Keeping up with human rights due diligence in 2026

Changing conditions mean growing complexity 10 min read

In mid 2026, the environment in which businesses conduct human rights due diligence (HRDD) continues to be dynamic, with heightened regulatory requirements, emerging technologies and geopolitical disruption making the risk landscape increasingly complicated.

This Insight examines HRDD in the context of six key and emerging issues, to help you stay across the developments generating elevated expectations and consequences.

Key takeaways

• Australian modern slavery laws are set to undergo very substantial transformation, with proposed new civil penalties for non-compliance with existing modern slavery reporting obligations and, significantly, a proposed new criminal offence of failing to prevent modern slavery.
• The updated supplementary guidance materials for Australia's Modern Slavery Act 2018 (Cth) (the MSA) clarify reporting obligations under it.
• Developments in the regulation of HRDD in the EU and New Zealand may have flow-on effects for Australian companies, including those that provide goods and services to these regions.
• HRDD processes should identify and address emerging human rights risks relevant to the business —including risks associated with the development and use of AI in operations and supply chains.
• The fuel crisis could exacerbate human rights impacts within operations and supply chains—and companies should consider whether there are now heightened risks of modern slavery and forced labour, as well as other impacts on employees and local communities.

Introduction

As we have previously reported, HRDD is a baseline operational expectation for companies seeking to manage their human rights legal exposure, meet stakeholder expectations and strengthen their social licence. A robust approach to it can also play an essential role in assisting boards and management to identify and stay on top of novel and emerging human rights risks, and therefore discharge their duties.

The human rights risks that companies face are complex and evolving. Below, we look at HRDD in the context of six key and emerging issues in 2026: proposed reforms to Australian modern slavery laws; clarified expectations regarding modern slavery reporting in Australia; updates to mandatory HRDD obligations coming out of Europe with implications for Australian companies; prospective new modern slavery reporting obligations in New Zealand; the responsible use of AI; and human rights risks related to current geopolitical disruption. In addition to these issues, the release for consultation of the Beta Version 0.1 of the Taskforce on Inequality and Social-Related Financial Disclosures framework—which is intended to operate as a voluntary guide for businesses to understand and report on impacts, dependencies, risks and opportunities related to people—demonstrates that, in the longer term, there will continue to be increased HRDD expectations of businesses.

Together, these underscore the ever-dynamic nature of the business and human rights space. As companies grapple with unfolding human rights impacts, due to technological and geopolitical disruption, they must also keep abreast of regulatory developments consolidating heightened expectations.

Proposed reforms to Australian modern slavery laws

The Federal Government has announced the following reforms to Australia's modern slavery laws:

• a civil penalty regime, with associated enforcement powers, to address non-compliance with reporting obligations under the MSA; and
• a new criminal offence directed at companies (with an annual consolidated revenue of above $100 million) that fail to prevent modern slavery in their operations and supply chains. A defence will be available if a company can demonstrate that it took 'reasonable steps' to prevent modern slavery.

This represents a profound shift in the business and human rights landscape in Australia.

While many of the details are not yet known, we note the following:

We expect that the Government's planned consultation on these reforms will cover matters including:

• how far the obligation to prevent modern slavery in a company's supply chain will extend—ie whether it will apply beyond Tier 1 suppliers;
• the influence of similar 'failure to prevent'-type offences, such as Australia's anti-bribery regulations, on the precise formulation of this offence and defence; and
• the relevance of concepts from the United Nations Guiding Principles of Business and Human Rights, including in relation to connection to impact analysis and the principles of due diligence.

We will explore all of these issues in a future Insight as we learn more about the upcoming reforms.  

Updated Supplementary Guidance materials

In March 2026, the Attorney-General's Department (the AGD) published updated Supplementary Guidance materials to assist reporting entities with meeting mandatory reporting criteria under the MSA.

