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Scrutiny of supply chains to increase as Australia’s Modern Slavery Act passes

Scrutiny of supply chains to increase as Australia’s Modern Slavery Act passes

Issue

  • Australia’s federal Modern Slavery Bill has been passed by the House of Representatives after approval by the Senate on 28 November. It is expected to come into effect on 1 January 2019. 
  • The Act’s mandatory reporting obligations require companies operating in Australia with annual revenues of AUD100 million (USD73 million) or more to publish annual statements on their modern slavery risks. Companies must report on risks in global operations and supply chains as well as any due diligence efforts to mitigate or remediate these risks.

Implications

  • As a result of the Act, large Australian companies that have foreign subsidiaries or which import goods from countries with much greater modern slavery risks than Australia will run the risk of reputational harm from association with the practice. 
  • For example, 73% of Australia’s imports of electronics, including laptops and mobile phones, are sourced from trading partners in China and Malaysia, which are rated as ‘extreme’ and ‘high risk’ respectively in our 2018 Modern Slavery Index. 
  • The fact that annual modern slavery statements will be publicly available in an online database, will not only give external stakeholders greater scrutiny over company due diligence efforts, but also allow them to compare compliance efforts among competitors. Investors and consumers are also likely to monitor statements closely. 
  • Faced with this level of transparency companies are going to need to commit adequate resources to both supply chain monitoring and due diligence processes in order to avoid damage to their reputation.

Outlook

  • With the French Devoir de Vigilance and UK Modern Slavery Act already in effect, plus discussions for similar legislation in Hong Kong, the human rights due diligence landscape is rapidly developing. However, the laws do converge around common requirements that businesses should follow to comply across multiple jurisdictions.
  • While there are no financial penalties for companies that fail to report, the door has been left open for civil penalties to be included in the future. 
  • Mandatory reporting requirements are a strong driver of compliance and transparency. The new Modern Slavery Act will enable Australian companies to take stronger action from the outset and set good practice standards for addressing modern slavery risks.

Read more on our blog: Behind the numbers - how Australia is tackling modern slavery

Rosie Beacock, Human Rights Researcher

To discuss this topic with an analyst or to request a Country Risk Report contact info@maplecroft.com
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