3.1
The Committee heard from a large number of businesses, non-government organisations (NGOs), investors, legal experts, academics, unions and individuals on the issue of supply chain reporting.
3.2
The majority of these submitters and witnesses supported the introduction of supply chain reporting requirements similar to section 54 of the UK Modern Slavery Act 2015 (UK Act). Many submitters and witnesses also suggested that any Australian legislation should seek to improve on the UK model based on international best practice.
3.3
This chapter outlines some of the key proposed principles for Australian legislation suggested in submissions.
Modern slavery in global supply chains
3.4
Submitters and witnesses to the inquiry recognised the significant risk of modern slavery in the global supply chains of businesses operating in Australia. Anti-Slavery Australia defines supply chains as the ‘vertically integrated systems of production that link raw materials to finished products’, highlighting that:
Modern business relationships frequently involve engagement with complex international supply chains, often with multiple tiers. These supply chains can involve industries that involve a high risk of exploitation in Australia, or extend to countries overseas with [a] high incidence of human trafficking and slavery.
3.5
Submitters acknowledged the particularly high risk of forced labour in the Asia-Pacific region, where many Australian businesses source materials and products. The International Labour Organisation (ILO) estimates that over half (11.7 million) of the 20.9 million victims of forced labour across the world are in the Asia Pacific region. The Walk Free Foundation, which publishes the annual Global Slavery Index, estimates that 30.4 million people are victims of modern slavery in the Asia Pacific region. The Committee notes that the Walk Free Foundation and the ILO are currently working on developing common definitions and data on the number of victims of modern slavery, including in the Asia-Pacific region.
3.6
Mr Andrew Forrest AO, Chairman and Founder of the Walk Free Foundation, told the Committee that when he investigated his own company, Fortescue Metals Group, he was shocked to discover ‘a number of incidences of slavery in our supply chain’ and took immediate steps to address it. Mr Forrest noted that his experience highlighted that:
The reality of people being kept in forced labour conditions and having their freedom removed is apparent in Australia and all over the region which feeds goods and services into Australia.
3.7
Similarly, Ms Fiona Lawrie, Sustainability Manager at Australia’s largest private sector employer, Wesfarmers, acknowledged:
… that forms of forced labour and very real human rights [abuses are] occurring across global supply chains, and there is no doubt that there have been instances of unfair treatment of workers in our supply chain.
3.8
The Committee notes that its predecessor Committee has previously expressed concerns about the risks of modern slavery in global supply chains in its 2013 report, Trading Lives: Modern Day Human Trafficking. The Committee notes that that report recommended that the Australian Government undertake a review of Australia’s anti-slavery mechanisms with a view to introducing legislation to improve transparency in supply chains.
3.9
The Committee also notes the concerns about modern slavery in the supply chains of companies and businesses operating in Australia recently expressed by the Joint Committee on Law Enforcement.
Support for supply chain reporting
3.10
The majority of submitters to the inquiry supported action to address and eliminate the risks of modern slavery in the global supply chains of companies and businesses operating in Australia.
3.11
The Committee heard significant support for supply chain reporting from NGOs, charities, religious leaders, unions, legal experts and consumers. These submitters emphasised that a reporting requirement was an important piece of the jigsaw to address modern slavery in Australia and around the world.
3.12
The Committee notes strong support for combatting modern slavery from the Business Council of Australia (Business Council). The Committee notes the statement of 29 March 2017 by the Business Council’s President and Chief Executive calling for a comprehensive approach to combatting modern slavery in Australia, including legislation. The Business Council submitted that supply chain reporting would be an ‘important piece of the jigsaw’ to combat modern slavery and would:
close the governance gap that is inherent in global supply chains;
increase transparency by providing more information about what is occurring in global supply chains;
shape corporate behaviour; and
ensure there is a level playing field so companies who are regulated in other jurisdictions are not put at a disadvantage by companies that do not face the same requirements and therefore may not face the same costs as well as scrutiny.
