WEBINAR ON DEMAND - Transcript - Australian Border Force Team on MSA Reporting & Continuous Improvement Expectations

Blog post Maya Dhir and Zachary Jarvinen 2021-04-19

Australian Border Force Team

Here is the transcript of CENTRL’s Webinar On-Demand with the Australian Border Force. The webinar is available to watch here, and you can check out the transcript of just the Q&A here. CENTRL is also sharing with you the presentation slides from the webinar here.

Thank you, Sanjeev. And hi everyone. We want to say a big thank you to CENTRL for having us today and putting on this webinar and thank you to all those on the line for taking the time to join this webinar today and listen to what we have to say.

This morning, or afternoon, depending on where you are, we’re going to talk a little bit about the rationale behind why Australia has a Modern Slavery Act and some of the requirements of the Modern Slavery Act. Then we’ll move into how we’re seeing these requirements being implemented in practice, and some of the compliance trends that we’re seeing with the statements that we’ve received so far. And then I’ll hand it over to my colleague Chantelle to talk a little bit more about how businesses can go about trying to continually improve their response and some of the things we’re looking for, and some tips for businesses around that.

So, why does Australia have a Modern Slavery Act? We know that many of the world’s modern slaves are exploited in global supply chains—in our supply chains. It may be the forced laborers weaving fabrics and textiles, the mica in cosmetics and paint which is mined by child labor, the conflict materials in all of our electronics, or the debt-bonded seafarers on mining charter vessels who fish our seafood.

The truth is that we all use goods and services tainted by modern slavery every day. Unfortunately, modern slavery is often hidden deep in global supply chains, which are more complex and faster moving than they ever have been before. Today, The UN estimates that one in five workers around the world are employed in global supply chains.

So, the Australian government established the Modern Slavery Act, which came into force on the 1st of January, 2019, to combat modern slavery in Australia’s domestic and global supply chains of the goods and services in Australia. The aim of our act is to combat modern slavery and supply chains by improving supply chain transparency.

So, what our act aims to do is to really establish a robust transparency framework to help drive business action to eradicate slavery in supply chains. The act applies to all entities in the Australian market to have at least one hundred million Australian dollars in annual consolidated revenue.

And if you do earn over that threshold you must publish an annual Modern Slavery Statement for every financial year of your entity. Your statement must explain your entities actions to assess and address modern slavery risks in your global operations and supply chains—and those of any subsidiaries—by addressing seven mandatory criteria which we have in our act, and which is what makes our act quite different to The UK’s Modern Slavery Act.

Importantly, all modern slavery statements must be approved at board level and signed by an appropriate delegate. Multiple reporting entities can report jointly if they wish, and small entities who fall under that one hundred million revenue threshold are also able to opt in and submit a voluntary statement.

So, if your entity is required to comply with Australia’s Modern Slavery Act, you’ll need to prepare a modern slavery statement that addresses the seven mandatory criteria that you can see on the screen at the moment.

The aim of these seven criteria is really to ensure that all the modern slavery statements that are submitted under The Modern Slavery Act are consistent and able to be easily compared. And this really goes back to that key objective of the act in establishing a really strong transparency framework for consumers, academia, and civil society.

So, with the first few tranches of statements that we’ve seen—which I’ll discuss a bit further shortly what we’re seeing with those—what we’ve seen so far is that it seems that some reporting entities aren’t referring back to these mandatory criteria or perhaps there’s a lack of clarity around some of the criteria when drafting their modern slavery statements and submitting them to us.

So really the criteria require you to: explain how your business works, where your general areas of modern slavery risks are, and what your business or your entity is doing about these risks.

This needs to include a description of the risks that you’ve identified and any actions that you’ve taken as well as any actions of entities that you own or control. So, we have a few resources and guidance to assist you and provide some further information on each of those. And we definitely encourage you to consult our comprehensive online guidance for reporting entities which is a very lengthy document which goes into a lot of detail about how you can address each of those criteria and what we expect in addressing each of those criteria in your modern slavery statements.

