The Australian Department of Home Affairs recently released a companion document to the Australian Modern Slavery Act of 2018 (MSA). The document, titled Guidance for Reporting Entities, provides in-scope businesses and organizations greater insight into expectations and best practices for complying with the act.
The guidance offers basic information about the act such as the entities required to report, when they need to report and how to respond to each of the mandatory criteria set out in the act. The guidance also provides examples of modern slavery risks that serve as useful pointers for reporting entities. Key issues addressed in the guidance include:
Broader Supply Chains & Enhanced Supplier Engagement
The guidance adopts a broad definition of supply chain that includes direct suppliers, indirect suppliers, services provided by suppliers as well as products provided by suppliers. Similarly, the guidance does not set any kind of limit on how far down the supply chain a reporting entity is required to go, or how many tiers of its supply chain it must examine or engage.
This encompassing definition of supply chain and broad application means companies in scope of the Australia MSA will need to thoroughly engage suppliers with regard to modern slavery. They must assess modern slavery risks throughout their global and domestic supply chains, and within the supply chains of any entity they own or control. It also means they must consider deeply embedded risks such as those related to raw material sourcing or the mining of conflict minerals, which are are particularly vulnerable to slavery and other human rights violations like forced labor and child labor.
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While the breadth and depth of supplier assessment required may seem daunting, the guidelines acknowledge the difficulty and allows for an incremental approach that focuses on continuous improvement. This means companies may initially only be able to assess and address modern slavery risks related to tier one or direct suppliers. However, as time goes on, they are expected to have a plan for engaging and assessing suppliers further down the supply chain. Annual reporting under the act ought to reflect this continuous improvement and demonstrate the development of due diligence activities.
Enforcement Actions & Education Efforts
The MSA took effect on January 1, 2019, with the first reporting period set to end in June 2020 for most companies. This gives companies enough time to implement due diligence processes that will ensure their supply chains are free of human trafficking and slavery. During this first reporting period, the Australian government is focused on working with reporting entities to ensure they understand their obligations under the act. When instances of non-compliance are found, the government will seek to engage organizations to support compliance.
However, in cases of deliberate and/or severe non-compliance, the government may choose to publicly identify the non-compliant entity. The Australian government’s approach is similar to that of the UK: start with education and focus on enforcement later. Non-governmental organizations (NGOs) will undoubtedly fill the gap through public rankings and “name and shame” lists, as has been the case with the UK MSA. Companies failing to adequately manage modern slavery risks can therefore expect media and public scrutiny, reputational damage and potential operational impacts.
While the focus is on education for now, with enforcement to come at a later date, the guidance document highlights the importance of communicating the risks throughout the supply chain and encourages companies to engage and educate their suppliers ahead of future enforcement action.
Can One Statement Put Your Company in Compliance With Multiple Regulations?
The Australia MSA is only one in a growing list of national legislation designed to combat human trafficking. Along with several others like the UK MSA and the California Transparency in Supply Chains Act, the Australia MSA requires companies to issue annual statements that detail the steps they have taken to prevent human trafficking and slavery in their supply chains. Reporting entities that fall under the scope of one or more of these regulations may wonder if they can meet the reporting obligations of multiple regulations with a single statement.
The guidance states that if an entity needs to report under both the Australian and UK acts, they can choose to submit the same statement in both the UK and Australia. However, the entity must ensure that its statement meets all the requirements in the Australian act, as it sets out a number of statement requirements that are not included in the UK act. Such requirements include mandatory criteria for the content of statements and options to provide joint statements. This means that statements submitted in accordance with the UK MSA will not necessarily be compliant with the Australian MSA.
Leveraging Third-Party Expertise to Improve Responses
In-keeping with the theme of ongoing education and engagement, the Guidance for Reporting Entities recommends leveraging third-party expertise to address modern slavery risks. Impartial third-party assessments are a widely recognized best practice and are considered essential to effective human rights due diligence.
The Assent Compliance Platform’s Human Trafficking and Slavery Module allows companies to streamline the collection of supply chain data to conduct effective human rights due diligence. The platform supports a variety of risk mitigation activities, including compliance with the Australian MSA. To learn more about Assent’s Human Trafficking and Slavery Module, contact us today.