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ORGANISATION

Signing off on
modern slavery
statements
With the Modern Slavery Act 2018                                                         Who is required to report under the Modern Slavery
(Cth) (Act) applying for Australian                                                      Act 2018 (Cth)?
companies’ first financial year                                                          Under the Act, ‘Australian entities’ and ‘entities carrying on
                                                                                         business in Australia’ with consolidated revenue of at least
commencing after 1 January 2019,                                                         $100 million are required to prepare and submit a modern
many businesses are currently                                                            slavery statement.
in the process of preparing and                                                          ‘Australian entities’ is defined to include companies, trusts
submitting their inaugural modern                                                        and corporate limited partnerships which are resident in
                                                                                         Australia for tax purposes, as well as other partnerships and
slavery statement.                                                                       entities (whether incorporated or not) that are formed in
Under the Act, modern slavery statements                                                 Australia or centrally managed or controlled from here. This
are required to be approved by the board and                                             means that the Act applies to a wide range of entity types,
signed by a director. While this approval is                                             including companies, superannuation funds, not-for-profit
often straightforward for companies reporting                                            entities and charities. The Act also allows entities that are not
on a standalone basis, in the context of larger                                          legally required to report to voluntarily prepare a statement.
corporate groups the complexity and risks for                                            In this director tool, we focus on ‘companies’ which are
boards are significantly higher.                                                         reporting entities, but in most cases the observations will
This director tool is intended to step directors                                         similarly apply to trusts and partnerships.
through key considerations and areas of potential
risk that they should ensure are addressed before                                     The tool has been prepared jointly by the Australian Institute
signing off on modern slavery statements for                                          of Company Directors (AICD) and Herbert Smith Freehills’ ESG,
corporate groups. It provides an overview of                                          Sustainability and Responsible Business practice1, drawing on
the role of the board under the Act, highlights                                       learnings from the UK modern slavery reporting regime and the
notable areas of complexity when reporting for                                        first wave of Australian modern slavery reporting during 2020.
corporate groups, sets out significant areas of risk                                  This guide should also be read in conjunction with the AICD’s
for the board, and concludes with better practice                                     modern slavery risk tool for members, Modern slavery risk
observations for reporting under the Act.                                             oversight.2

1
  Herbert Smith Freehills, 2020, ESG, Sustainability And Responsible Business: Building a resilient future, [website], https://www.herbertsmithfreehills.com/our-expertise/services/esg-
sustainability-and-responsible-business, (accessed 24 November 2020).
2
  Australian Institute of Company Directors, 2020, Modern slavery risk oversight, Director Tool, https://aicd.companydirectors.com.au/-/media/cd2/resources/director-resources/director-
tools/2019/pdf/modern-slavery/07236-5-modern-slavery-oct-19-a4-web.ashx, (accessed 24 November 2020).

DIRECTOR TOOLS: ORGANISATION                                                                                                            For more information visit aicd.com.au 1
S I G N I N G O F F O N M O D E R N S L AV E RY S TAT E M E N T S

