What’s the impact of COVID-19 on your Modern Slavery Statement?

The first Modern Slavery Statements (MSS) under the Modern Slavery Act 2018 (Cth) (Federal Act) are due to be lodged in the coming months (see table below). Due to the ongoing COVID-19 pandemic, original reporting deadlines were extended by the Department of Home Affairs (DHA), who have also provided guidance on how reporting entities may acknowledge and report on additional risks posed by COVID-19.

Summary of Federal Act requirements

Application

The Federal Act applies to Australian entities and entities carrying on business in Australia that have an annual consolidated revenue of $100 million or more, as well as to the Commonwealth and to corporate and non-corporate Commonwealth entities that meet that $100 million threshold. Entities operating in Australia that do not fall within the threshold revenue requirement may voluntarily comply.

Reporting requirement

The core requirement of the Federal Act is that reporting entities must produce a compliant MSS, have their principal governing body approve the MSS, and then submit it to the DHA via the new Online Register for Modern Slavery Statements. We have previously written on how reporting entities can comply with the Federal Act ('Eradicating Modern Slavery: How the new Modern Slavery Act affects your organisation').

What’s changed?

In consideration of the significant pressure COVID-19 has placed on Australian businesses, the DHA has announced an extension to certain deadlines for reporting entities to submit their MSS (as shown in the table above).

The Federal Act requires reporting entities to submit their first MSS within 6 months from the end of their first full reporting period following the Federal Act’s commencement. The Federal Act treats ‘reporting periods’ as the annual accounting period of a given reporting entity. As such, submission deadlines and relevant extensions vary.

An objective of extending the deadlines was to allow those reporting entities who had been experiencing business disruption from COVID-19 additional time to produce a satisfactory MSS. The DHA was also conscious of the unanticipated, but very relevant impact that the pandemic would have on modern slavery risks. Accordingly, the extended deadlines allow reporting entities to better interrogate such risks as part of producing their MSS.

To that end, the DHA have also published non-binding guidance on how reporting entities may need to address COVID-19 in their MSS.

How to address COVID-19 in your Modern Slavery Statement and business practices

Identify the impact of Covid-19 on modern slavery risks in your operations and supply chains

There are 2 key ways that reporting entities should consider COVID-19 as part of their MSS. The first is to ensure that (to the extent applicable) an MSS acknowledges the impact COVID-19 has had on modern slavery risks in a given supply chain, or in the reporting entity’s own operations. In this way, the DHA is reminding entities that their supply chains do not exist in a vacuum separate from the global pandemic and that its effects should be assessed accordingly. 

For example, a large retail business may have engaged new supply chains in order to comply with new government regulations or industry-body recommendations related to Covid-19, such as the ordering and installation of plexiglass dividers. As with all other supply chains, the modern slavery risk profile of additional supply chains should be considered.

Equally, existing supply chains may need to be reassessed to account for the potential impacts of COVID-19 on their operations and workforce. There is no doubt that COVID-19 has heightened existing vulnerabilities, unearthed latent risks, and created new challenges in supply chains globally. Reporting entities must accept this major shift in external forces and consider how it impacts their supplier relationships going forward.

Identify the impact of Covid-19 on your reporting capacity

The second way that reporting entities may need to discuss COVID-19 in their MSS is by describing how it has affected their ability to report under the Federal Act, or delayed any related activities planned. The DHA acknowledges that reporting entities may have a decreased ability to collect information from suppliers, conduct planned site visits, deliver training or even resource the drafting of the MSS itself. Reporting entities are encouraged to report on these limitations clearly and frankly in their MSS.

Recommendations

In addition to the above MSS-related considerations, the DHA has also recommended actions and initiatives that reporting entities may wish to consider as part of their broader social responsibility in managing modern slavery risks. The recommendations include:

• maintaining open lines of communication with suppliers and engaging them in discussions about how COVID-19 is impacting their operations;
• avoiding commercial practices that may place additional financial or labour stress on suppliers (such as delaying payments owed or renegotiating contracts on unreasonable terms); and
• collaborating with suppliers and their operational networks to workshop and codify best-practice approaches that are appropriate for the given sector.  

Though not required by law, these recommendations provide guidance as to how reporting entities can be responsible supply chain participants during this period.

Other recent developments

Considering the Commonwealth must also report under the Federal Act, in June 2020 the Australian Government released a scoping paper that sets out its intended approach to developing its first MSS, which is due before 31 December 2020. The scoping paper confirms that the Commonwealth, led by the Australian Border Force, will prepare a single MSS covering all non-corporate Commonwealth entities, and that each corporate Commonwealth entity will produce a separate MSS. The scoping paper not only makes clear the intentions of the Commonwealth, but also provides a valuable Australian reference point for other reporting entities preparing their first MSS. 

In addition to the Commonwealth’s obligation to produce an MSS as a reporting entity, the Commonwealth must report annually to Parliament on the implementation of the regime (section 23A of the Federal Act). The first of these annual reports was published on 18 June 2020. This report tracked the progress of the Federal Act’s implementation to date, and outlined focus areas of the Commonwealth going forward. Some of the Commonwealth’s proposed future activities include:

• establishing a ‘Modern Slavery Expert Advisory Group’ to provide advice on the ongoing implementation of the Federal Act; and
• developing a ‘Modern Slavery Recognition Scheme’ to further incentivise reporting entities by formally recognising excellence in innovation or collaboration to combat modern slavery in supply chains.

Final thoughts

Reporting entities should be aware of their revised reporting deadlines and ensure that, to the extent relevant, their first MSS addresses the impact of COVID-19 on modern slavery risks in their operations and supply chains.

Authors: Andrew Hii, Isobel O’Brien and Bryce Craig.