The expectation of continuous improvement in combating modern slavery

By Dora Banyasz, Anthony Hallal, Lia Mikaelian
Business & Human Rights Environment, Social, Governance Risk & Compliance

Going beyond the bare minimum 7 min read

There is an expectation that businesses demonstrate continuous improvement in their response to modern slavery and reporting under Australia's Modern Slavery Act 2018 (Cth) (the MSA).

As such, they need to consider how they can achieve this, including through uplifting their modern slavery risk assessments, contractual controls and grievance mechanisms, and through improvements to modern slavery statements. 

In this Insight, we explain the importance of businesses taking a continuous improvement approach by going beyond minimum compliance and how they can do it.

Key takeaways

  • Various stakeholders, such as civil society groups, investors and regulators, are calling for continuous improvement in relation to actions taken to combat modern slavery and reporting.
  • There are numerous actions businesses can take, including having more rigorous risk assessments, contractual controls and grievance mechanisms.
  • The MSA is expected to undergo change in the near future (see our previous Insight on its statutory review), which will reflect international developments in strengthening business's actions in respecting human rights, including in relation to modern slavery. Businesses that take a continuous improvement approach, by going beyond minimum compliance and towards best practice, will be well placed to respond to any regulatory developments.

Why businesses need to take steps towards continuous improvement

The MSA requires certain entities (known as 'reporting entities') to prepare and submit an annual modern slavery statement. Underpinning the MSA is an expectation that reporting entities take a 'continuous improvement' approach to responding to, and reporting on, their modern slavery risks. This means that businesses are expected to demonstrate yearly progress in their approach to combating modern slavery risks and in the quality of their modern slavery statements, as they better their understanding of modern slavery. Continuous improvement enables businesses to strengthen and refine their approach to addressing modern slavery before issues escalate.

Increasing scrutiny from stakeholders, such as the Attorney-General's Department (the AGD) (which administers the MSA), civil society groups, investors, regulators and customers, further strengthens the business case in favour of going beyond simply ticking the boxes to comply with the MSA, and instead taking a continuous improvement approach.

Continuous improvement in the modern slavery space will also enable businesses to demonstrate alignment with the United Nations Guiding Principles on Business and Human Rights (UNGPs), to which they may have publicly committed.

How businesses can achieve continuous improvement

Continuous improvement will be different for each business, but will typically involve taking progressive steps to uplift its anti-slavery program. Internal and external stakeholder feedback is key to enabling businesses to understand how their approach to addressing modern slavery risks and reporting can be improved. Some examples of continuous improvement include taking steps to uplift a business's approach to risk assessments, contractual controls and grievance mechanisms. Continuous improvement in these contexts is explained further below.

Modern slavery risk assessments

Risk assessments are a key component of any modern slavery program – they enable the business to identify what its modern slavery risks are and their key drivers, so that they can be addressed.

Typically, businesses will confine the scope of their modern slavery risk assessments in some way. For example, they may begin by only assessing certain parts of their operations, or focus on certain aspects of their supply chains.

Expanding the scope of modern slavery risk assessments over time is one way to demonstrate continuous improvement. This might involve taking steps to assess risks beyond tier 1 of the supply chain, or assessing risks in parts of the business that were excluded from earlier risk assessments (eg certain joint ventures).

In particular circumstances, supply chain risk assessments could also be improved by conducting on-site audits to supplement desktop assessments. Furthermore, businesses can improve supplier engagement by working with their suppliers when conducting risk assessments and addressing any potential modern slavery issues that are identified.

Another way in which risk assessments may be improved is through collaboration with the business's peers in its industry. For example, this might take the form of sharing knowledge of, and experience with, which approaches to modern slavery risk assessments worked and which did not. 

Modern slavery clauses in contracts

Contractual clauses relating to modern slavery present another opportunity for continuous improvement. They are an increasingly common feature of procurement contracts, and a useful tool to gain greater visibility and leverage over modern slavery risks within the supply chain.

Modern slavery clauses tend to go beyond a general obligation to comply with all applicable laws (even though such generic obligations would technically include applicable modern slavery laws). Contractual obligations under a modern slavery clause may include a specific obligation not to engage in modern slavery, to comply with specific modern slavery laws, to carry out certain forms of modern slavery-related human rights due diligence, and to notify the counterparty of any potential modern slavery issues that are identified.

While the inclusion of contractual clauses relating to modern slavery in procurement contracts is a step towards addressing modern slavery risks, these clauses should be periodically reviewed and uplifted where appropriate. For example, a business may demonstrate continuous improvement by updating its modern slavery clauses to require:

  • that parties implement human rights due diligence frameworks to identify, assess and address modern slavery risks;
  • that suppliers cascade comparable clauses into their own supply contracts; and
  • that parties take specific steps, such as prohibiting the imposition of recruitment fees on workers and carrying out due diligence in relation to the contract price to ensure that it is sufficient to pay for the contracted work without incentivising the use of modern slavery.

Businesses may also demonstrate continuous improvement by expanding the implementation of their modern slavery contractual clauses to more of their suppliers.

Effective grievance mechanisms

Effective operational-level grievance mechanisms allow businesses to identify modern slavery issues as part of their ongoing human rights due diligence, and for them to be addressed before they escalate, by creating a channel through which stakeholders can raise them with the business. Grievance mechanisms can take a variety of forms – they may be specific to a particular type of issue or site, or tailored to a specific group of people.

Continuous improvement is crucial to maintaining an effective grievance mechanism. Grievance mechanisms intended to capture issues related to modern slavery should be reviewed and updated periodically, to ensure that they are working as intended and are effective. The effectiveness criteria under Principle 31 of the UNGPs set out the features of an effective grievance mechanism. Businesses can demonstrate continuous improvement by taking steps to align their grievance mechanisms with those effectiveness criteria: for example, by addressing any issues that prevent the grievance mechanism from being accessible to certain users.

Seeking feedback on grievance mechanisms from internal and external stakeholders, including users, may open the door to specific ways in which they can be further improved.

Continuous improvement is also about ensuring modern slavery statements submitted under the MSA are uplifted each year. Businesses should continuously strive to improve their modern slavery disclosures by, for example, providing further detail when describing the risks of modern slavery in their operations and supply chains, or by including case studies to illustrate real-world examples of ways in which they have managed issues of modern slavery.

What's next?

Continuous improvement of businesses' approaches to modern slavery is likely to remain an overarching expectation.

The MSA is expected to undergo reforms following the recommendations of the 2023 review led by Professor John McMillan (see our previous Insight), which may include the introduction of penalties for non-compliance with the MSA, and the introduction of an obligation to carry out human rights due diligence in relation to modern slavery. Businesses that take a continuous improvement approach to their modern slavery program and reporting will be positioned favourably for any such future changes. To do so, they will need to go beyond mere compliance and strive for best practice responses to modern slavery.