                                                                  The board’s responsibility for                                    For most large corporate groups
   What is the status of the NSW                                  modern slavery reporting                                          with centralised management
   Modern Slavery 2018 Act?                                                                                                         and governance, the parent
                                                                  Under the Act, reporting entities are
   The NSW Modern Slavery Act 2018                                                                                                  company’s board will approve the
                                                                  required to annually prepare and
   (NSW Act) is currently on hold.                                                                                                  statement on behalf of all the
                                                                  submit a modern slavery statement to
   The NSW Government has                                         the Minister for Home Affairs within                              reporting entities within the group,
   committed to harmonising                                       six months of the end of their financial                          with the chair or managing director
   the NSW Act with the                                           year. Where there is more than one                                signing the statement once approved.
   Commonwealth Act, though with                                  reporting entity in a corporate group,
   the NSW Government view that                                   the group may prepare one or more
   the reporting threshold should                                                                                                      Department of Home Affairs’
                                                                  joint statements covering the relevant                               guidance materials and register
   be $50 million consolidated                                    reporting entities.
   revenue (rather than the $100                                                                                                       The Department of Home
   million requirement under the                                  The board has principal responsibility                               Affairs has published a range
   Commonwealth Act).                                             for modern slavery reporting                                         of guidance material, including
                                                                  under the Act, given its role in                                     a comprehensive note titled
   The NSW Government has                                         approving and signing modern                                         Guidance for Reporting
   also stated that the NSW Act                                   slavery statements.                                                  Entities, a fact sheet on good
   should commence on or before 1                                                                                                      practice trends and areas for
   January 2021.                                                  Approving and signing statements                                     improvement identified from
   It is unclear whether the                                      With respect to individual statements,                               modern slavery statements that
   Commonwealth will have the                                     the board of the reporting entity must                               have already been submitted,
   appetite for adopting a lower                                  approve the statement and a director                                 and supplementary guidance on
   threshold for reporting, and how                               must sign it under the Act. With                                     the consultation requirements.
   long the NSW-Commonwealth                                      respect to joint statements, there
                                                                                                                                       While non-binding, these
   discussions are likely to take. It is                          are three ways under the Act for the
                                                                                                                                       materials will be used as
   unclear if and when the NSW Act                                statement to be approved and signed:
                                                                                                                                       yardsticks for assessing modern
   will commence.                                                                                                                      slavery statements going forward.
                                                                  • By each reporting entity - with
                                                                    this approach, the board of each                                   These guidance materials can be
                                                                    reporting entity would approve                                     found here.3
  AICD director tool: Modern                                        the statement and a director from
  slavery risk oversight                                                                                                               The Department’s online register
                                                                    each board would sign;
                                                                                                                                       for modern slavery statements
  In October 2019, the AICD                                                                                                            can be found here.4 The
                                                                  • By a 'higher entity' (for example,
  published a tool for its members                                                                                                     website houses modern slavery
                                                                    the parent company’s board) -
  on modern slavery risk oversight,                                                                                                    statements provided by entities
                                                                    with this approach, the board
  summarising the legislative                                                                                                          reporting under the Act.
                                                                    of a reporting entity which is in
  framework for directors and
                                                                    a position, directly or indirectly,
  providing practical guidance to
                                                                    to influence or control the other
  assist directors in their oversight
                                                                    reporting entities would approve
  role of modern slavery risks
                                                                    the statement on their behalf and
  in their operations and supply
                                                                    have one of its directors sign; and
  chains. The tool can be accessed
  on the AICD’s website here.                                     • Where the above two approaches
                                                                    are impracticable, by any reporting
                                                                    entity covered by the statement -
                                                                    this approach would be unusual, but
                                                                    in such a circumstance the board of
                                                                    any of the reporting entities named
                                                                    in the statement could approve
                                                                    the statement on behalf of all the
                                                                    reporting entities and have one of
                                                                    its directors sign.

3
  Australian Government Department of Home Affairs, 2020, ​​​​​​​​​​​​​Modern slavery, [website], https://www.homeaffairs.gov.au/about-us/our-portfolios/criminal-justice/people-smuggling-human-
trafficking/modern-slavery, (accessed 8 December 2020).
4
  Australian Government Department of Home Affairs, 2020, Online Register for Modern Slavery Statements, [website], https://modernslaveryregister.gov.au/, (accessed 8 December 2020)

DIRECTOR TOOLS: ORGANISATION                                                                                                               For more information visit aicd.com.au 2
S I G N I N G O F F O N M O D E R N S L AV E RY S TAT E M E N T S