3.13
The Committee also notes the significant support from the union movement, as outlined by the Australian Council of Trade Unions (ACTU). The ACTU submitted that supply chain reporting is a ‘game changer in fighting slavery in supply chains’:
We strongly believe that having a robust act which clearly compels companies to pay attention to the risks in their supply chains would have a very beneficial impact both by stopping the practices of modern slavery and by creating a level playing field amongst companies. As trade unions, we would like to see the act require businesses to report on what they are doing to address slavery because we believe that a minimum standard established in law provides clarity to business and prevents good practice from being undermined by less responsible companies.
3.14
However, the Committee notes that some business groups questioned the need for legislation to address this issue. The Australian Chamber of Commerce and Industry (ACCI) suggested that the introduction of legislation would be premature and recommended the need for further consultation, particularly with businesses. ACCI recommended that ‘a great deal more work’ needs to be done to consult with businesses to:
… determine where any efforts should be focussed, which behaviours and practices should be addressed, and how best to do so, prior to starting to consider modern slavery legislation for Australia or its terms.
3.15
The Committee also heard from businesses, such as Adidas Group and Rio Tinto, which highlighted the significant work they have already undertaken to address modern slavery risks and the robust frameworks they have introduced to monitor and audit their supply chains. The Committee heard that many Australian businesses are already collaborating to address these issues through voluntary initiatives such as the United Nations Global Compact, and the Australian Business Pledge against Forced Labour.
3.16
These businesses supported the introduction of a legislative requirement to report on measures taken to address modern slavery risks in their supply chains. The Committee notes the significant support for supply chain reporting in Australia across a number of sectors including retail and clothing, food and grocery, mining and finance and investment.
3.17
The Committee also heard that investors are increasingly concerned about ensuring that the supply chains of businesses they invest in are free of modern slavery and other human rights violations. Ms Nicolette Boele from Responsible Investment Association Australasia told the Committee that investors:
… view human rights violations and their management as social and governance risks that, when poorly managed, may impact negatively on the long-term value of companies … eradicating modern slavery in Australian companies and their supply chains is fundamental to well-performing companies and stable economies.
3.18
The Walk Free Foundation submitted that government intervention would assist and strengthen efforts by businesses already trying to address modern slavery risks in their supply chains:
Governments have a critical leadership role to play in encouraging and guiding industry to take the necessary steps to ensure the integrity of their supply chains. We know what works to drive modern slavery from our supply chains. It requires collaboration and best practise by governments, business and civil society. Our approach must be to encourage business to look and find, and to be open about what they discover. As a community, we must support not shame them. We must work with them and their colleagues to find creative, commercial and long lasting solutions that free the victims, and empower them to pursue free lives.
3.19
Businesses and NGOs emphasised that a reporting requirement would help to ‘level the playing field’ for businesses in Australia already seeking to address these issues. Ms Alice Cope, Executive Director of the Australian branch of the UN Global Compact, told the Committee that there are already a number of leading Australian businesses ‘investing in getting this right’ and that:
This sort of regulatory development would help create a more level playing field for, and drive change in, those businesses that are not yet being proactive …
3.20
Similarly, Professor Paul Redmond from Anti-Slavery Australia told the Committee that a reporting requirement would reward businesses that are addressing modern slavery issues and remove the advantage for the ‘determined laggard’:
We need to remove the competitive advantage that the determined laggard has in this area. The firm that adopts best practice should not be punished for it … Movers of best practice suffer a competitive disadvantage through the expenses they incur and the opportunity to free ride … by competitors who do not.
3.21
The Committee notes that a 2015 report by the Australian Centre for Corporate Social Responsibility, together with the Australian Human Rights Commission and Global Compact Network Australia, identified that while some Australian businesses may aspire to address human rights impacts in their supply chains, most businesses lack clear strategies and processes to trace, monitor and address such risks.
Australian government actions
3.22
The Committee notes the Australian Government’s commitment to combatting human trafficking and slavery. A whole-of-government strategy has been in place since 2004 to combat these crimes covering four key areas: prevention and deterrence; detection and investigation; prosecution and compliance; and victim support and protection. The Committee notes that Australia's National Action Plan to Combat Human Trafficking and Slavery 2015‑19 (National Action Plan) provides the strategic framework for Australia's response to human trafficking and slavery.
