The new frontier of business and human rights

On 16 August 2017, the Australian Government announced that it proposes to introduce a modern slavery in supply chains reporting requirement for large businesses. Businesses will be required to report on their actions to address modern slavery in both their own operations and their supply chains. It is anticipated that 2,000 businesses will be impacted.

This Alert details the proposed requirement, explains the impetus for its adoption and highlights necessary actions that should be at the forefront of business' minds as they begin to contemplate this new space of corporate regulation.

What is Modern Slavery?

The term 'modern slavery' refers to exploitative practices where a person cannot leave their situation. This may be due to a variety of reasons including but not limited to a debt, forced labour, restrictions on their freedom of movement, threats (mental or physical) or human trafficking.

Overview of the proposed requirement

1. Entities subject to the requirement

The legislation will apply to entities headquartered in Australia or which have part of their operations in Australia.

2. Revenue threshold

The revenue threshold for the reporting requirement will be set at $100 million total annual revenue.

3. Reporting areas

Entities will be required to publish a Modern Slavery Statement in which they must report against four criteria:

  • the entity's structure, its operations and its supply chains;
  •  the modern slavery risks present in the entity's operations and supply chains;
  • the entity's policies and process to address modern slavery in its operations and supply chains, and their effectiveness; and
  • the entity's due diligence processes relating to modern slavery in its operations and supply chains and their effectiveness.

Reporting will need to extend beyond first-tier suppliers

4. Approval and frequency of reporting

An entity's Modern Slavery Statement will be required to be approved at the board level. Entities will be required to publish a Modern Slavery Statement annually.

5. Monitoring and compliance

Entities will be required to publish their Modern Slavery Statement on their websites.

The Government intends to introduce legislation in the first half of 2018.

Impetus for regulation

The International Labour Organisation (ILO) estimates 20.9 million people are in situations of modern slavery globally. The Government is of the view that Australian businesses are benefiting from modern slavery in their supply chains.

Actions business needs to take

Businesses need to gain visibility into their supply chains and take action to manage identified risks. International best practice requires operational measures that are facilitated by supplier contract obligations.

Operational measures include: establishing a policy for responsible supply chains; undertaking due diligence, such as supplier audits or pre-screening of suppliers; designing and implementing a strategy to respond to identified risks, for example, corrective actions plans and training; verifying that the actions taken have been effective; and training key personnel in the entity's own business as well as suppliers on how to identify and mitigate modern slavery.

Supplier contracts should be updated to include: audit rights; immediate notification of actual or potential non-conformance to policy; consent to follow corrective actions plans; the right to impose a penalty, suspend or terminate the contract for failure to meet policy standards, failure to cooperate with an audit process, or follow a corrective action plan; and the right to inform relevant authorities as necessary.

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