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Many Australian organisations submitted their first modern slavery statement in March 2021, in line with the Australian Modern Slavery Act (the Act). This is a big milestone and those who made it should be applauded for their progress.
It’s now tempting to park this issue until December when the next statements are due, but no rest for the compliant: the legislation calls for annual reporting and continuous improvement, and the window of opportunity for second-year progress is nearly closed.
Organisations need to act quickly to make progress from their first slavery statements, and they should strive to fall into a slavery reporting rhythm to enable year-on-year progress and avoid last-minute dashes over the deadline.
In this article, we provide suggestions for a basic Modern Slavery reporting cycle to help organisations ensure they are well prepared ahead of upcoming deadlines.
To develop a rhythm, we recommend breaking down the financial year into quarters and focusing on specific aspects of compliance in each, to set manageable targets and goals for success.
2021 modern slavery reporting – we are now at a confluence of stages
All organisations complying with the Act and on the Australian financial calendar are currently in a small window between reporting stages. The first reporting period – which was extended by three months due to the global pandemic – recently closed on 31 March, leaving organisations now roughly three months to undertake counter-slavery activities for their second statement.
Chart I below depicts the Act’s reporting cycle and highlights that most organisations are currently sitting with just over just two months left in the current activity window for their second slavery statement.
Organisations that have not yet begun any second-year activities risk running out of time and having to submit an un-progressed second slavery statement that fails to show clear year-on-year progress.
Chart I Reporting timeline for the Modern Slavery Act
The Act requires all entities turning over more than A$100 million in consolidated revenue to improve upon their counter-slavery response every financial year, and then within six months to report that progress in a publicly available statement on the government’s register.
Importantly, the reporting deadline for the 2020-2021 financial year is not subject to any COVID-19 extension, so all organisations on the 30 June financial year will need to submit their second statement by 31 December 2021. This won’t feel like a lot of time for organisations that used the optional pandemic reporting extension. However, after what may be a rushed second-year reporting cycle, most organisations should be able to settle into a reporting rhythm ahead of their third slavery statement.
Here we propose a simple structure for that rhythm.
How to get into a healthy rhythm of modern slavery reporting
The key for organisations is to settle into an annual rhythm of counter-slavery action and reporting against the Act. This will smooth out the year and prevent December rushes to prepare and submit compliant statements.
To develop a rhythm, we recommend breaking down the financial year into quarters and focusing on specific aspects of compliance in each, as depicted in Chart II below.
Chart II Proposed reporting cycle for the Modern Slavery Act
Proposed counter-slavery reporting activities by quarter
Quarter 1. For the first financial quarter in our proposed reporting process, you can measure progress from the year before and recalibrate your organisation’s counter-slavery strategy, targets, and KPIs accordingly. These findings should be included in your forthcoming slavery statement to respond to the Act’s requirement for continuous improvement and Criterion Five’s call for measurement of counter-slavery effectiveness.
Quarter 2. In the second quarter, focus on preparing and submitting your modern slavery statement for the previous financial year. This assumes that your organisation doesn’t have enough dedicated counter-slavery compliance capacity to focus all four quarters on activities, while also keeping up with statement-writing. If your organisation has no problem dual-tracking report writing and counter-slavery activities, we highly recommend doing so. Chart II is a relatively conservative assumption about available capacity.
Quarter 3. For the third quarter, we recommend you focus on longer-term counter-slavery activities such as assessing risk further into your supply chain or engaging suppliers identified as higher risk. This type of activity requires considerable time and focus and may spill into the final quarter of the financial year. These are also long-term projects that can be improved upon every year, but it will help your reporting process to think about them in one-year blocks. For example, you could focus risk mitigation and engagement activities on your 100 riskiest suppliers for your second statement, and then tackle 100 other suppliers every year thereafter until you get across your entire supply chain.