  Who should sign the statement?                  What are the requirements of the Modern Slavery Act 2018 (Cth)?
  In practice, the entire board will              The Act imposes an obligation on relevant reporting entities to prepare
  typically approve the statement                 and submit a modern slavery statement which must:
  prior to it being signed, which
                                                  • identify the reporting entity;
  reduces the significance of
  the person who is signing                       • describe the structure, operations and supply chains of the reporting entity;
  the statement from a risk
                                                  • describe the risks of modern slavery practices in the operations
  perspective (as they will have
                                                    and supply chains of the reporting entity (and any entities that the
  the endorsement of the board in
                                                    reporting entity owns or controls);
  doing so).
                                                  • describe the actions taken by the reporting entity (and any entity that
  Currently there are different
                                                    the reporting entity owns or controls), to assess and address those
  organisational approaches to
                                                    risks, including due diligence and remediation processes;
  this. Some want the chair to
  sign to signify the importance of               • describe how the reporting entity assesses the effectiveness of the
  the issue and the organisation’s                  actions it takes to assess and address its modern slavery risks;
  commitment to preventing                        • describe the process of consultation with any entities that the
  modern slavery. Others want                       reporting entity owns or controls and, for joint statements, the entity
  the managing director to sign                     giving the statement; and
  given they are accountable for
  implementation of the group’s                   • include any other information that the reporting entity, or the entity
  modern slavery risk management                    giving the statement, considers relevant.
  program and overseeing the
  preparation of the statement.                 Consequences of getting it wrong
                                                At present there are no penalties for non-compliance with the Act (see below,
Ensuring representations are accurate           What happens if the modern slavery statement is non-compliant?)
In approving and publishing the
                                                However, the consequences of inaccurate or misleading disclosure extend
modern slavery statement, the board
                                                well beyond the Act and may include:
makes public representations about the
group’s approach to risk management               Regulatory        • Breach of directors’ duties – for example, failure to exercise
for modern slavery issues.                        action              skill, care and diligence by appropriately managing and
                                                                      disclosing modern slavery risks.
This reflects that the modern
slavery statement includes detailed               Consumer          • Consumer claims – for example, Australian Competition and
information regarding reporting                   action              Consumer Commission (ACCC) complaints for misleading
entities’ structure, operations and                                   statements about ethical sourcing.
supply chain, areas of modern                                       • Consumer class actions – for example, in the US, consumer
slavery risk, and details of what they                                class action claims have been brought against chocolate
do to manage those risks in practice.                                 manufacturers over representations made regarding their
                                                                      supply chain practices.
Inaccurate or misleading disclosure
may be used as a ‘hook’ by activists              Shareholder • Requisitioned resolutions – for example, resolutions
and consumers when seeking to                     action        requisitioned at the company’s AGM, seeking a review of the
                                                                company’s supply chain practices or greater union involvement.
hold companies to account on social
issues or by shareholders alleging                                  • Shareholder class action – for example, a class action claiming
losses resulting from undisclosed                                     breach of continuous disclosure laws following a share price
                                                                      drop precipitated by modern slavery issues impacting the
modern slavery risk. It could also
                                                                      business and its reputation.
be pursued by the regulators in the
context of significant breakdowns of
                                                Boards should keep in mind that, in Australia as in many other jurisdictions,
risk management processes.
                                                modern slavery refers to a range of serious criminal conduct. Being aware
                                                of and addressing modern slavery risks are therefore not only required as
                                                part of a compliance exercise, but should be viewed as critical steps to help
                                                prevent an entity from being unwittingly involved in criminal activity.

