Date posted: 5/07/2019 5 min read

How to answer the slavery question

Australia’s largest companies must now produce Modern Slavery Statements and ask their suppliers tough questions.

In Brief

  • The first Modern Slavery reporting period in Australia is predicted to be the 2019/2020 financial year
  • A Modern Slavery Statement must be lodged within six months of the entity’s year-end reporting period.
  • The statement must include the risks of modern slavery in the business’s operations and supply chain, and actions taken to address those risks.

The Global Slavery Index estimates there are 40.3 million people enslaved worldwide today. About 71% are female and 62% are in the Asia-Pacific region, including 15,000 in Australia and 3000 in New Zealand.

The Commonwealth Modern Slavery Act 2018 requires Australian entities or overseas entities carrying on business in Australia, with consolidated annual revenue of more than A$100 million, to prepare a Modern Slavery Statement.

This statement must cover seven criteria including the risks of modern slavery in a business’s operations and supply chain, the actions taken to address those risks, and the effectiveness of those actions. (‘Risk’ means risk to people who are the victims of exploitation.)

Separately, under the NSW Modern Slavery Act 2018, commercial organisations with employees in the state and consolidated annual revenue between A$50 million and A$100 million need to prepare a statement.

Under both the NSW and Commonwealth legislation, a statement must be published for each reporting period and be approved by the principal governing body of the reporting entity. Groups can publish a joint statement to cover all reporting entities. The statements must be lodged within six months of the entity’s year-end reporting period. The first statements will be due in 2020.

Chartered Accountants Australia and New Zealand expects requirements for the NSW Modern Slavery Statement to align with those under the Commonwealth Act, and for organisations that voluntarily report under the Commonwealth Act to be exempted from NSW’s Act.

There are currently no penalties for non-compliance under the Commonwealth legislation, while the NSW Act has penalties of up to A$1.1 million for failure to report or for providing false or misleading statements.

Slavery reporting impact to be felt in New Zealand

Karen McWilliams FCAKaren McWilliams FCA

As big companies set about producing Modern Slavery Statements, they will require detailed information from the businesses in their supply chain, making this an issue for small-to-medium enterprises in the region.

EY estimates up to 500 New Zealand businesses will need to comply with Australia’s legislation. New Zealand businesses that have operations in Australia, are part of a group with operations in Australia or that supply businesses within Australia may need to comply.

In September 2018, Employment New Zealand released a three-page guide, “Practical steps to identify and mitigate labour rights issues in your supply chain”, to assist businesses in taking those initial steps to identify and tackle labour rights problems in their supply chains.

Whether you’re a business that needs to produce a Modern Slavery Statement, or an organisation that must answer questions from larger clients and business partners, there are steps you can take to prepare.

How to identify slavery risks

Begin by engaging with senior management and the board, collaborate with relevant teams, map your operations and supply chain and check which sectors, types of products and services, countries and entities involve high modern slavery risks.

Be aware that the most severe modern slavery risks in your supply chain may not align with the biggest volume or cost of products and services you procure.

Australia’s Department of Home Affairs has produced draft guidance that includes a list of modern slavery risk indicators, hypothetical examples and a list of resources.

Home Affairs defines modern slavery as instances of “serious exploitation”. This includes where a worker cannot refuse or cease work because of coercion, threats or deception. The worker may also be deprived of personal freedom.

I would encourage all CA ANZ members to embrace modern slavery reporting not merely as a compliance task, but as a real opportunity to better understand your operations and supply chains. Done well, the discipline of reporting on modern slavery risks could help businesses become more efficient and competitive.

“Done well, the discipline of reporting on modern slavery risks could help businesses become more efficient and competitive.”
Karen McWilliams FCA

As Australia’s Department of Home Affairs notes in its guidance: “It [modern slavery] distorts global markets and undercuts responsible business. If not addressed, modern slavery in your operations and supply chains can pose substantial reputational and legal risks for your entity and damage your commercial relationships.”

More resources:

Download Employment New Zealand’s “Practical steps to identify and mitigate labour rights issues in your supply chain”

Download

Read the Home Affairs’ Modern Slavery Act 2018 Draft Guidance

Read more