Now we’ll talk a little bit about the ABF approach to publication of statements that we receive. The first reporting cycle under the act is what will conclude on the 30th of June this year and commenced on the 31st of December 2020. So, the first deadline was 31st of December and the conclusion of this first reporting period will be the 30th of June 2021. Obviously, the exact reporting deadline for your entity will depend on the financial year that your entity operates on and if you have any questions about that we can answer them today or there’s further information on our website our statement once statements are submitted to the Australian government through our online register. We will make all statements publicly available in regular tranches.

We’re trying to upload statements about once every month and make them public, so there may be a lag of a few weeks between when you submit your statement to us through the register and when you see it become live and public-facing on the register website. We are certainly seeing submission rates peak at the moment in the lead-up to the 31st of March deadline—which is the deadline for any entities operating off the Australian financial year. In the last two weeks we’ve already seen as many submissions as we had in the previous six weeks so it’s definitely picking up ahead of that deadline.

So, to maximize transparency and ensure that entities are publicly accountable for their actions to combat modern slavery in their supply chains, we are publishing all statements that are provided to us—so long as the statement has been properly approved by the principal governing body and signed by an appropriate member.

This approach to the publication of statements means that public investors and other businesses are able to view and compare all statements, and hopefully—again going back to this transparency—it will be obvious in the comparisons between those statements or those entities who have submitted poor quality statements, and those entities who have really tried to do the right thing and are forward-leaning into this act.

As I noted before, we’re not publishing statements that are not approved by the principal governing body and/or aren’t signed by a responsible member, and we will return these to the entity for amendment explaining why. I’ll talk a little bit further about that requirement in a second because it’s something we’re seeing a lot of statements fall down on.

Our approach to publication means that not all statements that are visible and public on the modern slavery register will be compliant with the seven mandatory criteria set out in the act. We’ve updated the register and there’s an alert at the top which should make this clear for viewers and users. We’re also providing non-binding confidential feedback to selected reporting entities about the quality of their statements and we’re hoping this feedback process will support entities who are reporting for the first time to address possible compliance errors and build our own team’s understanding of where some of the lack of clarity or difficulties may be with compliance.

In addition to the feedback that we’re providing confidentially, we’re also releasing regular public updates on reporting trends and additional guidance where we’re seeing some key areas for improvement. We’re hoping this will help reporting entities to understand and respond to any compliance issues in real-time and in a timely manner.

If you’ve visited our website, which is modernslaveryregister.gov.au, you’ll have seen that we’ve released three additional guidance notes. One of them is on general reporting trends that we saw over the first one or two tranches of statements that we uploaded. A second additional guidance provided some examples of how entities can describe consultation which is another area that we’re seeing a lot of entities overlook in their statements. And a third and additional guidance clarifying how entities can comply with the requirements for approval and signature of their modern slavery statements. So far, we’ve published four tranches of statements onto the register, and this has been approximately monthly. I think we’re looking to upload another tranche at the end of this week. And I think in recognition of the peak in submissions that we’re receiving that may become a bit more frequent. But so far, we’ve published over 500 statements, and these 500 statements cover over 1000 entities from 21 different countries.

Statements on the register are fully searchable by keywords and you can see on the image on the screen, there’s a search the register function so you can type in and search by if a particular region or country is mentioned, or an industry, or anything you would like to search for. Any word that appears in a statement you can search using that function. You can also refine searches by selecting specific industry categories or revenue levels, countries where entities are headquartered, or whether they’re covered by similar laws overseas. For example, under the UK’s system. So hopefully that by using those functions you can get an understanding of the types of statements and entities that we’re seeing submit under the act so far.

What I will say so far is that a significant proportion of the statements we’ve received are from very large entities that have over 1 billion dollars in revenue. And so far, most statements we’ve seen are from Australian entities. Many of the statements that we’ve also seen submitted so far from the finance, IT, and extractive industries, which we think may reflect some of the higher levels of awareness of modern slavery and other ESG issues across these sectors.

