Australian Modern Slavery Laws: good intentions, inadequate impact?

Australian businesses have a very real role to play in addressing modern slavery. The recent introduction of the Corporate Sustainability Due Diligence Directive by the European Union (EU) has been hailed as sending a powerful message that the EU is taking a strong stand against modern slavery practices. While efforts have been made to strengthen Australia’s modern slavery response through the recent establishment of the Australian Anti-slavery Commissioner as an independent statutory office holder, the 2023 Global Slavery Index estimated there were 41,000 individuals living in modern slavery in Australia. Australia currently has a name-and-shame legislative approach, but if recent changes in the EU are a bellwether of things to come, Australian modern slavery legislation may just get some teeth.

Modern Slavery

Modern slavery describes a range of exploitative practices involving serious violations of people’s human rights and dignity, including human trafficking, forced labour, forced marriage, slavery, servitude, debt bondage, the worst forms of child labour and deceptive recruitment for labour or services. It shocks many to realise that these practices occur onshore in Australia. An evaluation of the legislative framework revealed there is much work to be done to meaningfully confront modern slavery and mitigate against the risk of modern slavery occurring both onshore and in the international supply chains of large Australian businesses and international companies with Australian operations. The products we buy and the services we use often have a hidden human cost.

Current requirements under the Modern Slavery Act

The Modern Slavery Act 2018 (Cth) (Commonwealth Act) was introduced by the federal government in 2018 and marked a critical first step in addressing the uncomfortable reality of modern slavery on Australian shores and in the offshore supply chains of companies doing business here. The Commonwealth Act imposes a reporting requirement on certain Australian entities and entities that do business in Australia during a reporting period to publish annual statements covering mandatory criteria describing, among other things:

• the risks of modern slavery practices in operations and supply chains;
• the actions taken by the reporting entity and any of its subsidiaries to assess those risks; and
• how the reporting entity assesses the effectiveness of such actions^[1].

The Commonwealth Act is a transparency regime that relies on entities to self-regulate and report modern slavery risks. Annual statements are made publicly available on an online register and the Minister can name and shame non-compliant entities, with a view to promoting corporate compliance.

In 2022, the Labor party pledged to galvanise Australia’s modern slavery regime. An independent Commonwealth Anti-slavery Commissioner^[2] was recently established to promote compliance with the Commonwealth Act and provide engagement and support. Similarly, under the Modern Slavery Act 2018 (NSW) (NSW Act) the NSW Anti-slavery Commissioner was appointed to, amongst other things, advocate for action to combat modern slavery and provide support to victims. 

How do Australia’s efforts measure up?

The Commonwealth Act was designed to create a mechanism that subjects businesses to public scrutiny and promotes compliance with the requirements.

While the establishment of Anti-slavery Commissioners in Australia are promising steps forward in achieving a more robust legislative framework, there are currently no financial penalties for non-compliant entities and the power of the Commonwealth Anti-slavery Commissioner is limited, with no enforcement or investigation powers, nor the ability to resolve complaints concerning instances of modern slavery.

The decision to appoint a Commissioner without enforcement and investigative powers has been criticised, particularly in the wake of a recent report (NSW Report) published by the Office of the NSW Anti-slavery Commissioner (who, like the federal Commissioner lacks formal investigative powers). The NSW Report found temporary migrant workers in low-wage roles in the agricultural, horticultural and meat processes industries in rural NSW face high risks of debt bondage, deceptive recruiting, forced labour, servitude and human trafficking.

A parliamentary inquiry into the risks of modern slavery for temporary migrant workers in NSW has also been launched following the tabling of the NSW Report. The Chairman of the inquiry committee has said that the report revealed ‘substantial evidence that many migrant workers are being subject to conditions akin to modern slavery’. Members of migrant community support groups have also spoken up, reporting that migrant workers have disclosed to them that their first experience in Australia has involved working from 4am until 8pm every day for 35 days straight. Community support groups have welcomed the inquiry but argue that more needs to be done to effect solid change for these workers. 