3.23
The National Action Plan identifies the Australian Government’s ‘response to labour exploitation in supply chains’ as a key area for focus. In 2014 the Minister for Justice established the Supply Chains Working Group, made up of experts from government, business, industry, civil society, unions and academia. On 28 November 2016, the Australian Government announced it would respond to recommendations by the Supply Chains Working Group to:
create a suite of awareness-raising materials for business;
further consider the feasibility of a model for large businesses in Australia to publicly report on their actions to address supply chain exploitation;
examine options for an awards program for businesses that take action to address supply chain exploitation; and
explore the feasibility of a non-regulatory, voluntary code of conduct for high risk industries.
3.24
The Australian Government also announced that it would review the corporate reporting requirement established by the UK Act, as well as other international best-practice. The Australian Government submitted that this review is being progressed by the Attorney-General’s Department in consultation with the Department of Foreign Affairs, Defence and Trade and is due to be completed within 12 months as at the date of the submission.
3.25
The Committee further notes that, in March 2016, the Minister for Foreign Affairs, the Hon Julie Bishop MP, launched Australia’s International Strategy to Combat Human Trafficking and Slavery, which complements the National Strategy and aims to amplify the impact of Australia’s international efforts to combat human trafficking and slavery.
Support for the UK model
3.26
The Committee heard significant support for a reporting requirement based on section 54 of the UK Act. The majority of submitters and witnesses supported the following requirements of section 54 of the UK Act:
annual reporting on the steps taken to ensure slavery and human trafficking is not taking place in any part of its business or supply chains;
statements to be approved by the board of directors (or equivalent) and signed by a director (or equivalent);
statements to be published; and
extra-territorial reach to apply to entities conducting business in the UK, regardless of where they are incorporated or formed.
3.27
One key advantage of the UK model highlighted by submitters and witnesses was in raising the awareness of modern slavery risks at the highest levels of organisations and across the community. The Committee heard that awareness of modern slavery issues in Australia is generally low. For example, while acknowledging that businesses in Australia ‘are at many different stages’, Ms Margaret Stuart from Nestlé Australia told the Committee that:
… awareness of worker exploitation, such as slavery and slavery-like practices, is very low among Australian businesses. Raising awareness has to be the starting point.
3.28
The Committee heard that a board-level (or equivalent management level) reporting requirement would help to elevate awareness of modern slavery risks. Ms Tanya Barden, Chief Executive Officer of the Australian Food and Grocery Council, told the Committee:
… the real change here will come from elevating this to a board level. The fact that the act requires either senior executive or board directors to take responsibility will be really where the conversation has the most impact, because the key role of boards is in identifying and managing risks for their organisations. They will have the incentive to take the issue seriously and will face repercussions if issues are found and if they are not adequately dealt with. They will face social licence issues and public pressure because there will be that transparency in that reporting.
3.29
The other key advantage highlighted was the impact of the public disclosure of statements in driving cultural change towards addressing modern slavery. The Institute for Human Rights and Business submitted that the UK Act:
… has been instrumental in delivering significant change in company practice and has seen anti-slavery initiatives being undertaken by companies individually and collectively in a range of sectors. In particular it has encouraged engagement and action from companies and industry sectors not normally exposed to market-based pressure through consumer-facing reputational risk.
Commentary on UK Act
3.30
The Committee heard that the introduction of section 54 of the UK Act was having a positive impact in efforts to combat modern slavery in global supply chains.
3.31
The Committee notes that a number of businesses operating in Australia and already required to report under the UK Act, such as Wesfarmers and Qantas, made submissions to the inquiry. The Business Council submitted that 46 of its members have published a modern slavery statement in some form. The feedback from these members has been ‘largely positive’, noting the process of reporting:
… has helped identify reporting gaps and systemic issues and provided an impetus for enhanced supply chain governance and the risk of modern slavery to be discussed by a large group of people across the organisation.
3.32
Evidence from UK businesses and NGOs suggested that the introduction of supply chain reporting under the UK Act has been a ‘game-changer’. In its submission to the inquiry, Ethical Trading Initiative highlighted that research from its 2016 study on business responses to the UK Act found it was having a ‘galvanising effect’ and that addressing modern slavery was becoming a business-critical issue. The study found that since the introduction of the Act:
CEO and senior executive engagement on modern slavery issues had doubled;
communication between companies and suppliers increased by 58%;
collaboration between companies, peers, NGOs and multi-stakeholder initiatives increased by 50%; and
companies seeking external advice increased by 50%.