The materials clarify certain minimum expectations regarding entities demonstrating compliance with the mandatory reporting obligations. Where the previous guidance materials were either silent or equivocal about certain matters, the updated materials provide greater certainty, including by specifying:

• A bare statement that an entity has a low risk of modern slavery in its supply chains and operations is expressly deemed non-compliant. Entities must describe the risk of modern slavery practices in their operations and supply chains, and a good practice response includes describing the actual modern slavery risk, acknowledging any limitations in the risk assessment process, and providing year-on-year reporting on how the entity's risk profile has changed.
• A bare reference to an entity's due diligence process is considered non-compliant. Statements should describe how an entity undertakes due diligence; if it is in the early stages of its modern slavery response efforts, the entity should be transparent about this and outline the steps taken.
• Heightened expectations for consultation requirements. The example of a compliant response now describes the process of consultation—eg by explaining that a modern slavery risk questionnaire was distributed, or that briefing sessions were held. Previously, the guidance suggested that it would suffice to simply state that consultation had occurred, without further detail.
• There should be no ambiguity in the approval of the statement. The new Supplementary Guidance suggests the words 'principal governing body' be added to make clear that the approval is consistent with the Act's requirements, and notes that including the date of approval is an indicator of good practice.

The updated Supplementary Guidance materials signal that the AGD still emphasises the need for continuous improvement in reporting, which, together with the proposed reforms to Australian modern slavery laws, exemplify a strengthening of regulation in this area.  

Updates on the European CSDDD

We have previously looked at the EU Corporate Sustainability Due Diligence Directive (the CSDD) and what it means for Australian companies.

In March 2026, the Amendment Directive (EU) 2026/470 entered into force, revising the CSDDD, tempering its initial scope and delaying commencement of the new reporting regime. Under the revised requirements:

• The timeframe for transposition of this law into Member States' law has been extended, meaning the CSDDD's impact may take longer to reach Australian companies. At the time of writing, Member States are required to transpose the CSDDD by 26 July 2028.
• The initial reporting threshold has been increased for EU companies and groups (from 1000 employees and a net turnover of €450 million to 5000 employees and a net turnover of €1.5 billion), and for non-EU companies (from a net turnover of €450 million to a net turnover of €1.5 billion). While this means a more limited number of companies will be directly captured from the outset, it is likely there will still be flow-on effects for other companies that do not meet this threshold.
• The harmonised EU-wide civil liability regime has been removed. While Member States must still set penalties for non-compliance, they are now capped at 3% of the ultimate parent company's consolidated net turnover, which is a reduction in the maximum penalty originally contemplated.

These changes reflect the result of political pressure and lobbying due to concerns about the impact of the original iteration of the CSDDD.

Australian companies that are within scope or directly impacted will need to consider how to meet the due diligence requirements to identify and address their human rights (and environmental) risks (whether that means implementing new due diligence procedures or uplifting existing ones). Australian companies that are not caught may still face heightened human rights due diligence expectations from suppliers, customers or other partners who are caught, and should consider if they are positioned to respond.    

New Zealand Modern Slavery Bill

New Zealand's Modern Slavery Bill (Bill 242-1) 2026 (the NZ MS Bill) is currently under consideration. Under the NZ MS Bill, a reporting entity would be required to prepare and publish an annual modern slavery statement.

We anticipate that there will likely be amendments, and so it will not become law in its current form. However, at the time of writing, under the NZ MS Bill:

• Fines and additional penalties may be applied against a reporting entity including if it fails to prepare a modern slavery statement in accordance with the applicable reporting requirements.
• It is an offence for any person to knowingly or recklessly make a false or misleading statement in a modern slavery statement.
• Direct liability can also be imposed on directors and other individuals in certain circumstances where a reporting entity has been found to have committed an offence under the NZ MS Bill. This includes where a director or an 'other person involved in the management of the reporting entity' knew, or could 'reasonably have been expected to have known', that an offence was to be committed and failed to take all reasonable steps to prevent it.
• The NZ MS Bill captures companies that control (either directly or indirectly) another reporting entity that meets the threshold revenue amount, and is a New Zealand entity or carries on business in New Zealand; therefore, Australian parent companies may fall within the definition of 'reporting entity'.

If the NZ MS Bill becomes law, Australian companies that have a nexus to New Zealand should promptly undertake a mapping exercise to identify whether they or any related entities meet the NZ MS Bill's definition of a reporting entity.

