Modern Slavery Act Guidance - Reporting Deadlines Under Australia's Modern Slavery Act Extended Due to Pandemic
BACKGROUND AND SCOPE OF COVERAGE - Australia’s Modern Slavery Act 2018 (MSA) entered into force on January 1, 2019. The MSA established a mandatory modern slavery reporting requirement (Reporting Requirement) for companies and other entities operating in the Australian market (both domestic and international companies) with annual consolidated revenue of at least $100 million AUD (approximately $67 million USD).
These publicly available reports must explain what each company is doing to assess and address the risks that modern slavery practices may be occurring in their global and domestic operations and supply chains and the operations and supply chains of any entities owned or controlled by the company. To meet this new Reporting Requirement, companies will need to proactively identify and address their modern slavery risks and maintain responsible and transparent supply chains. Although companies are still navigating the new pandemic marketplace, the first MSA reporting deadline is only months away. It is time to pull MSA compliance out from “down under” and back to the top of the table.
- Mandatory Annual Reporting
Within six months of the end of each financial year, companies must issue an annual report explaining what steps they have taken to address modern slavery risks in their global operations and supply chains, including risk assessments and remediation processes. This report must be approved by the company’s Board of Directors and signed by a director. It must then be submitted to an online, and publicly accessible, central government registry maintained by the Australian Border Patrol (ABF).
Content of Reports
An annual modern slavery report must include the following information:
- Identify the reporting entity;
- Explanation of the structure, operations and supply chains of the reporting entity;
- Identify the risks of modern slavery practices in the operations and supply chains of the reporting entity (and any entities that the reporting entity owns or controls);
- Identify the actions taken by the reporting entity (and any entity that the reporting entity owns or controls) to assess and address those risks;
- Explain how the reporting entity assesses the effectiveness of such actions;
- Described the process of consultation with any entities the reporting entity owns or controls or is issuing a joint modern slavery statement with; and
- Describe any other information that the reporting entity, or the entity giving the statement, considers relevant.
The ABF is developing an online central register to house all modern slavery statements, including voluntary statements. This register was expected to be operational in May 2020, but it has not yet been published by the ABF.
The annual reporting requirement means that compliance is not a “one and done” exercise. The Australian government expects reporting companies to take a “continuous improvement” approach to compliance and drive a “race to the top” to improve workplace practices. Annual reports should improve in quality and demonstrate progress over time as companies increase their understanding of their unique and evolving modern slavery risks.
Due to the pandemic, the original deadlines for certain initial annual reporting have been extended as noted in the chart below:
These new extensions above only change the deadlines for the submission of initial modern slavery statements. The reporting periods for companies has not changed.
RISKS OF NONCOMPLIANCE
There is no formal financial penalty for failing to comply with the MSA, but there are significant reputational risks for failing to file an annual report. The Australian government may request non-reporting companies to provide a written explanation of their position and if they fail to respond, their failure to respond may be noted in the official online registry.
The compliance challenges presented by the MSA and similar laws in other countries are substantial. Depending on your company’s footprint, it could require surveying hundreds or even thousands of your suppliers around the globe to determine the risk that their business practices may present to your company and identify any appropriate remediation measures, as needed. Companies that have had to comply with the United Kingdom’s Modern Slavery Act or California’s Transparency in Supply Chains Act may be able to leverage this experience to assist in compliance with the MSA. However, even companies with this experience will need to pivot their supply chain compliance programs because of the unique mandatory reporting requirements under the Australian law.
The Modern Slavery Business Engagement Unit (Unit) in the ABF has published guidance to assist companies in implementing the various requirements under the MSA. On June 1, 2020, the Australian government released a scoping paper outlining the government’s strategy in developing the first Commonwealth Modern Slavery Statement (Commonwealth Statement). The scoping paper outlines the content that will be included in the Commonwealth Statement, including the key modern slavery risk areas that the government will be targeting for action and the steps it will be taking to respond to these risks. The scoping paper provides an example that companies may follow in drafting their initial MSA reports.
Momentum is growing for other G20 countries to adopt similar laws requiring companies to identify and address modern slavery risks in their operations and supply chains. This area will remain a hot-button compliance issue around the globe.