3.33
The positive impact of the UK Act was also highlighted by the UK Home Office’s submission to the inquiry. The UK Home Secretary, the Rt Hon Amber Rudd MP, submitted that while it is ‘too early’ to reliably evaluate the impact of supply chain reporting in the UK, the ‘early signs are promising’:
Businesses have responded positively and tell us that modern slavery has been discussed in many board-rooms for the first time. NGOs are setting up online registries to collate the statements, making them readily accessible to 'armchair auditors'. Many business leaders have taken significant action to identify and confront modern slavery in their supply chain[s], and many are working collaboratively with us because they recognise the strong moral and business case for doing so.
3.34
The UK Home Secretary encouraged the Committee to consider introducing similar transparency legislation in Australia and submitted that, in regard to supply chain reporting:
… we think there is merit in governments adopting a legislative approach that incentivises and supports business to take action against slavery, without too many restrictions or red tape.
3.35
However, submitters and witnesses to this inquiry highlighted a number of areas where Australia could improve on the UK Act and proposed a number of principles for consideration. These proposed principles are summarised below.
Proposed principles for Australian legislation
Consistency with international jurisdictions
3.36
Submitters and witnesses highlighted the importance of ensuring that any Australian reporting requirements are consistent with those in other jurisdictions, including the UK, to avoid duplication or varied approaches.
3.37
In particular, global companies operating in multiple jurisdictions emphasised the importance of ensuring consistency between reporting requirements and mutual recognition. For example, the Qantas Group, which already produces a statement under the UK Act, expressed concerns about ‘the potential duplication of reports companies will be required to draft and publish to meet the requirements of these Acts and potentially future parallel legislation around the world’.
3.38
Based on the experience of businesses in the UK, the Advisory Committee for the Modern Slavery Registry submitted that to create a ‘consistent global reporting regime’, Australia’s legislation ‘should improve on, while remaining broadly coherent and consistent with, legislation that is in force or awaiting final parliamentary approval’:
This would help companies reporting under multiple regimes and avoid reporting fatigue by companies. Many responsible companies tell us that they want this floor of corporate behaviour, but they also want to avoid a “spaghetti soup” of incoherent national laws that would lead to increased reporting costs with no extra impact.
Consistency with international best practice
3.39
A number of submitters and witnesses emphasised that any Australian legislation should be consistent with international business initiatives such as the United Nations Guiding Principles on Business and Human Rights (UN Guiding Principles).
3.40
The UN Guiding Principles were endorsed by the UN Human Rights Council on 16 June 2011 and provide a global standard for preventing and addressing the risk of adverse impacts on human rights linked to business activity. The UN Guiding Principles make it clear that States must protect against human rights abuses by business enterprises within their jurisdiction, and should clearly set out the expectation that businesses respect human rights through their operations, including their supply chains.
3.41
In its submission to the inquiry, the UN Working Group on Business and Human Rights of the UN Human Rights Council urged Australia to:
… demonstrate leadership by joining the growing group of States that have taken legislative steps to strengthen protection of human rights in domestic economies and global supply chains. It is essential that such efforts are aligned with international standards, notably the UN Guiding Principles and relevant ILO conventions and recommendations.
3.42
The Global Compact Network Australia noted that Australian businesses are increasingly using the UN Guiding Principles to ‘identify and manage their involvement in adverse human rights impacts including those relating to modern slavery’. Global Compact Network Australia noted that consistency between the UN Guiding Principles and any new legislation would:
… help to avoid confusion and to situate progress around prevention and remediation within the broader human rights framework, ultimately driving better performance around all internationally recognised human rights.
3.43
Australian NGOs strongly supported aligning any possible legislation with the UN Guiding Principles. For example, Anti-Slavery Australia submitted that the UN Guiding Principles:
… provide a flexible framework for businesses and states to prevent human rights abuses. Human trafficking and slavery are often caused by, or occur alongside other human rights abuses, such as extreme poverty and violence against women. The preventative framework of the Guiding Principles is a valuable tool in the elimination of the causes and conditions of human trafficking and slavery.