DIRECTOR TOOLS: ORGANISATION                                                                        For more information visit aicd.com.au 3
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                                                Modern slavery reporting for              Ensuring accurate disclosure
  What happens if the                           corporate groups                          In order to effectively report on a
  modern slavery statement is
                                                In the context of a large corporate       joint basis, it is important that the
  non-compliant?
                                                group, ensuring that all relevant         practices, risks and policies disclosed
  At present, there are no penalties            reporting entities are appropriately      in the statement are applicable
  for non-compliance with the Act,              covered by the joint statement can        and accurate across the breadth of
  with the key driver for compliant             be complex. It is important that all      the group.
  disclosure being the public                   aspects of the business are carefully
  nature of the disclosure and                                                            While large corporate groups may be
                                                considered to ensure the accuracy
  potential reputational impacts.                                                         centrally managed, there may still
                                                of disclosure on risks and risk
                                                                                          be scope for significantly divergent
  The Department of Home Affairs                management processes.
                                                                                          practices or risks across the business.
  samples statements which are                                                            In most cases, it will be possible to
                                                Determining reporting entities
  submitted through the Federal                                                           concisely explain such differences
  Government’s online modern                    Unlike the UK's modern slavery
                                                                                          within the joint statement. However,
  slavery registry. Where there are             reporting regime, under the Act it is
                                                                                          in some cases, it may be more
  compliance issues with respect to             not sufficient for corporate groups
                                                                                          appropriate for different divisions
  the statement, the Department                 to report at head company level on
                                                                                          to report individually or in different
  may write to the reporting                    behalf of the group.
                                                                                          ‘groupings’ to ensure accuracy and
  entity to provide feedback and                                                          quality of the disclosure in
                                                The way the Act operates, each
  information on submitting                                                               the statement.
                                                ‘Australian entity’ or entity ‘carrying
  a revised statement (if the
                                                on business within Australia’ which
  reporting entity wishes to do so)                                                       Similarly, where specific business
                                                meets the relevant thresholds for
  or improving the statement for                                                          divisions have been recently acquired
                                                reporting (notably, those which have
  future years.                                                                           and are in the process of integration
                                                $100 million in consolidated revenue)
                                                                                          into the broader group, this should
  The Minister also has the power               will need either to prepare its own
                                                                                          be specifically noted and explained
  to make formal requests under                 statement or jointly report with
                                                                                          to ensure that representations
  the Act seeking explanations of               other reporting entities in the group.
                                                                                          are not being made that risks are
  non-compliance or requesting                  Accordingly, when preparing a joint
                                                                                          managed in a particular way, when
  remedial action by reporting                  statement, the statement will need
                                                                                          in practice that may not be case.
  entities. If these requests are not           to address the mandatory criteria in
  complied with, the Minister has               the Act for each reporting entity, at
  the power to ‘name and shame’                 least holistically.                        Common traps for joint modern
  the non-compliant reporting                                                              slavery statements include:
                                                In the context of the mandatory
  entity through the online register                                                       • not naming all reporting entities;
                                                requirement under the Act to
  or by other means. Although
                                                identify the reporting entity/entities     • not explaining differences in
  these powers are provided by
                                                covered by the statement, corporate          practices and policies between
  the Act, the Minister has not
                                                groups will need to conduct financial        business divisions;
  yet confirmed their intended
                                                analysis to determine which group
  enforcement approach and                                                                 • omitting risk exposures which
                                                companies are ‘reporting entities’
  whether they will exercise them                                                            are present in only part of the
                                                under the Act and specifically name
  during this first wave of reporting.                                                       group; and
                                                them in the statement (for example,
  The Act requires the Minister to              in the body of the statement or a
                                                                                           • failing to explain the extent to
  undertake a three-year review                 schedule or footnote).
                                                                                             which newly acquired businesses
  of the Act, which will consider                                                            have been integrated into group
  whether the introduction of                                                                processes and policies.
  additional measures to improve
  compliance, including civil
  penalties, would be necessary
  or desirable.

DIRECTOR TOOLS: ORGANISATION                                                                  For more information visit aicd.com.au 4
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Understanding ‘operations’                                                              Minimising potential areas of risk
and ‘supply chain’                                Charitable foundations and giving     in modern slavery reporting
The meaning of ‘supply chain’ is                  In many corporate groups,             Key risk exposures for companies
relatively well understood and                    reporting entities’ operations may    and boards with respect to modern
comprises the goods and services                  include charitable foundations        slavery statements include:
procured by the business, and                     or significant giving programs. In
                                                  these cases, specific consideration   • omission or understatement of
the various tiers of inputs which
                                                  should be given to whether there        material risk areas;
comprise those goods and services.
                                                  are unique risk exposures related
                                                                                        • statements which are untrue /
What is not as commonly understood                to those activities.
                                                                                          exaggerated; and
is the scope of reporting entities’
‘operations’ under the Act, which                 Particular risk areas may relate
                                                                                        • aspirational commitments which
comprises the activities of the                   to development projects funded
                                                                                          are not delivered in practice.
business. While some aspects of                   by the foundation in jurisdictions
a business’ operations are easily                 which are higher risk for modern      In most cases, the risk of misleading
identifiable, such as its offices,                slavery or involvement with           disclosure can be managed by
manufacturing and workers, the                    orphanages, which can carry           having an effective drafting process,
Department of Home Affairs                        higher risks of human trafficking.    correct framing of information and
has explained in guidance that                                                          the robust ‘testing’ of information
operational activities also include                                                     prior to disclosure.
                                                Considering joint ventures
financing and investing (including
                                                Careful thought needs to be given to    Strong consultation across the group
investments in non-managed and
                                                the inclusion of joint ventures (JV)    Broad input from across the business
non-operated joint ventures).
                                                in the scope of joint modern            will help mitigate key risk exposures
The level of detail expected to be              slavery statements.                     for companies and boards by ensuring
disclosed in relation to investing and                                                  a more comprehensive consideration
                                                Where they are ‘operated’ JVs with
financing activities is, necessarily,                                                   of the business’ operations and
                                                identical risks and risk management
high level, with risk exposures                                                         supply chains, as well as potential
                                                processes to the broader group, then
expressed at a thematic level rather                                                    differences in risk profiles or risk
                                                including JVs in the group’s modern
than in detail. However, the more                                                       management practices.
                                                slavery statement may make sense.
significant a particular investment or
                                                Where that is not the case, it may be   It will also assist the company in
financing activity is, the more detail
                                                preferable for them to self-report.     satisfying the requirement for
that should be provided – such that
the statement provides a fulsome                Importantly, the Act does not           consultation under the Act, which
overview of the business’ key risks             prescribe particular ownership          necessitates:
exposures and processes.                        requirements in order for entities      • consultation between reporting
                                                to report jointly. Accordingly, two       entities; and
To the extent that the business’
                                                entities can report jointly under the
financing and investing diligence
                                                Act provided the statement sensibly     • consultation between each
processes seek to address and
                                                covers all aspects of the content         reporting entity and its owned or
manage modern slavery risks, this
                                                requirements for each of the entities     controlled entities,
should also be called out.
                                                and they consult with each other
                                                                                        in relation to the statement, to
                                                in preparing it.
                                                                                        ensure it appropriately captures the
                                                                                        mandatory reporting criteria.

