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Finance glossary

What is the Modern Slavery Act?

Bristol James
7 Min

Australia’s Modern Slavery Act of 2018 is a law that requires Australian businesses to report annually on the risks of modern slavery within their operations and supply chains. Businesses must also report the actions they are taking to address and reduce modern slavery risks.

Modern slavery includes a multitude of risks such as human trafficking, slavery, servitude, forced labour, debt bondage, forced marriage, and child labour. As much as businesses and consumers around the world would like to believe that slavery no longer exists, many businesses across the globe continue perpetrating modern slavery. Australia passed the Modern Slavery Act, which went into effect in January 2019, to hold the country’s businesses accountable for their business practices and any modern slavery risks that may be present.

Today’s Reality: Modern Slavery Statistics

Modern slavery is very, very real. On a global scale, it’s estimated that 50 million people are subject to some form of modern slavery. This is actually an increase of almost 10 million people from 2018 estimates when the Modern Slavery Act passed in Australia. From forced labour alone – only one of the forms of modern slavery – the global private economy receives roughly $193 billion USD. In Australia today, approximately 15,000 people are considered “enslaved” by today’s definition.

These statistics are hard to come to terms with, and many business leaders choose to ignore them. However, the growing number of people who fall victim to predatory business practices suggests that more needs to be done to curb modern slavery, and that’s exactly why this law was passed in 2018. Perhaps, if businesses are held accountable for unethical and illegal business practices and supply chain operations, things can finally start to change.

Who: What Companies Need to Report?

 

Businesses and entities in Australia that bring in an annual revenue of $100 million Australian dollars or more are required to abide by the national Modern Slavery Reporting Requirement. Although smaller entities are not legally bound by the reporting requirements of this law, it’s a good idea for all business leaders around the world to assess their negative impacts regularly, especially their human rights impacts.

 

Features: Requirements of the Modern Slavery Act

 

In alignment with annual modern slavery reporting requirements, businesses should clearly and openly convey modern slavery risks that exist within their business operations and supply chains. This report is called the Modern Slavery Statement, and it’s published annually. It’s important that parent entities and any other owned and controlled entities are included in the report. The requirements outlined by this law are mandatory for qualifying Australian companies. The Modern Slavery Statements must include:

 

  • The identity of the reporting entity.
  • How the reporting entity is structured, including operations and supply chain details.
  • The risks of modern slavery perpetrated by the reporting entity’s operations and supply chain, as well as any risks perpetrated by entities owned or controlled by the reporting entity.
  • The actions the reporting entity has taken to address modern slavery risks.
  • An assessment of the effectiveness of actions taken to address modern slavery risks.
  • A breakdown of how owned entities – or entities included in the joint modern slavery statement — were assessed.
  • Other information that the reporting entity considers relevant to the report.

 

Businesses must provide an honest and complete picture of the risk of modern slavery in relation to their organization, as well as all actions taken to curb these risks within the reporting year. Please note that actions taken in prior years are not sufficient.

 

Criteria: Honest and Open Reporting

 

Reporting entities should not try to cover up modern slavery risks or overstate the actions taken to address these risks. Instead, the Modern Slavery Statement should accurately depict the actions taken – or not taken – to mitigate human rights abuses and related risks.

 

If there are no new actions to report in the current year’s statement, there should be open and honest reporting about the limited progress. If nothing else, the mandatory reporting criteria should be addressed, and a go-forward plan should be created to set action-based goals for the next reporting period.

 

Cybersecurity: Link Between Modern Slavery and Cybersecurity

 

The Modern Slavery Act was designed to address traditional forms of exploitation such as forced labour and human trafficking, but in the modern digital landscape that most businesses operate in today, the link between technology and human rights abuses cannot be understated. Not only is cyber-enabled human trafficking on the rise, but many exploitative business tactics rely on online platforms and digital communications to recruit, exploit, and control victims.

 

To prevent business systems from being used in this manner, companies should invest in top-notch cybersecurity measures and secure business systems. For example, using a secure payment platform like Eftsure can help prevent business payments from being made to unethical businesses or questionable partners. With secure vendor verification, business leaders can feel confident that their business tools and software solutions are not being exploited at any level to perpetrate modern slavery.