3.44
The Committee notes that, on 2 June 2017, the Minister for Foreign Affairs, the Hon Julie Bishop MP, announced the establishment of an Advisory Group on Business and Human Rights to provide advice to government and business on the UN Guiding Principles.
Repository of statements
3.45
A majority of submitters and witnesses supported establishing a central repository of modern slavery statements. The Committee heard that a repository would be central to facilitating scrutiny by NGOs, investors and consumers, and in encouraging a ‘race to the top’ among businesses. Mr Gershon Nimbalker from Baptist World Aid Australia told the Committee:
… if we are relying on market forces again to suppress this problem then a central repository just makes sense … If civil society, business, industry groups and investors want to be able to gather that data and analyse it and understand which companies are putting in relatively more effort, then having that housed in a central place that is regulated helps that to happen.
3.46
Some submitters expressed a range of views on how an Australian repository should be supported by government, with some suggesting it be hosted by a government department or agency, and others suggesting it be funded by government and administered by an NGO or independent agency.
3.47
The UK Act does not require the government to maintain a repository. The Committee received submissions from two UK NGOs that maintain repositories of modern slavery statements without government support:
Business and Human Rights Resource Centre: maintains the Modern Slavery Act Registry which lists all statements published under the UK Act; and
TISCreport: maintains a worldwide registry of statements prepared by companies reporting on supply chain transparency.
3.48
UK submitters and witnesses suggested that the lack of a legislated and government resourced central repository of statements was a key weakness of the UK Act. Professor Robert McCorquodale, who was the Specialist Advisor to the UK Joint Committee on Human Rights, submitted that while the two NGO‑run registries are ‘important projects’:
… without a central list of companies required to report under the terms of the Act, it is difficult to put pressure on companies that have not met their obligations.
3.49
Mr Kevin Hyland OBE, the UK Independent Anti-Slavery Commissioner, told the Committee that the inclusion of a repository in the UK Act would have been ‘useful’. Mr Hyland suggested that a repository could be funded by government and administered by NGOs or universities to encourage innovation, drive change and raise awareness.
3.50
Witnesses at public hearings also gave support for possible Australian collaboration with existing UK registries, to have one reporting database and thus preventing overlap, particularly for companies that might have to report in multiple jurisdictions.
Threshold for reporting
3.51
Submitters and witnesses offered a range of views on what the reporting threshold should be for businesses and organisations operating in Australia. Some submitters and witnesses suggested the threshold amount should consider a combination of factors, including annual turnover and business size. A range of thresholds based on annual turnover were suggested, including:
similar to the UK threshold of £36 million (around $50m to $60m);
higher than the UK to only capture large businesses;
lower than the UK to capture small and medium enterprises (SMEs);
similar to the $25 million definition of large companies under the Corporations Act 2001; or
other arrangements, such as a tiered threshold for different types of organisations.
3.52
Submitters highlighted the need for particular consideration of SMEs in determining the threshold mechanism. Mr Russell Zimmerman, Executive Director of the Australian Retailers’ Association, told the Committee:
… special care must be taken regarding over-regulation and impact on businesses with small turnover who do not have the resources to deal with what are very complex issues.
3.53
Some submitters also suggested that SMEs below the threshold (however determined) should have the option to ‘opt-in’ and report on supply chain risks. Mr Forrest told the committee that a mechanism that ‘encourages those beneath the threshold to opt-in will improve competition and improve the value of businesses across Australia’.
3.54
Similarly, Global Compact Network Australia recommended that businesses below the threshold ‘be able to voluntarily “opt in” and produce a modern slavery statement’.
3.55
Under the UK Act, the threshold is determined by annual turnover and is set at £36 million, which captures an estimated 12,000 to 18,000 companies. The threshold amount of £36 million was determined following a consultation process with businesses, NGOs and relevant stakeholders. Around 80 per cent of respondents to the consultation supported the £36 million threshold.
3.56
The UK Home Secretary submitted that the reason for applying the threshold to large companies was to reduce the burden on smaller companies:
By applying Section 54 only to large businesses, we aimed to reduce the administrative burden on smaller businesses while simultaneously ensuring that the actions (or inaction) taken by small businesses who act as suppliers to large businesses would be indirectly captured in those larger companies' statements.
