Essential ESG: Episode 3 – The Australian Modern Slavery Act and reporting requirements

Phoebe Wynn-Pope, Head of Responsible Business and ESG

Heidi Roberts, Partner and Human Capital Lead, Responsible Business and ESG

Phoebe: Welcome to the Essential ESG podcast, being brought to you from the lands of the Wurundjeri people of the Kulin nation. I’m Phoebe Wynn-Pope, Head of Responsible Business and ESG at Corrs and today my guest is Heidi Roberts, the Human Capital Lead in our Responsible Business and ESG group and we are going to be discussing all things modern slavery. Welcome Heidi.

Heidi: Thank you Phoebe great to be here.

Phoebe: In 2019 the Commonwealth Modern Slavery Act was introduced. It requires certain entities to report on the risks of modern slavery in their supply chains and in their operations, but let’s start right at the beginning. What do we mean by modern slavery and why should we really be thinking about it?

Heidi: The problem of modern slavery is a global one with around 40 million people estimated to be in modern slavery around the world and about two thirds of these are in the Asia Pacific region, so our home. And while we think of slavery in the traditional sense of people in chains or being traded, in the more modern context, we see that people are vulnerable to exploitation on a continuum. So on one side of that continuum, we have a breach of minimum employment conditions and safety standards, and way at the other end we’ve got a much more extreme sort of exploitation. So circumstances where people are deceived into work or coerced or threatened to continue in their work to the point that they can’t leave it, so their freedom is impacted. They are in effect, due to threats or coercion or deception, deprived of their freedom or liberty and this is modern slavery. The Modern Slavery Act includes a definition of modern slavery which refers to eight different types of modern slavery and just as maybe two examples to help – one of those is forced labour, so where a victim is not free to stop working, can’t leave their place of work, usually because of threats of violence, maybe threats of deportation or being reported to authorities. Another example would be debt bondage, where a worker has had to agree to owe a debt in return for being given a job and that debt is so big they’re never able to really work off or liquidate that. Other examples in the Act are the worst forms of child labour, forced marriage, human trafficking, those kinds of things.

Phoebe: Yes, right, and we see a lot of this overseas, like we have this idea that modern slavery is happening overseas, but does it really happen in Australia?

Heidi: Sadly, yes it does. If we think about in the context of Australia, if we think about migrant workers coming to Australia, perhaps having been organised to work on remote properties that produce some of our fresh food. They might have paid an overseas recruiter for their job and they owe a debt for that. They might have had to hand in their passport, they might be living on a property where all the food and essentials are supplied and they otherwise therefore don’t need to leave and they can’t leave and there’s no public transport for them to leave if they want to. So that’s just one example of how that might occur in Australia. If we think of circumstances where workers are in insecure work, particularly vulnerable to losing that work, might have to comply with conditions of visas to be here, they’re the kind of people who it’s easy for not so helpful employers to threaten with some kind of consequence if they don’t work in a way that’s in breach of our minimum standards.

Phoebe: And suddenly they’re in this situation of forced labour, whether they really wanted to or not. I wonder if you could tell us a bit about the Act, like who are the reporting entities, who has to report under that?

Heidi: So any entity that’s formed in Australia or any entity carrying on business in Australia that has a 100 million or more in consolidated revenue will have to report. You might be a business that wasn’t formed here, but if you’re carrying on business here and have that level of revenue, you’ll be required to submit a modern slavery statement. If you’re not a reporting entity, you can chose to report, you can volunteer, technically you need to notify in advance of doing that and you can notify for one or more reporting periods, but it is important to remember that you then have to meet all the mandatory reporting criteria and you can be directed by the Minister to address deficiencies in the report if you don’t. I think it might be worth just noting at this point that the Act is essentially a reporting regime. It doesn’t actually tell businesses precisely what they have to do to identify, assess and address modern slavery in their operations and supply chains, but it sets up the regulatory framework that requires businesses to report on the risks of modern slavery they have in their operations and supply chain and to report on what they’re doing about it and given those modern slavery statements are publicly available, once you submit they’re uploaded onto the Australian Border Force register. It certainly creates incentive to make sure you are doing something very positive about these risks of adverse human rights impacts.

