by Rachel Nicolson, Emily Turnbull, Dora Banyasz, Billy Hade and Lia Mikaelian · 26 March 2024
Ensuring modern slavery compliance and good practice
The Modern Slavery Act 2018 (MSA) is Australia's key piece of human rights-related reporting legislation. Boards play an important role in complying with this modern slavery reporting requirement, as they must approve and sign the company's modern slavery statement.
The recommendations of the first statutory review of the MSA were released in May 2023, and sought to enhance Australia's approach to managing and reporting on modern slavery risks in companies' operations and supply chains. This included the recommendation of introducing mandatory due diligence (refer to our Insight for more details and see this section of the Guide for more details on Human Rights).
How is the company assessing and managing modern slavery risks in its operations and supply chain?
Companies are required to report annually on actions taken to assess and manage modern slavery risks in their operations and supply chains, including in relation to due diligence and grievance mechanisms. A company's approach to assessing and managing modern slavery risks should be informed by the UNGPs. As the MSA continues to be an area of focus by which the Government will seek to strengthen Australia's approach to combatting modern slavery, boards should continue to monitor developments and consider whether any uplift is required to existing frameworks and policies, as well as their implementation.
What are the risks to be aware of?
As with human rights more generally, failing to assess and address modern slavery risks in a manner that is consistent with the UNGPs and other voluntary frameworks may attract scrutiny from shareholders, civil society groups, strategic litigants and other stakeholders.
Assessing and addressing modern slavery risks is now well beyond being a 'nice to have' practice, with the level of scrutiny demonstrated by each of:
- the focus on the 'S' in ESG;
- the increase in mandatory human rights due diligence laws globally;
- the increase in human rights-related complaints through non-judicial grievance mechanisms; and
- supply chain-related litigation, particularly in the US and UK.
A failure to adequately assess and address modern slavery risks may also mean a company may be found to have caused or contributed to modern slavery through its activities, which may give rise to complaints or litigation.
Additionally, failing to implement any commitments made in connection with modern slavery compliance may attract stakeholder scrutiny and a risk of bluewashing allegations. Finally, the upcoming changes to the MSA may mean stronger enforcement mechanisms are introduced for such things as failing to report or failing to have a due diligence system.
What is next for boards?
As the upcoming reform of the MSA is likely to include the introduction of a mandatory due diligence regime and the introduction of civil penalty provisions, directors should engage with management to understand the extent to which human rights due diligence systems are in place and embedded across their business, and interrogate the effectiveness of these systems, including their alignments with the UNGPs.
To ensure compliance and good practice, board members should also continue to:
- remain across the requirements under the MSA and expectations under the UNGPs;
- ensure adequate resourcing is available to assess and address modern slavery risks; and
- ensure all disclosures made in modern slavery statements are accurate.