3.57
Australian businesses supported further consultation on a possible threshold mechanism, coupled with support and guidance from government, particularly for SMEs. The Business Council highlighted the need for further consultation with businesses ‘to explore different options for the threshold’ and recommended that the Australian Government ‘consults extensively with business before they define which businesses the legislation will apply to or which parts of a supply chain a business must report on’.
Guidance for businesses
3.58
Submitters and witnesses emphasised the importance of providing government guidance for businesses and organisations on how to report, including on the operation of any threshold mechanism. ACCI suggested that one of the key weaknesses of the UK Act was that not enough guidance was provided to businesses prior to the introduction of the legislation.
3.59
To assist businesses in complying with the reporting requirements, the UK Home Office prepared guidance for businesses on who is required to publish a statement, how to write a statement and how to approve and publish the statement.
3.60
Civil society organisations also played an important role in providing guidance to businesses. In 2016, the Corporate Responsibility Coalition (CORE) prepared guidance material to complement the government material to share ideas about how the UK Act could be used to drive positive change and prevent modern slavery, including forced labour. CORE’s report, Beyond Compliance, provides advice from civil society groups in the UK.
Prescribing reporting requirements
3.61
Submitters and witnesses suggested a range of views on what businesses should be required to report on in their modern slavery statements. As outlined in Chapter 2, the UK Act does not prescribe what a statement must contain, but does provide six areas that a statement could contain.
3.62
Some NGOs suggested that any Australian legislation should specifically prescribe what modern slavery statements should contain, such as those six suggested areas listed in the UK Act. These groups expressed concern that the lack of prescribed requirements in the UK has led to inconsistencies in how businesses report. For example, the Walk Free Foundation submitted that in the UK the ‘lack of mandated content creates confusion and a lack of clarity for businesses trying to prepare their modern slavery statements’.
3.63
The Committee notes that analysis of UK modern slavery statements by the Business and Human Rights Resource Centre (BHRRC) has found that, to date, the majority of companies are not providing substantive disclosure in most suggested areas under the UK Act, and tend to only report on basic areas. CORE submitted that only an estimated 14 per cent of the 1800 statements available on the BHRRC’s Modern Slavery Registry comply with the three mandatory requirements of section 54.
3.64
Some submitters provided suggestions for what requirements should be prescribed. For example, Baptist World Aid Australia suggested a template for reporting similar to those it uses in producing its annual reports on the supply chains in the fashion and electronic industries. Mr Gershon Nimbalker from Baptist World Aid Australia told the Committee:
Our experience of getting companies to report on a template has been that it has helped them guide their behaviours and helped shift their culture, particularly amongst those businesses that recognise this is a problem they want to address. They become businesses that actively seek the guidance of where they want to go.
3.65
Other submitters and witnesses, particularly businesses, supported the UK model, which does not prescribe what statements should contain, allowing businesses flexibility to determine how statements should be structured. The Business Council expressed support for the UK approach, noting that it ‘provides a common framework for the statements, while not limiting an organisation’s ability to determine which areas they can meaningfully report on.’
3.66
Some businesses suggested this ‘light touch’ model of reporting would be more effective in raising awareness of modern slavery issues, and that a more prescriptive requirement could risk becoming a ‘tick-box’ exercise. Ms Margaret Stuart from Nestlé Australia told the Committee:
… the simple reporting requirements of the UK Modern Slavery Act provide a useful way to raise awareness among businesses, and are a way to encourage businesses to begin to turn their collective minds to the question of what might be happening in their supply chains beyond tier 1. We understand the viewpoint of those who want more—who want businesses to do more, to report more and to be held accountable. However, we first have to address awareness, otherwise we risk tick-a-box compliance from businesses that do not really understand what they are doing and therefore do not make any difference to any exploited person anywhere.
3.67
Ms Stuart went on to suggest that the market-based system in the UK, which relies on businesses self-regulating how they report, is beginning to yield positive results:
There are early [signs] in the UK that this approach can make a difference. It is encouraging to see that some companies are beginning to put out their second modern slavery report, that they are demonstrating more depth and length and more engagement and thinking around what they can do. It does not take a huge leap of the imagination to expect that businesses in the UK would have been looking over other businesses' reports, learning what they might do, and beginning to see what they can do next. In short, the market is beginning to work.