Australian companies who simply engage with New Zealand businesses may also be required to provide more comprehensive information in response to due diligence requests, as the NZ MS Bill contains more onerous reporting requirements than the current Australian regime. Eg the definition of modern slavery is broader, and includes serious violations of employment and health and safety laws.  

Australian companies should therefore continue to closely monitor the progress of the NZ MS Bill. It is yet another example of heightening expectations (and consequences) in this space—and it may well extend to Australian directors, as well as other individuals involved in the management of a reporting entity.

The OECD Due Diligence Guidance for Responsible AI 

AI technologies are moving at speed. As companies grapple with how best to utilise these technologies, and as AI becomes more embedded within operations and supply chains, business will also need to consider how their use of AI technology, or AI use by their suppliers, may impact on human rights.

Many common uses of AI could be associated with human rights impacts, such as:

• AI bias from flawed AI systems or inputs leading to discriminatory outcomes;
• over-surveillance from safety-related monitoring systems;
• privacy and data governance issues; and
• labour supply chain concerns, given the development of AI tools and use of AI products is associated with large outsourced workforces.

To assist companies with their AI-related HRDD, in February the Organisation for Economic Co-operation and Development (the OECD) published its Due Diligence Guidance for Responsible AI. This Guidance maps neatly onto the UN Guiding Principles on Business and Human Rights, which remain the core standard for guiding corporate behaviour on the use of AI. However, it highlights that businesses using AI systems in any way in their operations, products or services must ensure that their existing risk management frameworks are adapted to address the unique risks and impacts associated with the use of these new technologies. It is an important reminder of two things: first, that AI technologies are not simply business tools but potential vectors of adverse impacts; and, second, that risk management in this context can be readily incorporated into existing processes. 

Relevantly, the Guidance provides the following six-step framework for managing the human rights impacts of AI use:

This reinforces that due diligence measures regarding the adoption and use of AI should be embedded into existing HRDD processes designed by reference to the UN Guiding Principles on Business and Human Rights, which can expand to account for AI-specific risks. The Federal Department of Industry, Science and Resources Guidance of AI Adoption released in October 2025 also addresses the unique challenges that AI poses. Together, these soft-law frameworks offer practical guidance on HRDD and governance matters that are specific to the use of AI, but also reinforce the foundational practices associated with HRDD more generally.

The fuel crisis

The on-again off-again closure of the Strait of Hormuz—through which around 20% of the world's oil and natural gas passes—has significant economic and human rights impacts. Companies should ensure that their risk management and HRDD process adequately identify, assess and mitigate human rights impacts related to the fuel crisis. As exemplified in the supply chain disruptions associated with the COVID pandemic, geopolitical events of this magnitude have a disproportionate impact on vulnerable populations.

Suppliers will be facing economic and logistical stressors that heighten the risk of forced labour and other forms of workplace exploitation, likely exacerbated by the displacement of people.¹ Eg in the wake of sudden price increases, businesses may be forced to close or to immediately tighten spending, which can lead to unemployment (and a larger pool of people who may be forced to undertake more and more precarious forms of work), or cutting corners on basics such as wages and workplace safety measures.

Companies should stress-test their existing HRDD processes so they account for the impacts associated with this crisis. This should include by ensuring that operations or suppliers within impacted regions and/or impacted sectors are flagged as higher risk and subjected to closer scrutiny, to ensure impacts can be identified and assessed.

Companies should also be prepared to engage proactively with their impacted suppliers, rather than waiting for any foreseeable yet preventable severe harms to materialise.

Looking ahead

The year so far has already demonstrated the dynamic and challenging environment within which businesses conduct HRDD. As the above challenges underline, HRDD is a complex process, and it is essential that these processes are both robust and flexible enough to account for shifting risks, and shifting human rights impacts, amid heightened expectations by regulators and other stakeholders.

Companies that incorporate effective HRDD processes will be better placed to identify and proactively address potential or actual adverse human impacts—and, if the proposed reforms to Australia's modern slavery laws are enacted, best placed to avoid criminal liability for the failure to prevent modern slavery in the supply chain. Companies will also be able to deepen their understanding of their own operations and supply chains, and to identify potential governance and other pain points, so they can enhance organisational resilience.