KPMG Banarra’s Human Rights and Social Impact Services team, Richard Poole, partner, and Meg Brodie, associate director, discuss how you can meaningfully engage suppliers and build their capacity to meet new expectations around human rights risk.
The Senate Committee inquiring into the Modern Slavery Bill 2018 quietly released its report while Australia focused on the peaceable change from one Prime Minister to another.
The report is important because it marks one further step towards the introduction of legislation which will require companies to annually report on how they are addressing the risk of modern slavery in their operations and supply chain. Support for the Bill was once again overwhelming. The Committee noted that a large number of inquiry participants welcomed the Bill as an important first step towards addressing the challenges of modern slavery.
This is no longer controversial; cross-sector support from business, civil society and other stakeholders provides government with a strong constituency calling for immediate action. Indeed, many of our clients are so certain of the Bill’s passage that they are actively starting to assess their readiness to publicly report.
In our view, they are right to do so; time is a valuable commodity for those with complex supply chains open to human rights risk, including modern slavery. The actions your business takes now will be central to your first public report. It will be crucial that you can demonstrate first, that you understand that risk and second, that you have started to implement systems and controls to manage it.
The importance of taking action was given further impetus by the Senate Committee’s decision to review the accountability measures included in the Commonwealth Bill. Many submissions to the inquiry highlighted the absence of independent oversight, which remained a glaring omission in light of the existence of an Anti-Slavery Commissioner in the UK – the jurisdiction on which the Australian legislation is modelled, as well as provision for a Commissioner in the recently passed New South Wales Modern Slavery Act 2018.
To that end, the Senate Committee has recommended passage of the Bill with only one significant amendment – the establishment of an independent statutory officer. The officer’s wide range of functions would include monitoring and investigation, education, guidance and awareness raising, support for victims, engagement with government and business, and a particular role in providing data and analysis to support a review of the Act after three years. Such an officer would unquestionably strengthen the accountability framework, and provide a point of focus and momentum for guiding business responses.
If this is to be a “race to the top” on stopping slavery then all stakeholders will need to know what good looks like and be incentivised to strive for it. In our submission, we also argued for the adequate resourcing of the proposed Business Engagement Unit. Generally, the maturity of Australian business in understanding, identifying and managing human rights risk is still low. The support functions the government puts in place for the implementation of the Commonwealth modern slavery law will have a significant impact on our efforts to stop modern slavery.
This is particularly important for the first group of companies that will be required to report. The Senate Committee voiced its support for the $100 million threshold, all but ensuring that over 3000 companies carrying on business in Australia will need to report from year one. It was explicit in its view that this will drive reform in smaller Australian businesses along the supply chain. While we are already working with clients keen to meaningfully engage suppliers and build their capacity to meet new expectations around human rights risk, it is clear that significant support will be required across the value chain.
The government has the right idea – engage business, encourage innovation and work with leaders in Australia’s largest businesses. These are crucial first steps. However, the accountability structure and resources the government puts in place will significantly influence how quickly modern slavery is addressed in the Australian business community.
The Committee backed the position that there should be no pecuniary penalty scheme in the first iteration of the Act, although this is likely to be carefully scrutinised when the Act is reviewed. Nevertheless, the Committee was keen to give extra weight to the reputational risk of not reporting through the creation of a public list of reporting entities, derived from ATO data.
This was positioned as a recommendation to government – rather than a legislative change. If this is the approach, the government will need to be very clear what mechanisms it intends to use to encourage or require reporting. For instance, it seems now likely that there will be differentiated penalties for those with reporting obligations under the NSW legislation, which has a lower reporting threshold of $50 million and will impose large fines for misleading reporting or failing to report. Business will need certainty in both jurisdictions: an unambiguous signal of the consequences will be particularly important for those reluctant to participate.
While there may be amendments to the final text, the Senate Committee, comprised of multi-party representation, made it clear that there is a general consensus: the Parliament must prioritise passing the Modern Slavery Bill 2018. Given the turmoil in Canberra one could be forgiven for assuming that delay is inevitable. The very fact the inquiry report was released on time indicates that the Parliament remains committed to getting this done. After all, if they are going to agree on anything, why not stopping modern slavery.