3.68
The UK Home Secretary submitted that the UK model is designed to encourage innovative approaches from businesses on how to address modern slavery risks in their supply chains:
We decided to avoid setting minimum standards in the Act because this would run the risk of incentivising businesses to achieve the bare minimum - compliance and nothing more - instead of creating a space for business leaders to work collaboratively with us on innovative and creative ways to pull up slavery by the root.
Due diligence
3.69
Some submitters and witnesses, particularly NGOs, suggested that the prescriptive reporting requirements should include mandatory due diligence. These groups argued that Australia’s legislation should go further than the UK Act and require businesses to demonstrate due diligence in examining their supply chains, similar to recently introduced legislation in France and the Netherlands, and conflict mineral reporting requirements in the United States (see Chapter 2).
3.70
The Advisory Committee for the Modern Slavery Registry in the UK suggested that the Australian government should:
…require companies to put in place and report on due diligence processes, in particular on processes to assess and address modern slavery risks in their own operations and supply chains.
3.71
However, a number of businesses and business groups did not support due diligence measures. For example, the Business Council noted that the due diligence model is ‘new and untested’ and there is ‘a high risk that this type of approach will result in unnecessary regulatory overburden and be onerous and costly for companies without any experience reporting on modern slavery issues’.
Penalties and compliance measures
3.72
Submitters and witnesses expressed a range of views on whether the Australian model should contain penalties and compliance measures for those businesses and organisations required to report. As noted in Chapter 2, the UK Act does not contain penalties or sanctions.
3.73
Some submitters expressed concern about the UK approach of relying on market and reputational consequences to encourage compliance. The Adidas Group noted that while potential reputational risks may be a strong motivator for consumer-facing companies, it is ‘less effective for businesses where their public profile, scale, services or products are not reputation‑sensitive’.
3.74
Some submitters suggested that Australia’s model should include penalties or sanctions. Anti-Slavery Australia submitted that market disclosure is a ‘weak regulatory tool’ and argued that the ‘serious risk of criminal slavery and human trafficking being supported and hidden by complex supply chains necessitates a stronger regulatory framework’, including penalties and sanctions to deter non-compliance.
3.75
A number of submitters suggested that compliance measures should include government publishing a list of those businesses required to report. Others suggested publishing a list of businesses that do not report. The Advisory Committee for the Modern Slavery Registry in the UK submitted that experience in the UK had shown that:
Identifying which companies are and aren’t required to report poses a significant logistical difficulty for civil society and other stakeholders. Not having in place an easy way for stakeholders to identify which companies are captured under the reporting requirements significantly weakens the integrity of the provision and allows less public facing companies to go undetected.
3.76
However, other submitters, particularly businesses, did not support a punitive approach. These submitters suggested that a market-based system based on the UK model would be more effective in encouraging businesses to investigate and report. Mr Forrest told the Committee:
The prospect of severe penalties if industries look for slavery in their supply chains and find it is the exact reason why they will not look. In fact, we need to really encourage and celebrate industries that do look and that have found slavery in their supply chains, because we know for sure that active looking and finding will bring freedom to those otherwise completely enslaved people.
3.77
Similarly, Ms Siobhan Toohill from Westpac Group argued that an ‘if-not why-not’ approach, rather than a punitive approach, would encourage businesses to work more collaboratively to address modern slavery issues:
We think encouraging participation is certainly an important way to drive engagement and, by taking an if-not why-not approach, would be more likely to … [ensure having] conversations around how organisations can improve. You might see greater levels of disclosure and organisations prepared to talk about the challenges as well as the opportunities, and that is where you see the greatest cultural change.
3.78
Some evidence supported mandating the submission of statements, with penalties for non-compliance; penalties for those who find modern slavery then refuse to do anything about it; and/or penalties for companies directly engaged or knowingly using companies with modern slavery. However, most opposed penalties for those companies that look for and find incidences of modern slavery.
Public procurement
3.79
Some submitters and witnesses questioned whether government and public bodies should also be required to report on their supply chains. As outlined in Chapter 2, public bodies in the UK are not required to report.
