The Australian Modern Slavery Act 2018 – will it live up to expectations?
On 29 November 2018, the Modern Slavery Bill 2018 passed both houses of the Parliament of Australia and will soon become law. After taking effect, likely on 1 January 2019, the Modern Slavery Act 2018 (Act) will require large entities in Australia to report annually on the risks of modern slavery in their operations and supply chains, and actions taken to assess and address those risks.
There are high hopes for Australia’s new Modern Slavery Act, but will reality match expectation? The utility of the Act as a tool for addressing human rights abuses in supply chains will only emerge over time. To gauge the Act’s likely impact, it is important to understand which aspects of the new law represent strengths, and which may hinder its effectiveness.
Whilst not without its critics, the Act establishes a valuable model for change. By mandating reporting on human rights - albeit limited to those constituting ‘modern slavery’ - it codifies certain expectations of business as articulated by the UN Guiding Principles on Business and Human Rights. While the Act does not explicitly require businesses to conduct human rights due diligence, nor to remedy harm, its provisions on mandatory reporting criteria for modern slavery statements expressly refer, at section 16(1)(d), to both due diligence and remediation processes. This creates an expectation that entities will undertake these actions as part of their reporting process.
Hindsight is helpful and, in developing the Act, Australia has had the benefit of observing the UK Modern Slavery Act experience and applying its lessons. The Australian Act retains and builds on key strengths of the UK legislative model. As with the UK Act, the Australian Act introduces an annual public reporting requirement which facilitates year-on-year scrutiny by external stakeholders of corporate efforts to address modern slavery. Reporting entities’ slavery statements must be approved by the board, or similar, and signed-off by a director, ensuring high-level buy-in and accountability for the content of statements.
In terms of mitigating weaknesses in the UK reporting model, several key refinements have been built into the new Australian reporting requirement. First, the Australian government will operate a central, freely-accessible register of statements which should foster greater certainty about publication and, in turn, encourage higher reporting rates. The requirement that the Australian government should itself produce a slavery statement extends the scope of modern slavery reporting to public procurement activities - a key element missing from the UK model. Under the Australian law, entities are required to report against six mandated reporting criteria, plus other relevant information. This mandatory aspect should generate higher quality reporting content, as well as facilitating a comparative approach in assessing the efforts of different entities to address modern slavery. Government amendments, agreed in the Senate, provide a mechanism via which non-compliant entities can be asked to explain and remedy their failure to report, or risk being named on the register. We understand the Government is working to provide a public list of reporting entities, together with information about non-reporters (who cannot provide a valid explanation for their non-reporting)*. Another plus in Australia, is the anticipated release of more detailed governmental guidance, earlier in the process, which will provide a reference point for reporting entities on how to satisfactorily meet the new requirements.
The new Australian Act is an important transparency tool. It will yield information that business and others can use, including investors, civil society and consumers, to drive and measure improvements in corporate practices to address modern slavery. The Act also establishes a valuable avenue for engagement with business on human rights and has the potential to generate impetus for action against modern slavery. The anticipation is that, over time, better practices will translate into better conditions for factory and farm workers at the production end of global supply chains.
Limitations on effectiveness
The Act does, however, have limitations, which may limit its ability to achieve significant change. The first of these is the nature of the Act itself. As a reporting requirement, not a requirement to act, the Act does not create direct legal liability for companies that continue to cause harm via supply chains. This can occur when, for example, companies stipulate unreasonably short lead times, or place small volume orders for constantly changing goods to accommodate fleeting fashion tastes. Like other social disclosure laws recently passed, there is a danger that the law will engender a ‘tick-the-box’ form of reporting that prizes cosmetic compliance over a substantive response.
Secondly, the Act contains inherent weaknesses, inherited from the UK model, which have not been addressed. These are: no exclusion of non-compliant entities from public tenders; no financial penalties to induce compliance; and no explicitly mandated human rights due diligence requirement. Nor does the Act establish an anti-slavery commissioner to work with business to implement the law.
Catalyst for change
Despite these limitations, we anticipate that the Act will catalyse change, particularly in attitudes and approaches to human rights. First, it will create awareness and broader public understanding of the risks associated with current patterns of consumption and supply. Second, it will drive greater collaboration and engagement by companies with their suppliers, workers and peers. Third, it will prompt greater engagement with human rights in business and, importantly, at its higher echelons. These changes in attitude are essential prerequisites to effecting change in corporate practices.
On balance, the Modern Slavey Act is important, if imperfect, legislation. It represents a step towards establishing greater accountability for companies harming workers in supply chains. Whether the next step is mandatory reporting across the full spectrum of human rights, or a move away from reporting to mandated human rights due diligence, remains to be seen. The direction taken by future legislative human rights initiatives, will hinge on the Act’s ability to achieve positive change. Its ability to do this remains, at this stage, unclear.
To read more about the process leading up to the enactment of the Australian Modern Slavery Act 2018, explore our in-depth area on Establishing a Modern Slavery Act in Australia.