Written by Field Name
Report Date
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As modern slavery reporting continues under the Modern Slavery Act 2018 (Cth), many mandatory reporting entities have now submitted multiple statements. For many commentators on the nature and effectiveness of the Act’s operation, the overall quality of modern slavery statements has become a bit like Groundhog Day.
Some entities’ statements for successive reporting periods are sounding the same as last year’s (and maybe the year before, or even the year before that…). It only takes a random sampling of the responsible Australian Government Department’s online public register of lodged statements to see that widespread “copy and paste” of entire sections of statements from the previous year is a practice that is far more common than it should be. There have also been some indications that unjustified duplication will be an upcoming focus of the Government’s active monitoring of the quality of modern slavery statements.
Perhaps even more importantly, there is a clear trend where the nature and extent of substantive due diligence being undertaken by many entities has stagnated, or even regressed. Plenty of statements continue to be sprinkled with the popular rhetoric of the entity’s modern slavery response being one of “continuous improvement”. The reality, however, often paints a very different picture.
Having been involved with assisting reporting entities undertaking comprehensive risk assessment, substantive due diligence, and other key steps in the preparation of several hundred modern slavery statements since the Act’s commencement, we are convinced that these trends are generally not because ESG-minded companies consider modern slavery reporting to be little more than an annual box-ticking exercise. Rather, it really comes down to a lack of forward planning and operational triage.
Impressive modern slavery due diligence takes time and resources. Plain and simple.
During the early years of reporting under the Act, it was commonplace for companies to populate significant chunks of their statements with descriptions of a newly minted Supplier Code of Conduct, Modern Slavery Policy, staff training module, and other internal initiatives that could potentially be rolled out quite swiftly. Such initial measures, unaccompanied by further development, are now far removed from what is considered to be “best”, “leading” or even “good” practice in meaningful modern slavery due diligence and risk mitigation. Instead, due diligence activities now required to meet satisfactory to higher standards of practice, take, at a bare minimum, several months to develop and implement. Often, they require an ongoing commitment and consistent implementation of a well-organised action plan that spans multiple reporting periods.
This discussion paper outlines practical strategies for companies to enhance their modern slavery due diligence on an ongoing basis. If developed and implemented early, with clear and trackable month-by-month progress milestones, we are confident that the suggested approaches will help in achieving noticeably better reporting under the Act. In our opinion, intentionally implementing these forward-looking approaches will also significantly reduce the risk of the (common) broader criticism that a reporting entity is producing little more than year-after-year of hollow rhetoric.
This paper offers some thoughts in relation to each of the following questions. The topics covered are designed to practically stimulate effective and appropriately tailored planning for a company’s response to modern slavery issues in the current reporting period, and beyond:
- Are we on track with the planned measures for this reporting period described in our last statement?
- Does our company have any upcoming major procurement decisions?
- Does our modern slavery due diligence, risk assessment and mitigation strategy plan beyond the end of this reporting period?
- Come reporting time, what are we going to be able to say about external collaboration?
- Has our company transitioned beyond general industry-level due diligence to supplier-specific activities?
- Is our risk identification and assessment up to date and up to scratch?
Are we on track with the planned measures for this reporting period described in our last statement?
The final mandatory reporting requirement under the Act is a discretionary ‘catch-all’ that relates to entities describing any other relevant information. During the first few reporting periods, and in line with the ABF’s official guidance, this section was typically used for entities to describe the impact of the COVID-19 pandemic on their modern slavery risk and response. In more recent periods, it has become reasonably commonplace for companies to use this final section to describe the foreshadowed measures planned for the upcoming reporting period.
Another area in which such forward-looking statements have become commonplace in modern slavery statements is where an entity has been unable to complete a planned measure for a given reporting period (often described in its “Measuring Effectiveness” section) but describes it as a “priority” for the next reporting period. In either instance, it is striking how often a review of the entity’s subsequently lodged statement reveals that such foreshadowed measures have not actually been undertaken. Worse still, these previous plans are ignored altogether in the subsequent statement. This can be a clear demonstration that an entity is immature in its modern slavery response and does not (yet) have sufficient continuity in its actions across successive reporting periods.