Other long-term projects that will require focused effort over several years might include your organisation’s grievance mechanisms, remediation processes, dedicated training, and greater transparency further into your supply chain’s tiers. These deeper activities will require more dedicated time but can set your organisation up for long-term progress and reporting.
Quarter 4. Realistically, you will probably use the final quarter to shore up loose ends and finish off some quicker activities that you want written into the next statement. This could include revising relevant policies and procedures to directly reference modern slavery, issuing generic slavery training to more staff, or developing procedures for onboarding suppliers that incorporates checks and controls for modern slavery. Some activity streams will require constant maintenance or improvement, as shown in the center circle of Chart II. For example, training will likely be an ongoing process for all new employees that join your company, as will managing your whistleblower, grievance, and remediation mechanisms to respond to risks and incidents as they arise.
After you complete this reporting process a few times and refine it for your organisation’s specific needs, you will begin to fall into a reporting rhythm with the Modern Slavery Act. This will help you avoid rushing counter-slavery activities right before the deadline and then back-dating them into your statement. Not only is this dishonest, but it builds pressure in the future by shrinking your activity window for the next reporting year. Padding out your subsequent statement with back-dated activities makes it hard to get into a rhythm.
Embedding this proposed quarterly counter-slavery reporting process (or one of your own making) into your business operations will require clear assignment of responsibility to someone within your organisation. If no one focuses on this then it will be very difficult to get into a healthy reporting cycle and will inevitably be put off until near the deadline.
The upshot of reporting rhythm is not only ease-of-reporting, but it also sets your organisation up to prepare and submit a stronger slavery statement that can stand out among peers, help attract and retain employees, and impress consumers.
What happens if you don’t progress your modern-slavery activities year-on-year?
The Australian Modern Slavery Act has no direct financial or legal penalties for non-compliance, but there are still material reasons why organisations should be serious about assessing effectiveness and demonstrating improvement year-on-year in compliance with Criterion 5 of the Act (which requires you to describe how an entity is assessing the effectiveness of actions being taken to assess and address modern slavery).
A leading reason to track and show annual progress is the notorious “name and shame” clause included in the Act. This serves as a spectre whereby the government may, at some stage, publicly list companies that have failed to comply or failed to sufficiently undergo remedial action upon request.
This clause has not been used yet, as the government seems set on leniency for the first reporting cycle. However, over time, the government’s expectations will rise, and they could start deploying the “name and shame” clause, especially in the lead-up to the three-year review of the Act’s effectiveness.
Your organisation should strive to fall into a reporting rhythm before the government’s expectations increase.
If your organisation has submitted your first slavery statement already, it is important to show progress in your next statement. If you included any targets or KPIs in your first statement, these are easy points to focus on progressing. For example, many organisations said they would undergo a more comprehensive supply chain assessment for slavery risk. This assessment should be undertaken before the close of the second reporting year (June 30 for most) and then reported on in detail in the December statement.
What is clear is that the government expects you to demonstrate annual progress (see Page 31 of the Commonwealth’s Guidance for Reporting Entities). If your second statement looks almost exactly like the first, people are going to notice.
Even if the government waits to use the “name and shame” clause to encourage uptake of reporting, there are others who may notice. Academics and law students are already scrutinising the publicly available register, and NGOs, the media, and even consumers will be able to quickly access and assess an organisations seriousness and compliance with the Act.
It is hard to call an organisation non-compliant with their first statement unless they simply fail to submit one. However, once an organisation has submitted a second statement, if it fails to measure and demonstrate progress, it could be an easy target for scrutiny. These risks can be avoided by breaking down the financial year into quarters and progressing counter-slavery activities and reporting in line with your organisation’s capacity.
The issue of modern slavery is serious issue with material risks for companies and, most importantly, people around the world. By assigning clear responsibility and working throughout the year, we can all contribute towards identifying and eradicating modern slavery.
We help organisations advance their counter-slavery efforts and comply with the Australian Modern Slavery Act (Cth) 2018.
Reach out to our team if you need some advice or assistance with your modern slavery compliance.