Modern slavery reporting is coming – you won’t escape the net

Companies (and certain other entities) which meet required revenue and activity thresholds may be required to report on modern slavery risks within both their operations and their supply chains under the Federal Government’s proposed Modern Slavery Bill (Federal Bill) or the New South Wales’ Modern Slavery Act 2018 (NSW Act). The Federal Government will also have reporting requirements under the Federal Bill, which may impact companies. 

Key take aways for companies:

1. Companies do not yet have certainty on the extent of their reporting obligations but may take guidance from the Federal Bill.
2. Certain companies may still be required to report even though they might appear to ‘fall through the cracks’ of the two regimes. For example:
   1. Will a foreign company be required to report on modern slavery risks under with the Federal Bill or the NSW Act?
   2. Will a secondee located in the host employer’s business in NSW trigger the reporting requirements for the employing entity under the NSW Act?
3. Regardless, there are steps that all companies operating in Australia should take to prepare, including internal training, due diligence investigations, contractual protections, speak up mechanisms and general management oversight.

Under which jurisdiction will companies be required to report – Federal or NSW?

1. Companies which have a “total turnover” of AU$50 million and at least one employee located in NSW will be required to report on modern slavery risks under the NSW Act.
2. Companies which have a “total consolidated revenue” of AU$100 million will be required to report on modern slavery risks under the Federal Government’s proposed Federal Bill.
3. The NSW Government is yet to set out the extent of the reporting obligations and has not yet stated when businesses will need to start reporting under either reporting regime. There are, however, common themes between the proposed reporting regimes and steps that businesses can implement now in anticipation, which we discuss further below.
4. We anticipate regulations being introduced by the NSW Government to make it clear that a company will not have to report under the NSW Act if it is has reporting obligations under the Federal Bill.
5. Companies which have a total revenue under AU$50 million will not be required to report under either reporting regime.

As foreshadowed above, further guidance is expected to be released by the NSW Government about the scope of the NSW Act.  Changes may be made to the Federal Bill following receipt of the Senate Legal and Constitutional Affairs Legislation Committee’s report, which was released on 24 August 2018. 

What will companies need to report on?

It is not yet clear what will need to be included in a modern slavery statement under the NSW Act, but statements will need to contain information with respect to the steps taken by the company to ensure that its goods and services are not a product of supply chains in which modern slavery is taking place.  Further information on the NSW Act can found here. 

In contrast, the Federal Bill provides more certainty, setting out mandatory reporting criteria for modern slavery statements.  These criteria include:

1. the company’s structure, operations and supply chains;
2. the potential modern slavery risks in the company’s operations and supply chains;
3. actions the company has taken to assess and address those risks, including due diligence and remediation processes; and
4. how the company assesses the effectiveness of those actions.

Further information on the Federal Bill can be found here.

Government reporting

Under the Federal Bill, the Federal Government will also be required to report on modern slavery risks identified in its supply chains.  Whilst the NSW Act does not require the NSW Government to prepare a modern slavery statement, the NSW Act does put in place other mechanisms to ensure that the procurement of goods and services by NSW Government agencies are not the product of modern slavery.   Consequently, companies which form a part of either the Federal Government’s or NSW Government’s supply chain may therefore become subject to additional scrutiny by either the Federal or NSW Government in relation to modern slavery risks in the company’s operations (and potentially the company’s supply chains).  

Companies can get ready now

To adequately report on modern slavery risks, companies need to know whether their goods and services are sourced ethically and responsibly.  In anticipation of the introduction of the Federal Bill and the commencement of the NSW Act, businesses should consider the following:

1. Awareness and training – What training and awareness raising do you undertake internally and with suppliers?
2. Risk assessment – Do you know the areas of highest risk within your supply chain?
3. Due diligence – How do you select suppliers and contractors? Do you rely on head contractors to undertake key diligence steps?
4. Engagement – What protections and mechanisms do you include in your contracts?
5. Monitoring – What monitoring do you undertake on suppliers and contractors?
6. Speak up mechanisms – Do you have mechanisms to encourage concerns to be brought to your attention so that you have an opportunity to investigate and respond?
7. Oversight – How do senior management and the Board have visibility and oversight over mitigation steps/potential issues?

Please contact the authors or your usual Herbert Smith Freehills contacts if you have any questions or would like to discuss your business’ compliance framework or supply chain due diligence.