 

Supply Chains Act: California’s Influence

 

In 2010, the state of California passed is Supply Chains Act of 2010, which was one of the first breakout pieces of legislation written to address modern slavery and human trafficking within supply chains. This law was one of the first of its kind, and the catalyst for many similar laws around the world. In Europe, the UK Modern Slavery Act, the German Supply Chain Due Diligence Act, and Norway’s Transparency Act were later passed with similar goals. Finally, in 2018, Australia followed suit with the Modern Slavery Act.

 

When: Reporting Due Dates

 

For Australian companies, the annual modern slavery statement is due six months after the reporting year ends. Some companies have unique fiscal calendars, so this law considers each entity’s financial year in the reporting timeline. If the calendar year of a business ends December 31st, the modern slavery statement is due 6 months later, at the end of June.

 

Enforcement: Reporting Outcomes and Audits

 

When reporting entities have completed their modern slavery statements, they send those finalized statement reports to the Attorney General’s Department to be published on the online registry of all modern slavery reports from that year. The Modern Slavery Register is meant to serve as a database for current and historical modern slavery statements of all qualifying companies.

 

The Modern Slavery Expert Advisory Group is in place to support the Attorney General’s Department with the implementation of the Modern Slavery Act of 2018 and the monitoring of all incoming reports. The group meets on a quarterly basis to discuss compliance trends, enhance the Register for Modern Slavery Statements, and support reporting entities on their journey to eradicating modern slavery.

 

It’s important to note that in its current state, this law does not require reporting entities to conduct modern slavery due diligence, nor does it impose monetary penalties for companies that are found to be out of compliance.

 

Three-Year Review: Proposed Changes to the Modern Slavery Act

 

In 2022, the Australian Attorney-General’s Department reviewed the first three years of the Modern Slavery Act. The report that came out of that review contained 30 recommendations for changing the law itself and adjusting how the law’s requirements are enforced from an administrative perspective. By collaborating with reporting entities through a survey, the review of the Modern Slavery Act was holistic and detailed. Some of the key recommendations that came from the report are:

 

  • Lower Compliance Threshold: Currently, only organizations that see annual revenues of $100 million Australian dollars are required to submit annual statements. It’s recommended that the threshold be cut in half, requiring entities with $50 million or more in annual revenue to report.
  • Mandatory Due Diligence: It’s recommended that the act require entities to do more than just report their modern slavery due diligence, and instead, conduct their own proactive due diligence to prevent modern slavery. This would set the Act apart from other modern slavery legislation around the world and align it more closely with broad human rights laws.
  • Three-Year Reporting Cycle: Entities are currently required to submit full modern slavery statements on an annual basis, but the report findings recommend that full statements only be required every three years, with only updates or changes to current statements required in the years in between.
  • Penalty Requirements: The law currently does not impose fines or penalties for non-compliance, but it’s recommended that penalties be imposed for certain items such as failure to submit a statement by the deadline, submitting a statement with false information, or failing to comply with remedial actions.

 

None of these changes have been made, but they are currently under review and businesses should keep an eye out for adjustments to the law in coming years.

 

Summary: In Summary

 

  • The Modern Slavery Act 2018 mandates Australian businesses with annual revenue exceeding $100 million to annually report on modern slavery risks within their operations and supply chains, aiming to hold them accountable for unethical practices.
  • Modern slavery, including forced labour and human trafficking, remains a prevalent issue, affecting an estimated 50 million people worldwide. Australia’s legislation aims to address this growing concern and foster transparency in business practices.
  • Covered entities are required to publish Modern Slavery Statements annually, detailing their organizational structure, supply chain operations, identified risks, actions taken, and effectiveness of measures implemented to combat modern slavery.
  • A recent three-year review of the Act has proposed changes including lowering the compliance threshold, mandating due diligence, altering reporting cycles, and introducing penalties for non-compliance, signalling ongoing efforts to strengthen the legislation and combat modern slavery effectively.

 

Background References:

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