended that you read the detailed Appendix about responding to a case of modern slavery on page 67-68 of the Guidance document. The following considerations are included in the Guidance for responding to a case of modern slavery: • • • • • •

Do not attempt to resolve the situation by yourself. Ensure your actions are always in the best interests of the suspected victim or victims. Consider if further action is required to verify if modern slavery is occurring. Consider whether and how to involve law enforcement. Respond in a way that is appropriate to the circumstances of the situation. Recognise that you may not be aware of all the victims involved or the extent of the exploitation. Address the harm caused. Carefully consider the consequences of ending your relationship with the affected entity. Consider opportunities to collaborate with international and local organisations or civil society groups.

• • •

How SD Strategies can help: •

Work with you to proactively identify and document effective remedies for when incidents of modern slavery are found in your operations or supply chain.

We has compiled a database of over 200 modern slavery resources which we will continue to add to and update. To access the SD Strategies database of modern slavery resources, head to https://www.sdstrategies.com.au/resources

For further support and information on tailored services, please contact: Sonja Duncan, Director SD Strategies sonja@sdstrategies.com.au M: +61 (0)412 523 49