Now I’ll talk a little bit about some of the good practice trends we’re seeing in the statements that have been submitted to us so far, and then I’ll move on to some of the areas for improvement that we’ve seen. So hopefully if you have already submitted your statement, this will help you as you turn your mind to your second statement. And if you are yet to submit, hopefully you can make sure you address at least the areas for improvement before you submit your statement to us.

Our team is closely monitoring the compliance of all statements that are submitted to us and we review every statement that’s submitted to us but as I said we will we will publish everything as long as it has the appropriate approval and signature. But based on the statements we’ve seen so far, we’ve identified a range of good practice trends. The first of these trends is statements that clearly address the mandatory criteria for content.

So, while we’ve been very deliberate in not setting out a prescribed structure for non-slavery statements, or prescribing a certain template the entities must follow, we are seeing a direct correlation between those statements that clearly set out the mandatory criteria with headings and sections. They tend to be the higher quality statements. And some statements also may have a table at the start or the end, which sets out how they’ve addressed each of the criteria, and where they’ve addressed that criteria in their statement.

The second good practice trend we’re seeing are those statements that specifically call out or address some of the impacts of the global COVID-19 pandemic. We know this pandemic has impacted every business significantly, and increased modern slavery risks for vulnerable workers in supply chains. And it’s also impacted how we’re able to monitor and investigate our supply chains and engage with our suppliers. And so, we recognize all these impacts, and we certainly don’t expect you to have answers or to have the level of oversight that perhaps you did pre-COVID, but the better statements that we’re seeing address some of these impacts and call that out, and clearly explain some of the difficulties that they’ve had in monitoring and oversight, and any actions that they’ve taken to try and overcome some of those challenges.

I guess closely related to that: another good practice trend that we’re seeing are statements that include case studies or practical examples to demonstrate in really practical terms how that reporting entity is acting to combat modern slavery in their operations and supply chains. These case studies or practical examples help show that the entity is translating its commitment to combating modern slavery into concrete, on-the-ground change.

And finally: the last kind of good practice trend that we’re seeing is those statements that include a focus on continuous improvement. And my colleague Chantelle will talk a little bit further about that in the second half of the presentation, but the higher quality statements tend to set out how the reporting entity plans to strengthen its response to modern slavery over future years, and set up a bit of a framework that they can be held to account against as they move forward.

So now, moving to some of the areas for improvement that we’re seeing. The first, which I flagged earlier, is we’re seeing a lot of statements fail to show principal governing body approval or signature by a responsible member. It’s really important you may have received approval by the board, for example. And that may be, you know, properly documented for your business in minutes or something.

But unless you state that in your statement we have no way of knowing that it has received the appropriate principal governing body approval. So, we really encourage you to just explicitly state or indicate somehow that your statement has been approved by the reporting entity’s principal governing body. And it must also contain the signature of a responsible member. So that might be the director, or the CEO, or whoever that is for your corporate structure. But in the first few tranches we saw an alarming amount of statements missing this criteria, which really surprised us. But with the statements we’re hoping to upload at the end of this week we’ve seen that really dramatically reduced so hopefully some of our additional guidance materials and messaging is starting to assist and provide some clarification on that.

One other area for improvement that we’ve seen, which again, is becoming less of an issue as we’ve moved towards the reporting deadline for Australian financial year entities. But what we were seeing in the first few transfers were a number of foreign entities attempting to reuse statements that they have prepared under schemes in other jurisdictions. So, for example, using a modern slavery statement that they’ve prepared under the UK Modern Slavery Act and submitting that under ours. And as I flagged before, the key difference between our act and other jurisdictions is that our act has those seven mandatory criteria. And so, if your statement is prepared under the UK scheme, it won’t necessarily be compliant with the Australian scheme.

We were seeing a lot of that ahead of the 31st of December reporting deadline. It has become less of an issue but we do encourage you. We understand that you may be required to report under multiple jurisdictions, but if you prepare your statement to meet the Australian standards, it will then meet the requirements for the other jurisdictions. So, you should definitely be looking to our act and the mandatory criteria in our act in the preparation of your statement.

