[ad_1]
Strengthening fashionable slavery reporting in step with the worldwide shift away from a transparency based mostly strategy
8 min learn
On 25 Might 2023, the Lawyer-Basic’s Division launched the outcomes of the statutory evaluate of the Australian Trendy Slavery Act 2018 (Cth) (the Act). The report makes 30 suggestions for change which, if adopted, will mark a considerable strengthening in Australia’s efforts to fight fashionable slavery, in addition to creating extra onerous due diligence and reporting necessities for corporations caught by the regime.
The evaluate displays the pattern of governments trying to voluntary frameworks such because the United Nations Guiding Ideas on Enterprise and Human Rights when contemplating the right way to uplift due diligence and reporting necessities for enterprise.
Key takeaways
- The evaluate proposes that corporations be required to implement a due diligence system. If this advice is adopted, it would mark the primary obligatory human rights-related due diligence obligation in Australia, and can be per the worldwide pattern in direction of adoption of such legal guidelines. Corporations might want to assess the adequacy of their current due diligence techniques and whether or not any uplift is required.
- The evaluate features a advice to cut back the reporting threshold from $100 million to $50 million. Corporations ought to take into account whether or not this implies they’d be caught by the Act, or whether or not any extra entities of their company group can be caught.
- The evaluate considers the introduction of penalties and proposes that they apply, at a minimal, in 4 situations – failing to report with out cause, failing to place a due diligence system in place, submission of a false assertion, and failing to adjust to a statutory path to take remedial motion.
- The introduction of offence provisions is predicted to extend the extent of scrutiny that corporations and their boards apply to reporting underneath the Australian regime. That is primarily as a result of boards requirement to approve the assertion every year.
- There isn’t any clear indication of when or whether or not the Act will likely be amended to mirror the suggestions however, given the final pattern in direction of extra strong enterprise human rights obligations, corporations ought to take into account how they could future-proof themselves in opposition to the proposed legislative developments.
Background
The Act got here into pressure on 1 January 2019 and was hailed as a big milestone in Australia’s response to addressing fashionable slavery. Whereas taking path from the UK fashionable slavery regime, the Australian equal was extra onerous, imposing obligatory reporting necessities on these entities captured by the laws. Within the years following its introduction, there was a speedy international evolution as the trendy slavery and human rights compliance panorama has shifted away from a transparency based mostly strategy to a compulsory due diligence based mostly strategy.
On 31 March 2022, the Federal Authorities introduced a statutory evaluate of the Act, to be led by Professor John McMillan AO. As a part of the evaluate, the Authorities launched an issues paper initiating a three-month public session interval, inviting submissions on key focus areas.
The broader international shifts have knowledgeable the evaluate, the submissions made, and the suggestions delivered. These included whether or not the idea of due diligence must be a compulsory requirement of contemporary slavery reporting and whether or not extra enforcement measures must be launched for non-compliance. Different points contemplated included the appropriateness of the present reporting necessities and the choice of building an unbiased Anti-Slavery Commissioner to supervise implementation and enforcement of the Act.
The review of the Act thought-about a variety of views with 136 submissions obtained, 38 session conferences held with attendees from 285 organisations, and one other 65 conferences held with Authorities officers in Australia and overseas. Three questions had been on the coronary heart of the evaluate:
- can a regulation such because the Act be efficient in combating fashionable slavery?
- might the Act be simpler if modifications had been made to how it’s framed and administered?
- is the regulation being taken severely?
Whereas the report acknowledges that companies are taking the Act severely and buyers are paying nearer consideration to the standard of contemporary slavery reporting, a extensively held view expressed through the session was that there’s restricted proof the Act has but brought on significant change for individuals residing in situations of contemporary slavery. The report states that whereas there was enchancment within the high quality of statements 12 months on 12 months, that change will not be sufficient, and for a portion of corporations the reporting is a tick-box train.
Three important weaknesses had been recognized as a part of the evaluate:
- the usual of contemporary slavery reporting is variable;
- the reporting obligation will not be enforceable; and
- the method is vulnerable to being ‘drowned by a sea’ of huge and incompatible statements.
Key suggestions
The report proposes 30 suggestions for change to deal with the weaknesses of the Act. Whereas the report states that there was enchancment within the high quality of statements 12 months on 12 months, this modification will not be sufficient, and for a portion of corporations the reporting is a tick-box train. A number of suggestions put ahead within the evaluate are centered on revising the official steering doc for improved readability round reporting necessities for entities.
The suggestions search to sharpen the reporting course of and strengthen the effectiveness of the Act in combating fashionable slavery. Probably the most important suggestions for enterprise are summarised beneath.
Necessary fashionable slavery due diligence necessities
Probably the most important advice to come back out of the evaluate is for the Act to strengthen the way it offers with due diligence by inserting a compulsory due diligence obligation on entities. This was pushed by overwhelming assist through the consultations for a stronger due diligence framework. The Act presently solely requires an entity to describe its due diligence processes and doesn’t require due diligence to be carried out to any explicit commonplace (or in any respect). Underneath the proposal, an entity can be required to clarify the character of the due diligence processes it has in place, in addition to the exercise carried out underneath these processes through the reporting interval to establish and assess fashionable slavery dangers. The report recommends that this obligation be supported with prescriptive minimal parts for a due diligence system set out as guidelines within the Act, and in addition goes additional to suggest {that a} civil penalty offence1 for an entity to fail to satisfy this requirement. If this advice is adopted, it would mark the primary human rights associated due diligence regulation in Australia and can be per the worldwide pattern in direction of adoption of such legal guidelines.