                                                                                        In the context of a centrally managed
                                                                                        group structure, detail should
                                                                                        be included on the consultation
                                                                                        undertaken by the working groups
                                                                                        preparing the statement and the
                                                                                        review process undertaken by the
                                                                                        management team, culminating in
                                                                                        the relevant board approvals.

DIRECTOR TOOLS: ORGANISATION                                                                For more information visit aicd.com.au 5
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Legal risk associated with aspirational or forward-                                         For example, the inclusion of a case study on a reporting
looking statements                                                                          entity’s incident response could form an evidence
Under the Act, reporting entities are only required to                                      roadmap for potential claimants in litigation or, for ASX-
report in respect of the previous financial year. That said,                                listed entities, may invite scrutiny of whether a matter
Australian Border Force considers it to be good practice                                    should have been disclosed immediately to the market as
for modern slavery statements to ‘commit to continuous                                      part of the company’s continuous disclosure obligations.
improvement and explain how the reporting entity will                                       Detailed disclosure may also lead shareholder activists
refine its response in future years’.                                                       to ask questions about the company’s response to
                                                                                            incidents, such as whether the incident was reported to
These types of statements about commitments and                                             police (which in some jurisdictions is not recommended
future work plans need careful consideration and should                                     by human rights NGOs) and, if not, about the
only be included where the board is confident about the                                     justifications for not reporting it. Disclosures may also
achievability of the relevant actions. Reporting entities                                   create a risk of retaliation against whistleblowers,
are not expected to commit to aspirational goals or                                         human rights defenders or the original victims of the
future commitments which they may not be able to                                            incident in question.
achieve in practice. A key area of litigation arising in
the US relates to company disclosures regarding ethical                                     Whether disclosure regarding potential modern slavery
sourcing practices which are alleged not to have been                                       issues or incidents is or is not included in the statement
followed (or are improbable) in practice.                                                   will be highly fact-dependent and guided by the
                                                                                            board’s approach to transparency and reputational
Similar risks can arise with respect to forward-looking                                     risk management.
statements by listed groups, particularly with respect
to risks likely to affect the group in the future (or the                                   But, at a minimum, it will be important for board
group’s management of those risks in future). Under the                                     members to turn their minds to the issue and test
Corporations Act 2001 (Cth), when a person makes a                                          the extent to which these other legal risks have been
representation to the market about a future matter and                                      properly considered and acted on.
the person does not have reasonable grounds for it, the
                                                                                            Verifying information for disclosure
representation is automatically deemed to be misleading
by law if it ultimately proves to be inaccurate (even if                                    In the context of the requirement for board approval of
they genuinely believed it at the time).                                                    modern slavery statements, directors will necessarily be
                                                                                            keen to understand what verification-type process has
Where directors fail to correctly distinguish between                                       been undertaken in respect of the information in the
expectation and fact, or fail to properly explain the                                       modern slavery statement.
assumptions underlying the company’s analysis, they
may be exposed to claims for misleading disclosure if                                       While ‘prospectus-style’ verification is clearly not
events unfold differently to how they were anticipated.                                     expected, listed companies in particular should be
                                                                                            giving thought to whether they will confirm the modern
Disclosing potential modern slavery incidents                                               slavery statement is in line with their usual process for
The disclosure of actual or potential modern slavery                                        verifying the integrity of corporate reports according to
identified in the reporting entity’s operations and supply                                  Recommendation 4.3 of the ASX Corporate Governance
chain is not required by the Act, which instead focuses                                     Council’s (Council) Corporate Governance Principles and
on the disclosure of risk areas and actions taken to                                        Recommendations.5 It is not necessarily expected that
manage those risks.                                                                         companies will get formal audit sign off or third-party
                                                                                            assurance given the nature of the process. However,
There are, however, a number of reasons why reporting                                       internal verification (such as internal audit) can be a
entities may wish to include this information in their                                      useful risk mitigation tool.
modern slavery statement, including the need to meet
stakeholder expectations for transparent disclosure and                                     The modern slavery statement is not clearly a “periodic
proactively manage potential reputational risks.                                            corporate report” within the definition provided by the
                                                                                            Council. However, the spirit of the recommendation
Any disclosure of potential modern slavery incidents                                        is to cast the net broadly to capture different types of
in the modern slavery statement needs to be carefully                                       periodic ESG-type reporting with its recommendation.
considered from a legal perspective. The drivers for                                        In any event, following a system of informal cascading
greater transparency regarding identified issues will need                                  reviews prior to approval would be an appropriate risk
to be weighed against the potential legal risks which may                                   mitigation step given the nature of the disclosures in the
flow from voluntarily including this information.                                           statement and the risks to which they relate.