Another area—again which I guess took us by surprise—where statements are falling down, is some entities are failing to clearly identify the reporting entity in their statement. For example, a statement from a large overseas corporate group needs to identify which of the Australian subsidiaries in the group are actually the reporting entities covered by that statement. That’s something that, again, has started to improve, but we were seeing in the earlier statements. A lot of statements actually, just simply failing to identify the reporting entities captured by the statement.

And finally, the last area we’re seeing a lot of statements kind of gloss over and not really address is the requirement to describe consultation. So, entities have to include information about how that reporting entity consulted with any entities that they own or control in the preparation of the statement.

So, if your business has subsidiaries, you need to explain this in your statement, and outline how you engaged with those entities to prepare the statement.

We’ve developed an additional guidance note, describing how you might articulate and outline that process of consultation. If you don’t own or control any other entities, it’s also important that you then state that in your statement, because, again, in the absence of that information, we have to assume that you do own or control other entities, and that you fail to address that consultation criteria.

So, before I hand over to Chantelle to talk a little bit more about how businesses can go about continuous improvement, I wanted to touch on a few things I think that we’re hoping reporting entities under the act can consider and refine in their future statements. And certainly, their second statements over the next reporting period.

One key area for improvement is ensuring that your statement doesn’t include any of the technical compliance issues that I ran through just then—including, you know, failure to articulate, or at least demonstrate appropriate approval and signature. Or failure to describe consultation. Statements need to address all the criteria in the act including these requirements.

Secondly, we’ll be looking to see entities increase the sophistication of their responses. For many entities—and certainly as Chantelle can talk through—it was the same case with the government. Our first segment was about creating a foundation for further action. And we expect many NC’s will be in the same case as us. But we encourage you to consider how you can demonstrate continuous improvement—and Chantelle will talk through this a little bit further next.

And thirdly, it’s important that entities explore opportunities for collaboration to share expertise and identify opportunities for shared action. This may be with your business peers, industry bodies, or civil society.

And just before I pass over to Chantelle, I’ll just note again some of the guidance and resources we’ve made available, which are all on our online modern slavery register. We have a very comprehensive Guidance for Reporting Entities Document, which should be able to answer any question you have. It’s a very lengthy document, so you can scroll through to the relevant section where you’re having some issues. We’ve also got some information there about COVID-19 and how entities can go about addressing some of the impacts of that in their statements.

And as I flagged, some further guidance on how you might describe consultation or make sure that your statement has demonstrated the appropriate approval and signature. Separately to that, our team has also developed a toolkit of resources. It was developed for government procurement officers, and contains things like modern slavery contract clauses, and a supplier questionnaire risk assessment screening tool. And while it was developed for our own government agencies to utilise to assist and facilitate in the development of the government’s commonwealth statement, it certainly is equally applicable across many of your circumstances.

So, there are just some resources that are on our website there to assist you to comply with the requirements of the act. And now I’ll pass it over to Chantelle to talk through continuous improvements.

Great, thanks Ellie. And thanks again to CENTRL for having us along today, and to all of the attendees for dialing in—we really appreciate your time, and hope that you find this an interesting webinar. And we’ve already been seeing some really great questions come through, so thanks for that.

So, the rest of the presentation, as Ellie flagged, will focus on continuous improvement. On your screen now you’ll see five points, which we’ll run through throughout the rest of the presentation. So, we’ll start off by talking a little bit about how we can show a plan for continuous improvement amongst businesses, and we’ll draw out some experiences from government as well, just to really highlight how we’re very much in your shoes as well, and we know the struggles and the challenges that can face businesses as well. So, we’ll talk a little bit about that.

We’ll then move to talk about The UN guiding principles for business and human rights, and just draw out some of the key principles there, and how important it is for businesses to consider those UNGPs in developing their response. We’ll then move to look at taking a targeted risk-based approach to addressing modern slavery risks. Then on to engaging with suppliers, and establishing meaningful working relationships. And finally, showing a commitment to broader collaboration.

