Modern Slavery Act: beyond compliance

It's been several years since Australia's Modern Slavery Act 2018 came into effect, and for many large businesses, submitting an annual statement has become a routine compliance activity. But as a recent statutory review has made clear, the 'set and forget' approach isn't good enough.

The review highlighted significant gaps in corporate Australia's response and recommended a suite of changes to give the Act more teeth, including penalties for non-compliance. For boards and management, the message is clear: it's time to move beyond the box-ticking exercise and embed a genuine approach to identifying and addressing modern slavery risk.

A quick refresher: who and what?

The Act requires Australian entities, or entities carrying on business in Australia, with annual consolidated revenue of over $100 million to submit a Modern Slavery Statement to the Attorney-General's Department each year.

These statements must address seven mandatory reporting criteria:

1. Identify the reporting entity.
2. Describe its structure, operations, and supply chains.
3. Describe the risks of modern slavery in its operations and supply chains.
4. Describe the actions taken to assess and address those risks, including due diligence.
5. Describe how the entity assesses the effectiveness of such actions.
6. Describe the process of consultation with entities it owns or controls.
7. Provide any other relevant information.

The 'compliance trap': common pitfalls in statements

While compliance rates for submitting statements are high, the quality is often poor. The 2023 statutory review, 'In Good Faith', and analysis from civil society organisations point to several common weaknesses:

• Generic risk assessments: Statements often describe general, global risks of modern slavery rather than risks specific to the company's own unique supply chains, products, and geographies.
• Process over outcomes: Many statements describe the 'what' but not the 'so what'. For example, they'll state "we sent a survey to 500 suppliers" but provide no information on what the survey found, how risks were prioritised, or what actions were taken as a result.
• Superficial board engagement: While statements are signed by the board, there is often little evidence of genuine board oversight or integration of modern slavery risk into mainstream risk management frameworks.
• Weak effectiveness measures: The requirement to report on the effectiveness of actions is the most poorly-addressed criterion. Few companies have clear KPIs to track whether their actions are actually reducing risk for workers.

Moving from process to impact

A more effective approach moves beyond describing processes and focuses on demonstrating impact. This requires a risk-based methodology driven by prioritisation.

Instead of trying to survey every single supplier, leading practice involves:

1. Risk Mapping: A thorough analysis to identify the specific products, services, or geographies in your supply chain that carry the highest risk of modern slavery (e.g., sourcing raw materials from high-risk countries, using labour-hire services in low-wage sectors).
2. Deep Dives: Focusing your due diligence efforts on these high-risk 'hotspots'. This means moving beyond simple questionnaires and conducting more in-depth assessments, desktop audits, or, for the highest-risk suppliers, engaging local experts to conduct on-site visits and worker interviews.
3. Actionable Leverage: Using your commercial relationship to drive improvement. This could involve embedding stronger modern slavery clauses in supplier contracts, collaborating on corrective action plans, or building supplier capacity through training.

The coming changes: what to expect

The 'In Good Faith' review made 30 recommendations to strengthen the Act. While the government is yet to formally respond, we can expect the regime to get tougher. Key proposals include:

• Introducing penalties: Financial penalties for failing to report, or for submitting statements that are knowingly false or misleading.
• Lowering the reporting threshold: Potentially lowering the revenue threshold from $100 million to $50 million, capturing thousands more companies.
• Mandating a due diligence system: Requiring companies to have a specific due diligence process in place, not just report on their actions.
• Appointing an Anti-Slavery Commissioner: To oversee the regime and drive better practice.

These changes would significantly raise the stakes for companies.

The bottom line

The Modern Slavery Act was designed to be a catalyst for change, not a paperwork exercise. Simply submitting a statement is no longer enough. The expectation from government, investors, and the community is that companies will demonstrate continuous improvement in how they understand and address the real-world risks of exploitation in their value chains. It's time to review your approach and ensure your actions are as robust as your statement claims them to be.