This article is based on a presentation given to the Australian Universities Procurement Network on 30 May 2019 by Julie Whitehead.
In 2018, legislation aimed at assisting the business community in taking action to address 'modern slavery' was introduced in the Commonwealth and NSW – the Modern Slavery Act 2018 (Cth) (Cth Act) and the Modern Slavery Act 2018 (NSW) (NSW Act). The legislation prescribes that certain entities will be required to report annually, by a modern slavery statement, on the risks of modern slavery in their operations and supply chains and the actions they have taken to address those risks.
Modern slavery definition
The term 'modern slavery' is used to describe any situation where coercion, threats or deception is used to exploit a person and undermine or deprive them of their freedom. Modern slavery refers to the serious exploitation of victims and will not generally include substandard working conditions or underpayment of workers, although these practices may also be illegal and present in situations of modern slavery (see Australian Government Department of Home Affairs, 'Modern Slavery Act 2018 Draft Guidance for Reporting Entities' (Draft Guidance)).
Under the Cth Act, modern slavery broadly includes all forms of trafficking in persons, slavery and slavery-like practices and the worst forms of child labour (this includes forced labour, forced marriage, child prostitution and children working hazardously, and other conduct that would be an offence under the Criminal Code Act 1995 (Cth).
According to the Global Slavery Index 2018, a global study of modern slavery conditions by country published by the Walk Free Foundation, there are approximately 15,000 people living in slavery in Australia. It is estimated that of the 40.3 million people enslaved globally, approximately 25 million people are enslaved in the Asia Pacific region alone.
Australian supply chains are commonly linked with countries and businesses in the Asia Pacific region so Australia's supply chains are subject to work done under modern slavery conditions: in the food we purchase, the clothes we buy and the suppliers we choose.
Risk factors for modern slavery
It is imperative for reporting entities to understand where the risks may arise in their particular operations and supply chains. There are some key modern slavery risk factors to consider, as identified in the ACSI 'Modern Slavery Risks, Rights & Responsibilities' report (ACSI Report), including if your supply chain involves:
- Vulnerable populations, including migrant and base-skilled workers.
- Business models structured around high-risk work practices, such as third party labour arrangements.
- High-risk product and service categories, for example, raw materials and services procurement.
- High-risk geographies, including countries with conflict-affected zones or weak rule of law.
Some of the more pertinent high risk product and service categories relevant to universities include:
- IT / ICT equipment
- Office supplies
- Security services
- Laboratory supplies (including laboratory goods)
- Catering/ food chain supply
- Clothing (including health care and reception uniforms, sports clothing and gowning)
- Facilities management (including maintenance)
Where these high risk categories arise in universities' supply chains will be key areas to consider when putting in place processes to comply with the new reporting requirements.
Modern slavery legislation
The operative provisions of the Cth Act commenced on 1 January 2019. The Government released the Draft Guidance on 29 March 2019 and the period for consultation ended 19 May 2019. As of publication of this article, the NSW Act operative provisions have yet to commence, and the final Guidance or Rules under the Cth Act have not been released.
When will universities need to finalise their reports
The reporting periods under the Cth Act are determined by the reporting entity's accounting period and the first reporting period under the Cth Act will be the reporting period that commences after 1 January 2019. For example, universities with a reporting year of 1 January to 31 December, the first reporting period will be 1 January 2020 – 31 December 2020 and the report will be due six months after the end of that period (ie 30 June 2021). If the reporting year starts otherwise than on 1 January, the first reporting period will start in 2019 (for example if commencing 1 April or 1 July, the first reporting period will be 1 April/1 July 2019 – 31 March/30 June 2020 and the report will be due six months later). The reporting periods under the NSW Act are to be in accordance with the regulations, which are yet to be released.
Modern Slavery Statements
The main requirement under both the Cth Act and the NSW Act is to produce a ‘Modern Slavery Statement’ (annually) on modern slavery risks and remediation steps taken by entities (s 13, Cth Act; s 24(2), NSW Act). These reports have the following key features:
- Applies to entities based, or operating, in Australia with consolidated revenue of at least A$100M for the reporting period (see ss 4 and 5 – the definition of 'Australian entity' includes, but is not limited to, entities that are Australian residents for tax purposes)
- Annual Modern Slavery Statements must, in relation to each reporting entity covered (s 16):
- identify the reporting entity;
- describe the structure, operations and supply chains (see p25 Draft Guidance for definitions of these terms);
- describe the risks of modern slavery practices in the operations and supply chains;
- describe the actions taken to assess and address those risks, including due diligence and remediation processes;
- describe how the reporting entity assesses the effectiveness of such actions;
- describe the process of consultation with entities included in the report; and
- any other relevant information
- There are no penalties under the Cth Act, however, the responsible Minister may request an explanation or remedial action by an entity and may publish information about an entity’s failure to comply with a request (s 16A)
- All Statements will be published on the Modern Slavery Statements Register (ss 18 and 19)
- Applies to Commercial organisations that supply goods or services for profit, with at least one employee in NSW, and an annual turnover of more than A$50m (s 24(1). The NSW Act exempts commercial organisations subject to obligations under a prescribed ‘corresponding law’ of the Commonwealth or another State or Territory, and we expect that this will include the Cth Act however there are no regulations as of yet to confirm this).
