Enforced in 2019, the Australian Modern Slavery Act was hailed as a welcome equivalent to the UK’s own Modern Slavery Act 2015, taking direction from the UK’s landmark enactment of modern slavery reporting requirements for businesses over a certain size.
However, a public consultation recently concluded as part of a statutory review of the Australian law shows that changes are being considered which could set the Australian Modern Slavery Act apart from its UK equivalent and set a higher standard for modern slavery reporting globally.
An ‘issues paper’, published to accompany the consultation, invites responses from the public to some important questions on how the Australian Modern Slavery Act should be revised. From these questions, three key issues emerge:
- First, the paper asks whether there should be a lower revenue threshold above which companies are required to report on their efforts to address modern slavery. Currently, only entities with a revenue above AUD 100m are required to report under the Australian law. The paper considers whether this reporting threshold should be lowered as far as AUD 25m, bringing potentially thousands more companies within its scope.
- Second, the paper considers the introduction of penalties for companies who fail to comply with their modern slavery reporting obligations. Examples of penalties suggested in the paper include monetary penalties, exclusion from government contracts, and sanctions against company representatives responsible for modern slavery reporting.
- Third, the paper looks at harmonising mandatory reporting criteria across jurisdictions. Australia requires modern slavery statements to cover certain obligatory topics. As similar requirements have not yet been adopted elsewhere, the consultation asks how a common set of reporting criteria can be standardised across different international modern slavery laws, facilitating the comparison of statements from one jurisdiction to the next.
These developments halfway around the world are sure to resurrect some long-held debates on the state of the UK’s own modern slavery law – debates which were (sadly, though understandably) side-lined during the pandemic, but which may gain traction under a new prime ministerial mandate.
Indeed, with a new UK Modern Slavery Act supposedly being prepared in response to commitments made by Queen’s speech to Parliament in May, these debates in Australia will provide ministers in the UK with plenty to consider. Some possible responses are set out below.
- A lower revenue threshold above which companies are required to report
Currently, the UK Modern Slavery Act requires companies to report annually on the steps they have taken to ensure that modern slavery is not taking place in their organisation or supply chains.
This reporting requirement applies to organisations above a turnover threshold of GBP 36m.
The review of the UK Modern Slavery Act completed in 2019 did not recommend that the government should lower this threshold, and asked instead that the UK focus on ‘improving compliance, quality and enforcement’ among the companies already in scope.
However, this more recent review of the Australian equivalent is considering a 75% reduction in its revenue threshold for modern slavery reporting.
If the UK Government were to follow suit, it would lead to significant increases in the number of companies falling within the scope of the UK’s modern slavery reporting obligations.
A large number of medium-sized firms in particular would be affected and required to fall in line with standards of self-assessment and transparency previously applicable only to larger businesses.
- Penalties for companies who fail to comply
The UK Modern Slavery Act enables the Secretary of State to issue injunctions against companies who fail to comply with its reporting requirements. However, this procedure has never been used.
The 2019 review of the UK Modern Slavery Act recommended that the government should strengthen this approach to non-compliance by adopting staggered sanctions, including initial warnings, fines, court summons and director disqualifications.
At the time, responses from the UK Government to these proposals were non-committal. However, the Queen’s speech to Parliament in May has since indicated that the UK’s revised modern slavery legislation could include civil penalties for organisations that fail to comply with its requirements.
Although these promises have not since been followed up in law, a decision by the Australian Government to adopt penalties for non-compliance could set an important precedent in this area.
Such a move could be a game-changer for UK modern slavery reporting, which often struggles with issues of non-compliance. An April 2022 FRC paper, for example, showed that less than half of affected UK companies provided a clear and comprehensive discussion of modern slavery concerns in their modern slavery statements, with more than one in ten failing to provide a statement at all.
Compliance in Australia has been similarly poor, with one recent review estimating that 77% of companies failed to comply with the basic reporting requirements mandated by the Australian law.
If Australia decides to remedy these common issues of non-compliance using penalties, it could set the tone for the UK Government’s own decision-making and UK businesses may need to up their game.
Importantly, this would also represent a shift in modern slavery legislation away from the softer approach, in which firms are trusted to make adequate disclosures independently, towards a harder regime in which firms could be actively sanctioned for not doing so.
- Harmonisation of mandatory reporting criteria
Currently, the UK Modern Slavery Act offers only guidance on the issues which a modern slavery statement should cover.
According to the UK legislation, an organisation's modern slavery statement can include information on modern slavery policies, areas of the business where modern slavery risks are greatest, and steps taken to address these risks. However, these criteria are not mandatory.
No legislative changes appear to have been made since the UK Government’s pledge to mandate the reporting areas that should be covered in a modern slavery statement. However, recent developments in Australia again have the potential to force the UK Government’s hand on the issue.
The Australian Modern Slavery Act already includes mandatory criteria for modern slavery reports. In completing their reports, Australian companies are obliged to include content on important issues such as due diligence processes, remediation, and consultation with owned entities.
Far from questioning whether these mandatory reporting criteria are beneficial, this latest consultation on the Australian law seems more interested in asking how they can be ‘harmonised’ across jurisdictions, implicitly encouraging foreign modern slavery legislators to follow their lead.
Indeed, there are signs that this kind of mandatory reporting criteria might be helpful in the UK. A paper last year by the Business and Human Rights Resource Centre found that, without mandated content for their modern slavery statements, many UK firms reported only the ‘bare minimum’.
If the UK Government is spurred into action on this issue, as a result of the developments in Australia, it could again raise the bar on modern slavery reporting significantly, with affected companies legally required to address a much broader range of issues in order to remain compliant.
What happens next
The latest announcement that there are an estimated 50 million victims globally will bring the issue of modern slavery back to centre stage. Ministers will be feeling this pressure as they put together a revised UK Modern Slavery Act in response to the Queen’s speech to Parliament earlier this year.
Looking to their counterparts in Australia, however, will provide them with ample food for thought.
The challenge for companies in the meantime will be to remain compliant with existing modern slavery requirements, while also preparing themselves for a future which could bring significant changes in the scope of companies affected by modern slavery reporting, the issues on which they are required to report, and the consequences for those who fail to do so.
For information on how we are helping our clients to meet their obligations under international modern slavery laws, please contact Michael Pollitt or Simon Stiggear