Phoebe: That’s right, we’ve seen a couple of rounds of modern slavery statements now haven’t we? Most organisations have submitted two and some are just about to submit their third modern slavery statement. So what do you think have been some of the biggest challenges for organisations as they’re going through this?

Heidi: So I think that in the first round of statements, we really saw organisations who hadn’t previously implemented governance or risk frameworks in respect of modern slavery. Really having to focus on those basics, so organisations really had to spend that first year understanding what modern slavery is, understanding how it manifests in our local operations and our local and global supply chains and then implementing the infrastructure to be able to identify and assess risks. So implementing policies, implementing supply minimum standards, making sure they had contractual clauses to engage with suppliers around risks of modern slavery, training, all of those kinds of things and I think after we’ve got through that, what’s been noticeable is that organisations spend a great deal of time in the first reporting periods building knowledge of their supply chains. So building understanding of who their suppliers were and what kind of risks manifest in those kinds of supply chains. But I think where we’re going to now, is organisations are expected to do more than that, to say well in Australia the highest risks in my supply chain locally are cleaners and security guards. For example, they’re required to now actually say well having identified the cleaning industry as high risk, my supply is high risk, what are my suppliers doing about that risk and what kind of risk minimisation measures have they put in place and am I satisfied that the organisation is providing me with cleaning services are taking the appropriate steps to ensure that that’s not occurring in their business. And so that’s the challenge I think, to shift to that space.

Phoebe: It’s a real engagement with your suppliers isn’t it? Rather than just saying generally speaking this category might be a risk, it’s really diving in to those particular suppliers and understanding them and that gets difficult further down the supply chain, doesn’t it?

Heidi: It does, it really does get more difficult further down the supply chain and I think the way we’re seeing organisations address that for now, is to really identify the areas that they can perhaps have greatest influence or greatest impact. I think it’s important to think about the fact that no one can fix modern slavery in a couple of years of reporting and even in our own operations and supply chains there are risks at our first tier of our supply chains and much deeper. There’s a range of different risks, so it is available to you to identify where you think you can have the greatest impact or influence and to focus and start there. Start with those in your first tier that you actually have some contractual relationships with that enable you to require them to provide you with information and require them to take action, but then as you say Phoebe, it’s really understanding well I’m purchasing these consumable goods from a supplier, who purchases them from a supplier, who purchases them from a factory, manufacturing centre, how do I get the two suppliers in my second and third tier supply chain to engage with the manufacturer or how do I collaborate with them in circumstances where I maybe don’t have any particular direct influence over their operations?

Phoebe: Yes it’s very complex, but I think one of the things that we’ve seen recently is the example of cotton in Uzbekistan which everyone had understood was extremely high risk of child and forced labour and just recently after years, almost more than a decade of working on that industry, in that country, the ILO has declared that cotton from Uzbekistan now is pretty well free of forced labour and child labour. So what we’re seeing is that these things are actually having an impact in different jurisdictions in different ways and with different commodities and so it’s definitely worth persisting.

Heidi: Yes absolutely, that is an excellent example and I think it illustrates that where you have risks that are perhaps really well known, that are really deep in your supply chain and it will be hard for you to engage directly and leverage with suppliers deep in your supply chain. It’s always worth considering what are the options to engage across industry and where you have a particular well known risk and lots of participants perhaps in your industry or just industry more broadly are interested in coming together and engaging with a group of suppliers who are suppling a particular commodity or a group of organisations that are responsible for a risk across a particular sector, how can you work together to build awareness, I think that’s something that we’re going to see organisations starting to do more and more as we go forwards.

Phoebe: That’s right and that multi stakeholder engagement is going to be absolutely critical for success. Heidi thank you so much for joining me today to talk about the Modern Slavery Act and the reporting and the requirements and some of the challenges that we’ve been looking at. It’s been great to have you on the show.

Heidi: Thank you for having me.

Phoebe: You’ve been listening to Corrs’ Essential ESG podcast and if you’ve enjoyed it, please do not forget to subscribe, wherever you are listening to your podcasts, to get notifications about future episodes and we have a great one coming up about gender and modern slavery. Thanks very much.