Change is in the air for Australia’s Modern Slavery Act 2018 (Cth) (Act), but not before the Australian Government undertakes further consultations on significant proposed reforms.
In particular, the Australian Government has flagged further consultation on introducing a requirement for a modern slavery due diligence system, which (if adopted) could see Australia move in a similar direction to increasing human rights due diligence obligations in other jurisdictions.
With the recent appointment of Australia’s first Anti-Slavery Commissioner, businesses can expect continued momentum for further developments to Australia’s framework for addressing modern slavery risks.
This will only reinforce the trend we have seen in our second major ESG survey, with businesses reporting that modern slavery is now the most heavily weighted ‘S’ factor in business and investment and strategic decisions. For more information, read our ESG report here.
Background to the response
In May 2023, the Australian Government tabled a report outlining 30 recommendations for reform of the Act – the output of a statutory review of the Act by Professor John McMillan AO (Review). Our insights on the Review can be read here.
On 2 December 2024, the Australian Government released its long-awaited response to the Review (Response), accepting – at least in principle – 25 of the recommendations while noting the other five recommendations.
The Response categorises the 30 recommendations, and its response to each, into four focus areas, summarised at the end of this article.
The introduction of penalties is expected, but due diligence requirements are less certain
Of particular note, the Response agreed in principle to the introduction of penalties for non-compliance with the Act (Recommendation 20), with the exception of penalties for a failure to have in place a due diligence system that complies with statutory rules.
That is because the Response only noted – rather than agreed with – the Review’s recommendation to introduce a requirement for such a due diligence system (Recommendation 11). Whilst the Government agreed with the importance of due diligence frameworks in identifying, preventing and managing modern slavery risks, it stated that the Act already required the disclosure of actions taken by reporting entities to assess and address modern slavery risks, including due diligence processes. However, this falls far short of requiring a reporting entity to have in place a due diligence system that complies with prescribed requirements – or even requiring them to have in place any due diligence processes.
The Government has committed to undertake consultations:
- on the introduction and operation of civil penalties for:
- failing to submit a modern slavery statement;
- providing false information in a modern slavery statement; and
- failing to comply with a request for specified remedial action; and
- to identify how the Act could be amended to enhance its due diligence requirements. Such consultation is expected to include a consideration of how enhanced due diligence requirements on modern slavery would align with broader global developments towards human rights due diligence, as we have seen mostly in Europe.
Expanding the mandatory reporting criteria but not expanding the entities within scope
In its Response, the Government noted criticisms that the current Act is ‘not sufficiently robust’ in identifying and addressing modern slavery risks in supply chains. Agreeing to Recommendation 8 in principle, further stakeholder consultation will be undertaken regarding the amendment of mandatory reporting criteria to:
- add new mandatory requirements to report on:
- modern slavery incidents or risks identified by the entity during the reporting year;
- grievance and complaint mechanisms made available by the entity; and
- internal and external consultation undertaken by the entity during the reporting year on modern slavery risk management;
- replace the phrase ‘operations and supply chains’ with ‘operations and supply networks’; and
- revise criteria 3 (risks in operations and supply chains), 4 (actions to assess and address risks), 5 (assessing effectiveness of actions to address risk) and 6 (consultation) in the Act.
However, the scope of entities required to report under the Act will not be similarly expanded: the Response indicated that the Government will not be reducing the reporting threshold at this stage (as recommended in Recommendation 4).
Status quo maintained on reporting cycle
The Government noted Recommendation 12, opting to maintain reporting timeframes rather than move towards a three-year reporting cycle. In its Response, the Government noted that ‘annual reporting is now a familiar corporate process’ and remains preferable – at least for now – while it considers changes to the substantive reporting requirements.
Enhanced transparency on compliance and opportunity for public complaint
The Response agreed to certain recommendations which, if implemented, have the potential to enhance the community’s scrutiny of, and lodging complaints about, reporting entities’ compliance with the Act. The Government agreed to:
- Recommendation 23, which will see the Government considering the practicability of making additional high-level information available regarding reporting entities’ compliance with the Act; and
- Recommendation 24, which will see the Government considering the practicability of establishing a formal procedure for the receipt and investigation of complaints from the public regarding reporting under the Act. While there is an existing means by which the public can contact the Attorney-General’s Department regarding the administration of the Act, the suitability of these processes will be reviewed as part of this process.
Guidance, guidance and more guidance
The Response accepted a range of recommendations to provide clearer guidance to reporting entities. The Government’s ‘Guidance for Reporting Entities’ is now set for review, with new and expanded content potentially including:
- alignment of the description of modern slavery practices with the terms of the Criminal Code (Recommendation 3);
- tailored guidance for small- and medium-sized enterprises (Recommendation 5);
- greater clarity on whether entities fall within the legislative definition of ‘reporting entity’ under the Act (Recommendation 6);
- greater clarity on the terms ‘operations’ and ‘supply chains’ (Recommendation 7);
- revised guidance on the mandatory reporting criteria (Recommendation 10); and
- clearer guidance on approval and signature requirements (Recommendation 16).
The Government has also said it would consult on the ability for the Government or the Anti-Slavery Commissioner to make declarations about certain regions, locations, industries, products, suppliers or supply chains as carrying a high modern slavery risk (Recommendation 27).
Next steps
The Response indicates that reporting entities will play a key role in providing input to the future direction of the Act. As set out above, consultation is expected to follow on:
- the introduction and operation of penalties, and related regulatory powers;
- the potential introduction of a mandatory due diligence obligation;
- amendments to the reporting criteria; and
- a model for high-risk declarations.
With the significant recommendations pending further consultation or further consideration – and with no indication as to the timing and scope of these processes – the ultimate formulation of the reporting obligations and associated provisions remains uncertain.
For the time being, it is business as usual in terms of modern slavery reporting in Australia, although some (albeit potentially quite modest) amendments are expected to be made to the Act in the near future. One area to keep a particular eye on will be the outcomes of the Government’s consultation on introducing a requirement for a due diligence system and how that requirement would interact with increasing human rights due diligence obligations in other jurisdictions.
For further information, please contact:
Timothy Stutt, Partner, Herbert Smith Freehills
Timothy.Stutt@hsf.com