3.80
A number of organisations recommended that public bodies, including the Australian government, be required to report on their procurement activities. Professor Jennifer Burn from Anti-Slavery Australia told the Committee this would provide an opportunity for the Australian Government to demonstrate global leadership in ethical and responsible business practices:
… there is an inescapable and compelling obligation on government to exercise ethical and moral leadership and ensure that government procurement processes are free of the risk of human rights abuses, including slavery and forced labour.
3.81
Other submitters and witnesses suggested that government and public bodies should be required to source only from those businesses found to be in compliance with the proposed supply chain reporting requirements. Australia’s Ambassador for People Smuggling and Human Trafficking, Mr Andrew Goledzinowski, told the Committee:
I would think that it would be open to government to say that government agencies should procure only from those Australian companies that were in compliance with that modern slavery act.
3.82
The Committee notes that an opt-in reporting option for businesses below the threshold would ensure that small businesses would not be disadvantaged in working with government.
3.83
Ambassador Goledzinowski went on to state that well over 90 per cent of all procurement from government comes from Australian companies:
So if those companies are in compliance I would have thought that was, at least prime facie, satisfying of our obligation to … procure ethically. If they are not in compliance I would think it might be open to government to say that departments should not procure from those companies.
3.84
The Committee notes that, in June 2017, the Joint Select Committee on Government Procurement Rules considered human rights risks in government procurement policies and recommended that the Attorney‑General’s Department:
… oversee the introduction and application of a procurement connected policy requiring Commonwealth agencies to evaluate suppliers’ compliance with human rights regulation.
3.85
Some witnesses suggested that the requirement to comply with the requirements of a Modern Slavery Act should also apply to Australia’s foreign aid program and funds provided to foreign governments.
Need for further consultation
3.86
Submitters and witnesses emphasised that further consultation on the specifics of any reporting requirements would need to be undertaken prior to the introduction of any legislation. ACCI suggested that possible next steps could be:
… a discussion paper / more refined set of questions to encourage further engagement and invite more detailed input on how Australia should do more to address forced labour beyond our shores … Only following the next stage of this process should there be any consideration of legislation.
3.87
The Committee notes that, in the UK, the Draft Modern Slavery Bill was considered by a Parliamentary Joint Committee prior to its introduction, and businesses were later consulted in the development of the threshold mechanism. The Committee notes that this approach could be considered should an Australian Modern Slavery Bill be drafted.
Independent Anti-Slavery Commissioner
3.88
A number of submitters and witnesses supported the establishment of an Independent Anti-Slavery Commissioner, similar to the role established under the UK Act. The UK Commissioner, Mr Kevin Hyland OBE, told the Committee that the key focus of his role is in assisting to identify and support victims of modern slavery, and prosecute offenders:
… my role as the commissioner is about working with government and other agencies. We are working with non-government organisations, businesses and key stakeholders as a critical friend to ensure that consistent focus on the identification and support of victims is there for this abhorrent crime whilst, at the same time, we need to make sure that we are pursuing those who inflict the suffering so that they are brought to justice.
3.89
The Committee notes that the Joint Committee on Law Enforcement has recently recommended that the Australian Government consider appointing an Anti-Slavery and Trafficking Commissioner to monitor and implement the National Action Plan to Combat Human Trafficking and Slavery 2015-19.
3.90
Some submitters and witnesses to this inquiry suggested that a Commissioner should have a role in monitoring and enforcing the proposed supply chain reporting requirements. For example, the Walk Free Foundation suggested that the Commissioner host the repository of modern slavery statements:
The Office of the Commissioner may be the appropriate home for the repository, particularly given the Commissioner’s remit to work with the private sector. While the maintenance and management of a repository will require a different skill set and additional staff, the Office of the Commissioner would provide the required independence and ensure business and community confidence.
3.91
Mr Hyland did not support his office maintaining a repository, suggesting that it could challenge his independence:
If I were seen as the adjudicator on whether it is a good statement or a bad statement, suddenly I would get drawn into arguments and issues I should not be addressing.
3.92
The Committee notes that, in the UK, providing oversight of supply chain reporting is only one aspect of the Commissioner’s role. As the other key functions of the Commissioner’s role fall outside the scope of this interim report (such as law enforcement and victim support), the Committee will consider the exact role of an Australian Independent Anti-Slavery Commissioner in its final report.