Review of Australia’s Modern Slavery Act

The three-year statutory review of the Australian Modern Slavery Act 2018 (Cth) calls for reform to strengthen the Act’s reporting obligations and compliance. Reporting entities should be prepared for potential new due diligence obligations for modern slavery and civil penalties for non-compliance.

The statutory review of the Modern Slavery Act 2018 (Cth) (the Act) led by Professor John McMillan AO commenced on 31 March 2022. Professor McMillan’s report was tabled in Parliament on 25 May 2023 and makes 30 recommendations which will be considered by the government. Access the full report here.

At a high level, the review found that the Act’s reporting-only approach has not always translated to accountability. In its current form, the Act requires large entities carrying on business in Australia to submit a modern slavery statement (MSS) every year pursuant to seven mandatory reporting criteria. Civil society groups, and other members of the business community, claim that Australia’s reporting-only regime has resulted in a “tick-a-box” approach to modern slavery, rather than genuine attempts to identify and manage risk. The review’s recommendation to introduce an obligation to adopt a due diligence system is pivotal to steering companies to look deeper into their human rights impacts.

The absence of penalties within the Act has also been the subject of criticism. The review’s recommendation to introduce penalties, if adopted, will undoubtedly prompt many entities to enhance their response to modern slavery risk. It also aligns with the increased focus of Australia’s corporate regulators in relation to greenwashing, which they have clearly stated covers misrepresentations in relation to social issues (the “S” in ESG).

Professor McMillan found that while the Act constituted an important first step to raise awareness of modern slavery risks across Australian and global supply chains, reform is needed to ensure entities doing business in Australia are held to account for their actions (or inaction). His recommendations are broadly consistent with global regulatory trends and community expectations of business.

What are the key recommendations to be aware of?

Establishment of Commonwealth Anti-Slavery Commissioner

The review supports the establishment of a new Commonwealth Anti-Slavery Commissioner. The Commissioner would be responsible for monitoring compliance with the Act, and publishing regulatory standards and guidelines that entities are expected to observe in preparing MSS’s. The report also recommends empowering the Commissioner to make a written declaration of a region, location, industry, product, supplier or supply chain as regarded as carrying a high modern slavery risk. Entities would also be required to report on how they responded to this risk in their MSS, where relevant.

This is one recommendation that we are confident will be adopted given the $8 million of budgeted funding in the recent May Federal budget has been allocated to the establishment of a Commonwealth Anti-Slavery Commissioner.

Lowering the reporting threshold to $50million

The Act in its current form requires entities to report if they are an Australian entity or carry on business in Australia with a minimum annual consolidated revenue of $100 million. The review recommends this threshold should be lowered to annual consolidated revenue of $50 million. If Parliament accepts this recommendation, the review estimates that a further 2,393 entities will be required to report.

Introduction of a due diligence obligation

The review recommends that reporting entities be obliged to have a modern slavery due diligence system in place. Non-compliance will be an offence. This would take a significant step forward from the current obligation for entities to merely describe the actions it has taken to address modern slavery risk. Further, the review recommends that the failure of a reporting entity to include a description of the due diligence processes in its MSS should be an offence.

Expanding the mandatory reporting criteria

The Act in its current form requires reporting entities to describe the risks of modern slavery practices in its operations and supply chains and the actions taken to address those risks. Taking a more prescriptive approach, the review recommends introducing new mandatory reporting criteria which would require entities to report on:

• modern slavery incidents or risks identified by the entity during the reporting year;
• grievance and complaint mechanisms made available by the entity; and
• internal and external consultation undertaken by the entity during the reporting year on modern slavery risk management.

Imposing penalties for non-compliance

The review describes the need for additional enforcement measures to ensure compliance. It recommends that a failure of a reporting entity to produce a MSS, or producing a MSS that knowingly includes materially false information be an offence. It also recommends that the failure to have a due diligence system in place that meets the requirements set out in the rules made under the Act be an offence and result in a civil penalty.

Next steps

While the recommendations made in the review are yet to become legally binding, they signal that more stringent modern slavery obligations are likely forthcoming.

Reporting entities should seek advice on the adequacy of their current approach in the event that the recommendations are adopted. Global entities operating across multiple jurisdictions with similar legislation should consider a global approach to due diligence and reporting. Entities that are unsure of whether they will meet the consolidated revenue threshold should assume that they will be reporting. It is too late at the end of a financial year to start implementing a modern slavery risk management system.

Reporting entities who have adopted a ‘technical’ or ‘bare’ compliance approach should re-assess this strategy and their risk appetite. The time between now and when amendments to the Act commence is an important period for businesses to review what they have achieved to date, and plan the path forward.

This article was co-authored with Yasmine Sahihi.