- Content of Annual Modern Slavery Statements to be prescribed by regulations but may include information about (ss 24(4) and 24(5), and as may be prescribed by the Regulations):
- the organisation’s structure, its business and its supply chains;
- its due diligence processes in relation to modern slavery in its business and supply chains;
- the parts of its business and supply chains where there is a risk of modern slavery taking place, and the steps it has taken to assess and manage that risk; and
- the training about modern slavery available to its employees.
- Significant penalties (up to A$1.1M) for commercial organisations who fail to make their statement publically available (s 24(6) and persons who provide false or misleading information related to the organisation’s Statement (s 24(7))
- Public register will identify any organisation that has disclosed modern slavery may be taking place in their supply chains and whether the organisation has taken steps to address the concern (s 26)
The UK experience
The UK Business and Human Rights and Environment Research Group published its second report into the universities sector’s Modern Slavery Statements under the UK Modern Slavery Act 2015 (UK Act), the 'UK Modern Slavery Act Transparency in Supply Chains: The Second Year of Reporting by Universities' (BHRE Report). The analysis determined whether the statements met the six suggested reporting areas in the UK Act (which are effectively the same as the Cth Act mandatory reporting criteria) and highlighted the positive and negative aspects of the statements, for example:
- Supplier engagement tools to engage suppliers in relation to issues of modern slavery, track suppliers’ progress and share best practice.
- Integrated policies and development of specific modern slavery policies.
- Working groups to develop policy and due diligence procedures.
- Developing KPIs around supplier engagement, training, and actions taken on modern slavery.
- Utilising purchasing consortium, including the use of relevant frameworks and purchasing agreements that include modern slavery contract performance requirements.
- Not providing required information such as organisational structure.
- Not providing real insight into supply chains – declaring “our supply chain is diverse” is simply not enough.
- Not backing up statements with evidence of action – statements such as “the University has a zero-tolerance approach to modern slavery” without evidence of the appropriate supporting policies and procedures.
- Only addressing the topic of modern slavery within their institution, focusing on internal recruitment policies and temporary staff rather than broader supply chains.
These provide a useful indication of the areas of focus for Universities preparing reports in Australia.
Practical responses to risks and content of Statements
In order to comply with the modern slavery legislation and prepare a Statement, universities should take the following steps:
- Planning – Consider applicable legislation, timeframes and deadlines. Establish a framework for reporting within your entity's existing governance and risk management framework and allocate reporting responsibilities to the relevant people.
- Scoping and mapping – Develop frameworks mapping out the structure, business and supply chains and checklists to identify at-risk areas both in Australia and overseas. Identify risk categorisation by sector, product, and geography.
- Due diligence – Carry out risk assessments to further identify and assess modern slavery risks. Engage with suppliers to clarify their effectiveness in addressing modern slavery. Embed ongoing and periodic due diligence and reviews.
- Policies and contracts – Formulate or update policies and codes of conduct to address modern slavery. Include terms in contracts prescribing obligations to address modern slavery risks, and provide termination rights or other remedies.
- Training – General training for staff on how to understand, identify and report modern slavery. Targeted training for legal, compliance, HR, CSR, and procurement, including a detailed overview of the requirements under the legislation.
- Remediation framework – Implement a modern slavery incident reporting process and create a framework for the management of suppliers who perpetrate, or are at risk of perpetrating, modern slavery offences.
- Monitoring compliance – Implement regular audits and ongoing monitoring of your entity’s modern slavery compliance measures. Establish Key Performance Indicators to monitor the effectiveness of actions undertaken.
- Preparing Statement – Draft the Modern Slavery Statement, in accordance with the requirements of the legislation and best practice and undertake the relevant approvals processes for approval of the Modern Slavery Statement.
Driving a 'race to the top'
One of the intended purposes of the modern slavery legislation is to drive a 'race to the top’. Universities can combine their academic expertise on human rights and business with their professional procurement practices in order to take a lead on combating modern slavery. Universities should consider tackling the issue and complying with modern slavery reporting obligations collectively and collaboratively to become a ‘gold standard’ sector.