To guard against being in the situation, can it be helpful to start the year by reviewing your company’s most recently lodged statement (especially the sections mentioned above) and prepare a table of the intended measures for this reporting period described in it. More substantial tasks should be broken down into clear monthly milestones and this can be effectively done through the preparation of a comprehensive multi-year (or even annual) plan (see below: Does our modern slavery due diligence, risk assessment and mitigation strategy really go beyond the end of this reporting period?).
Does our company have any upcoming major procurement decisions?
It is almost universally recognised that some of the most impactful due diligence involves measures that are undertaken before a company makes a major procurement decision. For example, a reporting entity that describes its process for comprehensively screening solar panels for a new office fit out based on an evaluation of the lowest overall risk supplier or the one with most impressive risk mitigation framework during the tender/pre-contract phase is demonstrating far better practice than a company that merely acknowledges the general industry risks of solar panel supply chains in its statement.
As part of the planning phase for the upcoming year, we recommend that the team member(s) responsible for championing modern slavery due diligence proactively and promptly open channels of forward-looking communication with key procurement staff about any major upcoming procurement decisions that may have significant implications from a modern slavery risk perspective. Some common examples include:
- non-recurring building or construction works (such as office fit out or renovation);
- food catering and hospitality services for a major company event;
- cleaning or security services contracts;
- solar or renewable energy infrastructure (such as lithium battery banks) purchases;
- company upgrades of desktop computers, laptops and/or other electronic devices;
- staff uniforms
Do our modern slavery due diligence, risk assessment and mitigation strategies really go beyond the end of this reporting period?
In our experience, one of the best ways for any company to implement a modern slavery response that has maximum impact and genuinely showcases continuous improvement between reporting periods is through developing and implementing a Multi-Year Modern Slavery Response Plan.
We typically recommend and assist with plans that cover a period of three years. However, this is not a fixed rule and different company circumstances may dictate that longer (or slightly shorter) duration plans are a better fit.
The following is an outline of a sample ‘menu’ of a range of due diligence activities from which companies can make selections to develop a well-balanced and holistic multi-year plan. To help facilitate a spectrum of actions that are appropriately tailored to the relative levels of risk, we tend to group these measures based on the general risk level of the type of supplier(s) for which it will be implemented:
Due diligence activities for different risk levels of supplier(s)
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Elevated risk suppliers
In terms of how many of the elevated due diligence measures can realistically be implemented, we generally recommend, as a starting point, only selecting 1-2 elevated-risk due diligence measures for the initial reporting period. This reflects how resource-intensive and long-term these measures are designed to be, with a focus on long-lasting, cumulative impact. If significant progress is made on selected measures beyond that which is initially anticipated, the measures can readily evolve with further follow-up action.
Moderate risk suppliers
In our experience, an entity that successfully completes 3-5 activities of the kind listed above for moderate risk suppliers is generally going to be positioned at the more impressive end of the spectrum for all reporting entities.
Lower risk suppliers
These due diligence activities include some of the most common measures evident in modern slavery statements for the first couple of years of the Act’s operation. For example, supplier self-assessment questionnaires (SAQs) have been a prominent feature of modern slavery due diligence since the inception of mandatory reporting regimes.
It is important to bear in mind that companies which remain solely or predominantly reliant on SAQs as the central feature of their overall due diligence response now risk criticism as only engaging in ‘token’ measures. Particularly for mandatory reporting entities and other sophisticated global entities, supplier SAQs are now widely recognised as being ‘low hanging’ fruit when it comes to supplier due diligence. Response rates that are typically minimal; a lack of meaningful follow-up action; and an overall impression of ‘tick the box’ due diligence are all commonly cited reasons as to why SAQs should be viewed, at most, as only a relatively modest part of an effective overall due diligence framework.
Whilst we have not included detailed discussion of each of the above due diligence actions in this paper, in the process of preparing a multi-year modern slavery response, it is very important that key personnel become familiar with the nature of each measure and what is involved in successfully achieving the set targets. Some of the general questions that should be answered in relation to any type of due diligence under consideration include:
- What kind of elevated risk supplier is appropriate for [the selected due diligence activity]?
- What are the key features of [the selected due diligence activity], including considerations relating to timing, cost and essential personnel / departmental involvement (both internal and external)?
