Australia became one of a handful of countries to regulate modern slavery practices in global supply chains, with the enactment of the Modern Slavery Act 2018 on January 1 this year. A key obligation is complying with the modern slavery reporting requirement by filing a modern slavery statement.
The act addresses concerns, for example, identified by the Global Slavery Index 2018, which estimates 15,000 people are trapped in modern slavery within Australia. The United Nations estimates half of the more than 40 million people affected by modern slavery globally are located in the Asia Pacific region.
The act recognises the prevalence of modern slavery — the new reporting obligations require businesses to assess any risks of modern slavery in their own operations and supply chains, both in Australia and overseas.
While many commentators have discussed the implications of this act for businesses large and small across Australia, there is a dearth of discussion about how the act will be implemented and who within a business will be personally responsible for overseeing compliance in an operational context with filing a statement. On March 29, 2019, the Department of Home Affairs published Draft Guidance for Reporting Entities seeking submissions by May 19, 2019.
Businesses are not obligated to file their first statement on the Modern Slavery Statements Register until the six-month period after June 30, 2020 at the earliest (later if a business’ accounting period aligns with a calendar year rather than the Australian financial year). Despite this, a board must start thinking about compliance now, and who within the business will have the task of overseeing compliance. There is a debate about what skill set is best suited to the task.
While procurement or purchase managers have a key role to play, human resource managers must be at the centre of that conversation.
What does the statement actually need to say?
A statement must identify the business, its structure and its supply chains. Relatively simple, even though a supply chain is not defined.
More challenging is describing the risks of modern slavery practices within its operations and supply chains. Then, the statement must identify what action has been taken to eliminate or reduce these risks. Assessing this task is particularly challenging. It may take more than steps such as policies and staff training to raise internal awareness within the business.
A business may need its own certification scheme for its suppliers with regard to their labour practices. This, in turn, may require well-trained staff visiting international suppliers to inspect operations or engaging external service providers to provide independent verification of anti-slavery measures taken.
Training needs to start now
HR professionals have a pivotal role to play in modern slavery compliance in all Australian businesses. They need to start putting in place training to ensure key individuals across their organisations understand the new laws, can identify slavery risks in an employment context, and are prepared for the statement’s reporting requirements.
While the act only requires a report from large companies with $100 million or higher consolidated revenue, the supply chain implications mean any business, however small, that deals, or would like to deal, with large business, must know how to identify potentially non-compliant practices which involve coerced labour or slavery. It would be a mistake for a business not obliged to file a statement to ignore the risks of modern slavery in its business and supply chains. Competitors who demonstrate they have taken anti-slavery measures will be a more attractive commercial proposition for a larger business obliged to comply with the act.
The statement also requires businesses to indicate what strategies — such as policies or training — they will put in place to manage and eliminate modern slavery risks.
This is why leadership by HR managers is so crucial. The HR profession instinctively knows how to manage staff training requirements and know what employment practices or policies will best ensure compliance within a business.
What’s at stake?
In the United Kingdom, which passed its modern slavery law in 2015, the UK government has followed up on an estimated 17,000 businesses that had not complied with modern slavery reporting requirements. The UK government had stated it would publish a list of non-compliant companies on March 31 this year. In effect, the UK government has taken to naming and shaming such businesses for the public to see. To date, the UK government has not yet published any more information on its Home Office website.
While there is some uncertainty for businesses on the future of compliance requirements, particularly with a federal election just announced for May 18, 2019, the fact remains that failure to comply could expose businesses to reputational damage with informed consumers.
How can you identify modern slavery?
Identifying non-compliant practices is difficult. Here are three key questions to consider.
- Are suppliers’ prices too cheap?
- Is outsourcing exposing a business to potential slavery practices?
- Are labour hire organisations involved in indentured labour or other illegal labour practices?
Outsourcing within Australia may create a risk. For example, the Fair Work Ombudsman required a major supermarket chain to give an enforceable undertaking on labour practices, following the exploitation of outsourced trolley collectors.
HR managers are already knowledgeable about complying with the industrial awards, avoiding sham contracting and recent changes to protect vulnerable workers. They have experience understanding and managing legal and reputational risks.
The duty now falls on the HR profession to understand the requirements of the act and prepare their workforces for compliance.
Businesses owners and HR managers who are unsure about the requirements of the new regime should seek legal advice.