Lowered reporting threshold
The evaluate proposes to cut back the reporting threshold from $100 million to $50 million. This could widen the scope of the Act each by capturing smaller companies and in addition probably by capturing a higher variety of entities in a company group. A lowered reporting threshold would align Australia extra carefully with thresholds already making use of or proposed in different jurisdictions together with the UK, New Zealand and Canada. The proposal for a lowered threshold additionally recognises that human rights abuses have to be the priority and accountability of all companies no matter their measurement or sector.
Penalties
One other key focus of the evaluate was penalties, and the position they will play in driving steady enchancment in fashionable slavery reporting and danger administration. The evaluate takes the stance that the strategy of voluntary compliance is now not adequate, and that it’s incongruous for a reporting responsibility to not be supported by a process guaranteeing that responsibility is carried out. The evaluate proposes that civil penalties ought to apply, at a minimal, in 4 conditions:
- for failing to report with out cause;
- failing to place a due diligence system in place;
- submission of a false assertion; and
- failing to adjust to a statutory path to take remedial motion.
The report doesn’t go so far as recommending penalties for insufficient reporting, however somewhat is targeted on unequivocal reporting breaches of the Act. The report outlines that civil penalty offence provisions mustn’t apply to an entity with a consolidated annual income between $50 and 100 million till two years after the entity has turn into topic to the Act’s reporting necessities.
Modification of the Act’s obligatory reporting standards
The evaluate additionally recommends refining and, in some circumstances, extending the obligatory reporting standards inside the Act to offer extra readability on key phrases and sector-specific steering.
The evaluate proposes that consideration be given to the time period ‘operations and provide chains’ being changed with the time period ‘operations and provide networks’. The report discovered that the usage of the time period ‘provide networks’ might help in higher describing the vary of enterprise actions and relationships to be reported on. There may be additionally a proposal so as to add a number of new obligatory standards requiring an entity to think about and report on:
- any fashionable slavery incidents or precise dangers recognized by the entity through the reporting 12 months together with any incidents that had been referred to regulation enforcement;
- grievance and criticism mechanisms made out there by the entity to workers members and different individuals; and
- inside and exterior session undertaken by the entity through the reporting 12 months on fashionable slavery danger administration.
Different suggestions
With the perception and expertise that the previous three years of reporting have introduced, the evaluate proposes plenty of extra modifications to the Act and associated supplementary steering supplies, to boost the trendy slavery reporting course of and guarantee continued enchancment. A few of these suggestions embody:
Particular steering for high-risk areas
The evaluate proposes that the Act is amended to extend focused steering for particular areas via consideration of a mechanism for declaring high-risk areas, areas, industries, merchandise, suppliers or provide chains that have to be addressed in fashionable slavery statements. A reporting entity can be required to establish whether or not a declared high-risk space exists in its operations and provide chains, and tackle every of these danger areas in its fashionable slavery assertion. The rationale for this advice is to make sure consideration is drawn to the issues that pose the best fashionable slavery danger, and permit for simpler comparability of firm responses to deal with such dangers throughout fashionable slavery statements.
Updates to the steering for reporting entities
A number of suggestions proposed within the evaluate particularly concentrate on amendments to the steering. The report proposes a evaluate of how the phrases ‘operations’ and ‘provide chains’ are described within the steering to make sure that there may be additional readability on what must be coated by each phrases. This could permit reporting entities to know which suppliers must be mapped and which enterprise relationships must be included. The evaluate additionally requires focused sector particular steering the place enterprise actions can differ throughout sectors (in step with submissions made by our Enterprise Human Rights group), and clearer steering on approval and signature necessities.
Streamlining the reporting course of
One other essential advice which acknowledges the numerous sources that may go into the preparation of a complete fashionable slavery assertion, is that reporting entities have the choice of submitting a contemporary slavery assertion that addresses all necessities of the Act each three years, and within the intervening two years submit a report that updates the knowledge within the full assertion. This comes as a response to criticisms shared in lots of submissions, together with a submission from Allens, that the current requirement is burdensome and time-consuming and provides little worth the place 12 months on 12 months statements haven’t substantively modified.
Timing and subsequent steps
It stays to be seen which suggestions will likely be adopted by the Authorities, and when any amendments to the Act will likely be launched. In a joint media launch, the Authorities has commented that it’ll now take into account the evaluate and undertake consultations throughout authorities and key stakeholders in formulating a response.
Actions you may take now
There have been a variety of suggestions put ahead within the evaluate, and if accepted, some might help corporations in making ready their statements and streamlining the reporting course of, whereas others are more likely to considerably shift the way in which some corporations assess and tackle their fashionable slavery dangers, within the broader human rights context.
In mild of the suggestions and to make sure corporations are greatest positioned to answer any future developments, we advocate that corporations:
- rethink their coverage commitments relating to human rights due diligence, together with as in opposition to the UN Guiding Ideas on Enterprise and Human Rights, which is more and more a touchpoint for legislative developments within the enterprise human rights area;
- assess the adequacy of current human rights due diligence processes;
- evaluate and assess the effectiveness of any current fashionable slavery danger administration processes;
- develop and conduct coaching on human rights due diligence insurance policies and procedures; and
- proceed to observe any legislative updates on this area.
Our Enterprise and Human Rights group have specialised experience in enterprise human rights issues and have an in depth understanding of the authorized framework surrounding human rights expectations on enterprise. Now we have expertise advising a shoppers in a variety of industries on managing human rights dangers of their provide chains, together with in reference to fashionable slavery reporting necessities. Please attain out if you need to debate these developments.