- What steps need to be taken / conditions need to be in place before the [selected due diligence activity] can be undertaken?
It is up to an individual company to decide whether selecting a range of specific suppliers or the proposed due diligence activities comes first. There is no right answer about which approach is better. Some companies will have specific suppliers already in mind in relation to suitability for specific due diligence measures.
Once the selection of activities and corresponding suppliers is complete, we find that the most useful next step is to prepare a draft calendar that sets out, on a month-by-month basis, the interim goals and activities that need to be completed.
Avoid over-promising and under-delivering. Sticking to, and completing, planned due diligence measures is a signpost of a mature ESG framework. Once the company’s draft Multi-year plan is completed – take a hard look at it and consider whether the required time and resources will actually be available to undertake all planned measures. Concentrate on a balanced mix of high, moderate, and low-risk measures in a few key areas, rather than spreading resources too thin.
Another advantage of a comprehensive multi-year plan is that, when it comes to reporting on progress and measuring effectiveness in the annual modern slavery statement, specific key performance indicators (KPIs) can readily and directly be adapted from the Plan, including through the extent to which month-by-month progress goals are being met.
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Come reporting time, what are we going to be able to say about external collaboration?
Significant external partnerships and collaboration are generally considered essential characteristics of effective modern slavery due diligence, not an optional add-on.
By working collectively (and on a long-term basis) with external stakeholders (including industry bodies and public interest groups), companies can enhance their collective capacity to identify, assess and address issues with high-risk suppliers, and promote ethical practices throughout their industry groups.
Establishing partnerships with industry-specific or cross-sectoral organisations, openly sharing information and insights on risks and best practice methods and conducting joint audits / assessments with collaborating entities are all options that are worth pursuing, depending on individual company circumstances and priorities.
Partnerships and external input on key initiatives from leading NGOs and other watchdog-type third-party stakeholders can substantially boost the overall credibility of a company’s modern slavery response and can counter scepticism surrounding the inherently self-appraising nature of modern slavery statements. Some of the most prominent examples of this are in the Australian apparel industry, particularly around the concept of Living Wage audits for workers in international manufacturing facilities.
Has our company transitioned beyond general industry-level due diligence to supplier-specific activities?
Another important way to demonstrate genuine “continuous improvement” is through progressing beyond industry category level actions to comprehensive due diligence activities involving actual (current or prospective) suppliers.
Although the published descriptions of such activities through subsequent modern slavery statements will (and should) almost invariably be anonymised and generalised (to protect commercial-in-confidence details and maintain trust for ongoing supplier relationships), the inclusion of such supplier-specific activities is often one of the clearest differentiating features that point towards an above-average modern slavery response framework.
Another interesting aspect that we have repeatedly seen in our involvement with this kind of due diligence activity is the confounding of general expectations and common stereotypes regarding at-risk workforces. The following case study illustrates this.
Is our risk identification and assessment up to date and up to scratch?
The increasing push for companies to get serious about substantive due diligence is a welcome trend that is only likely to gather further momentum, both in Australia and abroad. However, given the time and resources that such activities require, and the impracticability for most companies in carrying out in-depth and longer-term due diligence actions in every facet of their supply chains and operations, the foundational bedrock of comprehensive risk identification and assessment becomes more important than ever.
Despite this, our analysis of the overall cohort of publicly available modern slavery statements over the past year or so indicates that risk identification and assessment is one of the most common areas for blanket repetition across successive modern slavery statements. Contrary to this, effective risk assessment should be updated regularly (and at least annually). It should focus not only on identifying the most up-to-date industry categories, but also on ensuring that the particular supply chain tier(s) at which the most elevated risks are potentially occurring is constantly monitored.
For example, the publication of the Walk Free Foundation’s updated Global Slavery Index in May 2023 provided important updates to risk data inputs both within Australia and abroad. Such changes have the potential to significantly alter the overall results of reporting entities’ risk identification and assessment. While initial due diligence activities are most commonly targeted at first-tier (direct) suppliers, an effective multi-year modern slavery plan will greatly assist companies to build upon prior actions in establishing a long-term pathway towards effective risk mitigation activities that extend far deeper into a company’s key supply chains.