There are clearly serious instances of modern slavery in Australia that endure despite the Commonwealth and NSW Acts. An early review of modern slavery statements^[3] showed a lacklustre approach from many businesses to modern slavery compliance. It revealed a significant portion of statements did not address each of the mandatory criteria in the Commonwealth Act. Companies failed to identify obvious modern slavery risks in operations and supply chains, only considered first tier suppliers in the supply chain and did not adequately describe effective actions to address modern slavery risks. The review questioned the extent to which the Commonwealth Act was requiring entities to report properly, transform their business practices and therefore make a meaningful difference to people living or working under modern slavery conditions. 

A recent report on the three-year statutory review of the Commonwealth Act (Review Report) acknowledged the lack of progress and made a raft of recommendations for change. The Review Report revealed a fundamental weakness of the federal regime is the reporting requirement only obliges relevant entities to describe modern slavery risks and associated actions taken to assess and address risks, rather than imposing any positive duty to take remedial action in respect of those risks. 

With respect to modern slavery statements, the Review Report identified that enhancing reporting requirements and the standard of modern slavery reporting will be key to improving the efficacy of the regime.

Other countries have taken a more comprehensive approach to addressing modern slavery issues. Notably, the EU recently adopted the Corporate Sustainability Due Diligence Directive (EU Directive) which establishes a corporate due diligence duty. Certain EU and non-EU companies will be required to identify and address potential and actual adverse human rights and environmental impacts in the company’s supply, production and distribution streams and provide remedies where harm is found. Companies will also be liable for damages that are caused by non-compliance with their due diligence obligations. The EU Directive also provides a framework to investigate the use of forced labour in companies’ supply chains.

Significantly, the EU Directive will also apply to:

• companies with franchising or licensing agreements in the EU with a worldwide turnover higher than 80 million euro if at least 22.5 million euro was generated by royalties; and
• non-EU based companies, parent companies and companies with franchising or licensing agreements in the EU reaching the same turnover thresholds in the EU.

The EU Directive will be transposed into national law by 26 July 2026. Application will take a phased approach, with full application by 26 July 2029.

Australia has a significant two-way goods trade relationship with the EU. In practical terms, eligible Australian companies that directly or indirectly supply to EU member states will be impacted and should expect enhanced scrutiny of their management of human rights and environmental risks. Mere compliance with Australian modern slavery laws will not be enough to meet EU requirements.

Additionally, import bans in the EU and US actively restrain the supply of goods associated with modern slavery practices. In NSW, the legislative regime imposes a consultation requirement between the NSW Anti-slavery Commissioner, the Auditor-General and the NSW Procurement Board to monitor the effectiveness of due diligence procedures to ensure goods procured by government agencies are not the product of modern slavery. There is currently no equivalent import ban or due diligence procedures in this regard that apply at a federal level in Australia.

Where to from here?

Critically assessing modern slavery compliance within businesses and taking steps to remediate, or at least reduce modern slavery is not simply a feel-good corporate exercise. It is good business. Having rigorous modern slavery prevention measures can increase consumer and investor confidence and lead to increased profits and the availably of greater funding options. Companies that take modern slavery in their operations or supply chains seriously are safeguarding their business from the potential of real financial and reputational harm.

With the application of the EU Directive on the horizon, some Australian businesses will be impacted and should start taking steps to review and assess the effectiveness of their current modern slavery risk management framework. Identifying and remediating modern slavery risks is not a straightforward or quick exercise so efforts should be made now ahead of full implementation of the EU Directive in less than 5 years’ time. As global jurisdictions review the EU requirements, it is possible that the EU Directive becomes the new standard.

Addressing risks of modern slavery presents a complex challenge for businesses. While it can be said that cultural change is starting to take place, and businesses are focussing on the issue by mapping supply chains and reviewing supplier arrangements in particular, many organisations are falling short in meeting their reporting obligation and continue to adopt a ‘tick the box’ approach to modern slavery statements.

For the 41,000 people in Australia impacted by modern slavery, and the much larger numbers within global supply chains, the EU Directive requiring businesses to take action is a lifeline. For Australian businesses, especially those with business links to the EU, this is a wakeup call.

Please get in touch with us if you would like to discuss developments in this area or require assistance to meet your legislative obligations.