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THE MARKET IS WATCHING” MODERN SLAVERY STATEMENTS UNDER THE MICROSCOPE

Written by Johnathan Glinatsis & David Glinatsis

 

THE MODERN SLAVERY ACT (CTH)

The Modern Slavery Act 2018 (Cth) (“the MSA”) introduced a requirement for major entities operating in Australia to annually submit a Modern Slavery Statement.

At its most basic level, the Statement must identify key risks of modern slavery within the reporting entity’s supply chains and operations, and must also describe the actions taken to deal with those risks.

The MSA has broadly defined ‘modern slavery’ as including [1]:

  • Trafficking in persons;
  • Slavery;
  • Servitude;
  • Forced marriage;
  • Forced labour;
  • Debt bondage;
  • Deceptive recruitment; and
  • The worst forms of child labour

The purposes of the MSA are to improve transparency of global supply chains and increase the involvement of major businesses to address the risk of modern slavery.

The MSA seeks to achieve these purposes by mandating the online publication of Statements on the Modern Slavery Register of the Australian Border Force. [2] Published Statements are then subject to scrutiny by the Minister for Home Affairs and the general public.

 

UPDATE ON THE NSW ACT

In mid-2018, NSW Parliament also passed its own version of the Modern Slavery Act, which created an additional modern slavery reporting requirement for NSW entities above $50 million turnover.

However, in October 2021, the Modern Slavery Amendment Bill 2021 (NSW) [3] proposed to repeal this requirement. If passed, businesses in NSW will be required to report only under the Commonwealth Act if they surpass $100 million in consolidated revenue.

 

THE MONASH REPORT

Following the first round of Statements published for the 2019 – 2020 reporting period, a study by the Monash Centre for Financial Studies (“the Report”) assessed and ranked the quality of Modern Slavery Statements submitted by ASX100 companies. [4] The Report’s scoring framework considered the disclosure of:

  • Structure and operation;
  • Supply chains;
  • Modern slavery risk in operation and supply chain;
  • Due diligence and remediation processes;
  • Effectiveness assessment.

The Report recognised companies that provided thorough disclosure of modern slavery risks and identified companies that provided an unclear and incomplete description of their risks and the actions undertaken to mitigate them.

This is a clear message from the market to reporting entities that demonstrates that the Modern Slavery Statements are important to clients and investors, they will be scrutinised, and ‘template’ or bare-minimum reporting is not enough.

Reporting entities will therefore do wisely to avoid being ‘named and shamed’ and protect their reputation by responsibly addressing the mandatory criteria for Modern Slavery Statements.

 

LEARNINGS FOR CONSTRUCTION

The Monash Report has relevance for the construction firms due to the complex nature of international supply chains involving raw materials extraction, recycling, manufacture, logistics and labour.

The industry is therefore particularly vulnerable to unseen exploitation in the construction supply chain, and businesses may be unknowingly supporting modern slavery practices.

To comply with the Modern Slavery Act regime, construction entities must understand the key risks of modern slavery in their supply chains and operations, and develop innovative and targeted strategies to mitigate those risks.

Kreisson’s eBook “Modern Slavery – A Report Card on Modern Slavery Statements, Lessons for the Construction Industry” provides insight into the key risks facing the construction industry, and industry-specific actions that firms should implement as part of their modern slavery management strategy.

 

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ENDNOTES

[1] Modern Slavery Act 2018 (Cth) section 4

[2] Australian Borderforce – Modern Slavery Register

[3] Modern Slavery Amendment Bill 2021 (NSW)

[4] Monash Centre for Financial Studies – Modern Slavery Statement Disclosure Quality

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