All right, so continuous improvement. Addressing modern slavery risks really is a complex and challenging process, and how businesses will address this will inevitably change and develop over time. Australia’s Modern Slavery Act aims to drive good practice and continuous improvement from reporting entities. It’s really important here to note that we as government don’t expect reporting entities to have a perfect response to addressing modern slavery risks in their first statement, let alone their first few statements.

We absolutely acknowledge that this is a long-term journey for everyone—us included—so that’s really important for us to state up front. And we recognize that building a robust response to modern slavery is a long-term commitment. We encourage businesses to continually revisit, refine, and develop their responses to modern slavery risks. For example, information collected in your first statement may then help identify future areas of risk that you might want to focus on in future statements.

Just briefly, on our government experience: we recognize very early on that capturing data and information from a number of different government agencies is a very timely exercise. We worked quite closely with other government agencies to identify areas of risk quite early on, before we sat down and drafted our statement. So, this really allowed for those conversations at a high level to be had, and for different representatives from different government agencies to voice their perspectives and their opinions on what areas we might like to focus on. We were then able to prioritize these risks in the first reporting period, and map out what areas of risk we might like to then focus on in the second and third statements.

And a similar approach can be adopted by businesses. So really, we would encourage businesses to map out quite clearly: in your first statement you’re going to focus on X, Y, Z risks, and then in your second and third statements you might build on those risks, whilst also touching on new risks as well.

So, I guess the key takeaway from this particular point is: it’s okay not to have all of the answers. As long as you map that out, and say that you’re aware of it, and you’re focusing on other risk areas in future statements—that really flags to us that you do have a plan for future continuous improvement and development with your response.

Moving on to our next point: aligning your response with The UN guiding principles for business and human rights. So, Australia’s Modern Slavery Act—and the standards it sets—are a part of a broader global conversation about business and human rights. And we can’t emphasize enough the importance of aligning your response with the UNGPs. These principles give us an internationally agreed framework to answer questions including “What is modern slavery and human rights risks?” “How far into supply chains do businesses need to go?” and “Is it okay to prioritize supplies and to prioritize risks?”

Importantly—investors, business peers, clients, civil society, and governments now expect businesses to understand and apply the UNGPs in their response to modern slavery. So, a really important point there. For example, you might make a policy commitment against modern slavery as suggested by the UNGPs, and establish a hotline that meets the requirements for grievance mechanisms suggested by the UNGPs. So, it’s a really useful document which does quite clearly map out suggestions of actions that businesses can take. If you haven’t had a read of that, I strongly recommend it. It’s a really valuable resource that we as business and government can utilize.

Moving on now to targeted risk-based approaches. Many businesses have supply chains that involve hundreds if not thousands of suppliers and entities. And in most cases, you won’t be able to identify or engage with these suppliers straight away. It’s something that can take years of relationship building and investigating. So, another thing that we very much like to promote to businesses is that it’s okay to not know everything straight away.

Rather, our advice to businesses in the first few reporting periods under the act is to focus on three to five of the biggest risk areas within your entities’ global supply chains and operations. The key is to consider areas of risk throughout your full operations and supply chains, and focus on those risks that pose the greatest harm to people. And it’s really important that you use risk to people as a way to assess the severity of modern slavery risks, rather than the possible impact to your business. It’s also important to recognize that your ability to respond to these risks will differ depending on whether you cause, contribute, or are directly linked to the risk. And these terms are explained really well in the UNGPs that we just touched on earlier.

If this is the first time you’ve considered your modern slavery risks, you may only be able to assess and address risks associated with some of your direct suppliers—so your Tier 1 suppliers. And that’s okay. What is important for all businesses, regardless of your level of maturity in responding to modern slavery risks, is to develop a plan to help you engage with suppliers deeper in your supply chain in future.

So, similar to what I talked about a little earlier, it’s okay to not know your Tier 2 and Tier 3 suppliers, but as long as there’s thinking going on behind the scenes within businesses about how you might reach out to those suppliers and engage them later. And if you flag that in your statement, that’s a really good sign of good practice from our perspective.

