New modern slavery reporting requirements

By Holding Redlich partner Natashia Ackroyd and graduate Sam Marks
With the first season of the modern slavery reporting deadline fast approaching (31 December 2020), Holding Redlich outlines the new reporting obligations and their underlying objectives.  They also take a look at the property and construction industry, which is more susceptible to modern slavery due to the fact that it is so labour-intensive and heavily reliant on the supply of international raw materials.  

What is modern slavery?

Modern slavery describes the use of coercion, deception, threats and financial pressures to exploit and undermine the freedom of 40 million workers around the world. These situations include but are not limited to human trafficking, slavery, servitude, forced or unpaid labour, wage theft, unsafe conditions, inadequate accommodation, debt bondage, passport confiscation, child labour and deceptive recruiting methods.

The Modern Slavery Register

The Federal government launched the Modern Slavery Register on 30 July of this year, which is the World Day against Trafficking in Persons. The register will act as a public repository of modern slavery statements.

Functionally, the register allows companies to submit modern slavery statements and the Australian public to search historical statements by any term or phrase.

In practice, this register will act as a self-regulation mechanism using transparency and publicly available information to drive compliance. The government has opted to apply reputational pressure rather than harsh financial penalties for non-compliance. It will no longer be possible for companies to enjoy blissful ignorance as public perception and company reputations will be impacted by the information laid bare on the register.

Reporting requirements

Australian companies and foreign entities conducting business in Australia with a consolidated revenue of over $100 million are now required to submit an annual modern slavery statement under the recently enacted Modern Slavery Act 2018 (Cth) (the Act).

The original deadlines for the first round of reporting were extended by three months to allow entities to meet their obligations and assess new modern slavery risks linked to the COVID-19 pandemic. The below table shows the first round of deadlines for modern slavery statements, which are dependent on a company’s financial reporting period.

Company reporting period Original deadline Extended deadline
 Foreign Financial Year (1 April – 31 March)  30 September 2020  31 December 2020
 Australian Financial Year (1 July – 30 June)  31 December 2020  31 March 2021
 Reporting periods ending after 30 June  Six months from the end of the reporting period
Approximately 3,000 companies will be subject to this first round of reporting and must disclose seven mandatory reporting criterion in their statements, including:
  • the risks of modern slavery practices in their operations and supply chains; 
  • the actions they have taken to assess and address these risks;
  • how they assess the effectiveness of their actions; 
  • the process of consultation they have undertaken with other entities they own or control.

Modern slavery in the property and construction sector

Property and construction is a labour-intensive sector heavily reliant on international raw material supply, complex global supply chains and foreign labour.

Reliance on imported raw building materials and complex supply chains means that companies often have poor visibility of the manufacturing process and less confidence that the materials and services they use are ethically sourced.

Examples of high-risk functions within the property and construction sector include:

  • corporate: hospitality, company merchandise and promotional item procurement
  • construction: labour, raw materials and manufactured plant and equipment
  • asset management: cleaning, security, preventative and reactive maintenance.

Labour-intensive industries are more susceptible to modern slavery due to the high demand for low-skilled labour forces globally. For example, Qatar's development requirements to host the 2022 FIFA World Cup has seen a huge increase in demand for manual labour and an influx of migrant workers. There have been widespread reports of modern slavery practices and migrant worker mistreatment as a result of this infrastructure boom.

One does not need to look as far as Qatar to observe instances of modern slavery. These practices are common in developed countries, including Australia.

Opportunities and risks for companies

Boards must look at the register as an opportunity to positively impact the lives of the people they interact with directly and indirectly around the world. A bi-product of this is highlighting their ethical sourcing capability and building their reputation as an organisation.

Proactive boards are looking at the register not as another reporting hurdle but as a chance to refresh and develop best practices.

This process starts with the ‘heart’ of the organisation:

  • what are its values?
  • what will it stand for?
  • what difference does it want to make?

These values should govern the sourcing decisions of the company.

The ‘head’ of the organisation can then drive the code of conduct by implementing changes, such as:

  • centralised subcontractor management and oversight
  • consolidation of supplier information
  • supply chain auditing and due diligence
  • risk assessments in high-risk regions and functions (as above)
  • grievance and remediation mechanisms.
Those companies who do not have the necessary visibility of their supply chains and labour force should see this as a chance to review company values and align their practices with the Australian standard. If they choose not to, they will damage their reputation, public trust, investor and lender confidence and employee perception as their statements are easily compared with those of industry leaders at the click of a mouse.
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this publication is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources.
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