The new modern slavery reporting requirements have much of corporate Australia scrambling to understand what is required of them.
As of 1 January 2019 the clock started for business with directors accountable for annual public modern slavery statements that describe how the business is identifying and managing modern slavery risks. While the 2020 horizon for first reports may seem distant, the decisions, activities and work you are doing right now will form the subject of your first statement.
For some Boards and executives the conversation about human rights is completely new – and uncomfortable. Key questions our clients are asking right now include:
- Where do I start?
- How far into my supply chain am I expected to go?
- What do I do when I find people in slavery-like conditions?
- Will this increase my costs? Will suppliers charge me more when I ask them to manage the risk?
- I’m only operating in Australia so I’m not exposed to modern slavery risk, right?
- Is it really my responsibility to do something about this?
- What human rights reporting obligations do I have in other jurisdictions?
However, the most challenging question of all that we are being asked is – what is the minimum I need to do to comply with this legislation?
The answer is in and of itself uncomfortable. To comply with the modern slavery legislation all you have to do is lodge a public modern slavery statement that explains what you are currently doing against seven mandatory criteria. There is no obligation to take any particular course of action to identify, address or manage your modern slavery risks. If your risk appetite is unconcerned with reputational blowback, undermining trust in your brand, investor unease and divestment, and willful blindness to the risk of harm to people, then in fact, you can choose to do nothing.
The fact is, there are very few directors on Boards here in Australia that would feel comfortable signing off on that level of risk to business. Invariably, that means you need to have a plan. Making sense of the complexity is vital to protecting your business and has the distinct advantage that it is right thing to do.
The Australian Council of Superannuation Investors (ACSI) today released its new report: Modern Slavery: Risks, Rights and Responsibilities – A Guide for Companies and Investors.
ACSI commissioned KPMG Banarra’s human rights specialists to create a guide for business and investors to better understand modern slavery – the context, the key modern slavery risk factors, sectors at high risk of slavery like practices, and the practical questions to ask to prepare a response ahead of public reporting.
The report focuses on five ASX200 sectors considered to be high-risk for modern slavery:
- financial services
- construction and property
- food, beverage and agriculture, and
- health care.
While the Act mandates that you report, managing modern slavery risk requires practical responses.
The guidance section of the ACSI Modern Slavery Report sets out the questions boards and executives need to ask. The checklists in the report are a useful tool to bring together diverse functions with a stake in understanding and actioning modern slavery responses – procurement, risk, legal, compliance, human resources, sustainability, corporate affairs and others.
Responding to the Act presents an opportunity to embed into each of these roles a shared understanding of where human rights risks lie and the company’s commitment to respond. For investors, the questions in the ACSI Modern Slavery Report are designed to promote conversation and set expectations: your ESG risk considerations will need to include modern slavery, and if you meet the thresholds you’ll need to prepare your own modern slavery statement.
Tools are only a small part of what business needs. Amongst the more interesting developments here in Australia are the businesses and industry bodies taking a collaborative approach to thinking through the issues. For example, shared platforms for assessing suppliers is one response which echoes the experience of more mature jurisdictions. Some businesses are extending the scope of their response beyond slavery-like practices to whole of business human rights strategies and external stakeholder engagement. Others are using modern slavery as a lever for rolling out broader human rights training to key decision makers.
Right now, business needs clear steps to identify risks, respect rights, and take responsibility for the business decisions and practices which lead to harm. The ACSI Modern Slavery Report will equip especially investors to be asking harder questions of companies and their directors. Directors now need to decide what level of modern slavery risk they’ll accept in their supply chains and operations.