So, just to draw out a little bit of our experience on the government side, and developing the Australian government’s first commonwealth Modern Slavery Statement. It was a big task, and so we approached it initially by sending a call out to all government departments in the Australian government, and we formed what we call an IDC—an inter-departmental committee.

So, this IDC now has 26 representatives from different government agencies, and it’s a really useful collaborative mechanism for us to drive the strategic direction of the commonwealth statement, but also to act as a forum for discussing the broader approach, and how government will respond to modern slavery risks in public procurement. We’ve then established some sub-groups under this broad IDC group to focus on some of the thematic risks across the commonwealth—so we have a textiles working group, a construction working group, and this year we’ve established an ICT hardware working group, where we’ll be able to have a bit more targeted discussions based on those thematic risk areas that we’ve identified.

At the moment we’re undertaking a supplier mapping exercise with our working groups. And this really is just an opportunity for us to do a bit of a stock take on where our highest spends are, and cross-check and draw out where we might have common supplies that we can use some of our government leverage to engage those suppliers with.

Moving on now to engagement with suppliers. So, just building off that point. In order to best assess and address your business’s modern slavery risks, you’ll need to engage and work closely with suppliers. Provide support for your suppliers to improve their response to modern slavery. That’s a really important point, as for many suppliers this might be a new realm for them, whereas others are a little bit more across the subject matter.

Avoid outsourcing compliance to your suppliers where possible. With this point it’s really important that businesses are working with suppliers hand-in-hand, rather than just sending out a supplier questionnaire, and hoping that you’ll get all the responses you want. Sometimes it works, but a lot of the times suppliers might need a little bit more support and engagement from businesses directly.

We really want to see businesses clearly communicating expectations to suppliers, and encouraging an honest two-way engagement and collaboration. For example: you might be in a situation where your supplier may need to respond to requests from multiple reporting entities. And it can be quite burdensome for suppliers to have to respond to hundreds of supplier questionnaires. So, one thing that we as government are considering is where we might be able to draw out common suppliers, and engage with them in a targeted way that reduces the number of requests coming their way. So, you may also be able to identify and engage with suppliers that operate at control points in your supply chains, as they are likely to have the most leverage and visibility over activities.

And now, moving on to collaboration. So, no one should complete a modern slavery statement by themselves. There shouldn’t be someone in your business sitting down to write the modern slavery statement over a couple of months. It really should be an exercise in collaboration. Internally, it’s important to involve all areas of the business, and one of the best first steps you can take is to set up a working group, similar to what we did as government last year, that brings together key business representatives from your business. Particularly from areas such as legal and procurement. Externally, look for opportunities to work with business partners, and civil society to share expertise and increase leverage.

For example: a group of mining companies in Perth have developed a standard questionnaire for suppliers that they can all utilize. We’ve seen some really excellent examples of collaboration with business and the non-government sector. Just in our government patch, we have tried to really amp up our collaboration this year, and we’re working quite closely with the Cleaning Accountability Framework, who are doing some work with us to look at government buildings and assessing the workplace arrangements and treatment of cleaners within those buildings.

We’re working closely with Electronics Watch as well, to help us develop some risk assessment tools within our ICT hardware procurement. We also consult widely with our National Roundtable on Human Trafficking and Slavery, so there are a number of expert representatives from civil society organizations on that group. And finally, we also have a Modern Slavery Expert Advisory Group, which is made up of largely business representatives, and we consult with them quite regularly on the government’s approach to addressing modern slavery risks in our supply chains. So that’s just a little snapshot of some of the collaboration that we’re doing at the moment.

So, just to sum up: making a start in in five steps. Scope out the risks that you have within your business. Consider the UN guiding principles for business and human rights. Prioritize those risks, and set out a plan of action, and how you’re going to build on that plan in the coming years. Engage suppliers. And finally, collaborate. And don’t forget the importance of that collaboration as well.

All right thank you very much. I might turn back now to the CENTRL team, so we can fit in some of our Q&A.

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