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5 Common Mistakes to Avoid in Your First Modern Slavery Statement

The Australian Border Force (ABF) has published the first tranche of Modern Slavery Statements. This marks a watershed moment in Australia’s fight against modern slavery, and the move towards business transparency and corporate accountability globally.

How have organisations fared in the first round of reporting? And what lessons can the rest of us learn from these early responders to ensure best practices going forward?

Submitted before the legislative deadline—which falls between 31 December 2020 and 31 March 2021 depending on your financial year reporting period—the first batch of Modern Slavery Statements provides helpful insights into how today’s organisations are defining and addressing modern slavery risks.

We also have an opportunity to learn from the mistakes that have been identified by the ABF thus far. Armed with this knowledge, we can all refine our risk management and compliance approaches, as well as avoid common reporting errors.

Firstly, it’s vital to get the basics right.

The Modern Slavery Act requires every company that conducts business in Australia and has an annual turnover of A$100m or more, to publish a yearly Modern Slavery Statement. Every statement must meet the minimum mandatory criteria set out in the Act.

At the very least, your statement should:

  • Identify your reporting entity
  • Describe your reporting entity’s structure, operations, and supply chains
  • Define the risks of modern slavery practices in your operations and supply chains (in terms of risk to people, rather than reputational or financial risk)
  • Explain the actions taken to assess and address these risks, including due diligence and remediation processes
  • Outline how your organisation assesses the effectiveness of these actions
  • Describe the process of consultation within your extended corporate structure
  • Include any other relevant information not covered through the other criteria, for context or clarity.

What lessons can we learn from the first tranche of statements?

When reviewing the first round of statements, five common compliance gaps have been noted:

1. Not meeting approval and signature rules:
Some companies failed to sign off their statements correctly. To meet the requirements for approval and signature set out in the Act, all statements must indicate principal governing body approval and signature by a responsible member.

2. Excluding reference documents:
Some statements have been submitted without including the reference documents mentioned in the statement. It is vital to enclose all relevant material, to prevent the risk of statements being deemed incomplete by the authorities.

3. Submitting generic statements:
Some multinational enterprises are submitting one blanket statement for all jurisdictions in which they operate. However, statements need to be tailored to comply with the specific reporting laws for each jurisdiction. Your statement for Australia must be amended to address the Act’s mandatory criteria for content, for example.

4. Incorrectly identifying reporting entities:
When submitting your statement to the Australian authorities, you must clearly identify the Australian reporting entity or entities covered by the statement (and not just the overseas corporate group).

5. Not describing the consultation:
It is important to describe the process your organisation has followed to enable statement submission. This involves detailing how the reporting entity or entities consulted with owned or controlled entities to put the statement together.

Beyond avoiding these blunders, here are some additional best practice guidelines for improving compliance, now and in the years to come.

Some best practice guidelines

Map your statement to the key criteria:
When structuring your statement, it is advisable to map your content to each of the seven mandatory criteria, using headings and tables as a guide, for example.

Address COVID-19 impacts:
Due to the impact of the pandemic, your organisation may not be able to provide detailed responses to some criteria in your statement. Perhaps you are currently unable to undertake planned activities to address modern slavery risks or you have experienced significant changes to your supply chains.

If your organisation has been affected by COVID-19, you need to clearly explain how the pandemic has impacted your capacity to assess and address modern slavery risks during your reporting period. The ABF also encourages reporting entities to include information about relevant activities that took place after the end of their reporting periods and before the statement submission deadline.

Provide a clear picture of modern slavery risk:
Some early statements mention that modern slavery risk areas have been identified but fail to provide sufficient risk details. It’s advisable to provide a clear and comprehensive description of the nature, context and extent of these risks.

Include practical examples:
Incorporate case studies or practical examples of how your organisation is addressing modern slavery risks. You can also use this approach to illustrate how you are engaging suppliers and collaborating with civil society to mitigate these risks.

Commit to continuous improvement:
Don’t forget to explain how you plan to evaluate the effectiveness of the interventions and actions set out in your statement, with the goal of continually optimising your response.

 

Are you ready to take compliance to the next level? For further guidance on modern slavery reporting and how to adapt your current compliance programme to the Modern Slavery Act, download Five Practical Steps to Comply with the Modern Slavery Act.