5
  ASX Corporate Governance Council, 2019, Corporate Governance Principles and Recommendations, 4th edition, February, p 20, https://www.asx.com.au/documents/asx-compliance/cgc-
principles-and-recommendations-fourth-edn.pdf, (accessed 24 November 2020).

DIRECTOR TOOLS: ORGANISATION                                                                                                     For more information visit aicd.com.au 6
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Better practice modern slavery reporting                                Linkages to governance and risk
                                                                        management processes
Building the right team
                                                                        Good quality joint statements will explain how the
While there may be a tendency within some businesses to regard
                                                                        corporate group governs and manages modern
modern slavery as a procurement item, the requirement to report
                                                                        slavery risks by reference to its governance
on risk under the Act, along with the technical nature of the
                                                                        structure and risk management system. For
disclosures, means that a cross-disciplinary approach is preferable.
                                                                        example, what is the process for different business
Key contributors to preparing the modern slavery statement              divisions to report emerging risk issues? How
may include:                                                            do they get channelled up to management and
                                                                        the board? What happens if a group company
 Team or          For input on…                                         identifies a red flag for modern slavery risk? Is
 function                                                               there a formal process, who manages it and how
                                                                        is it overseen?
Finance           … which entities in the corporate group meet
                  the criteria for reporting under the Act.             Similarly, corporate groups should also disclose
                                                                        and explain how their management of modern
Procurement … a description of the business’ supply chains,             slavery risks works alongside their other
            goods and services procured, and processes                  processes for whistleblowing, internal/external
            for supplier diligence, on-boarding and                     investigations, anti-bribery, corruption, financial
            management.                                                 crime prevention and procurement.
Risk              … analysis on potential areas of risk with
                                                                        Consider broader reputational risks
                  respect to modern slavery practices.
                                                                        The modern slavery statement is required to
Sustainability … anti-modern slavery practices adopted                  disclose modern slavery risk areas in reporting
               by the group and, in many cases, leading                 entities’ operations and supply chains under the
               preparation of the modern slavery statement.             Act. However, better practice is for the company
                  … a description of the business’ governance           to consider, and the statement to disclose,
Company
                  systems for overseeing and managing modern            broader reputational risks as well.
Secretariat
                  slavery risks.                                        This may take the form of the business disclosing
                  … working conditions of employees and                 its processes for identifying and escalating
Human
                  contractors, training programs provided to            modern slavery concerns with respect to its
Resources
                  manage modern slavery risk, and other steps to        customer base (for example, financial services
                  build a culture that places high priority on modern   businesses which may become aware of
                  slavery and other human rights abuse risks.           patterns of behaviour which indicate possible
                                                                        slavery conditions).
Legal             … areas of litigious or other legal risk exposure
                  and ensuring compliance with the Act.                 It may also involve considering the extent to
                                                                        which the group could be linked to modern slavery
Corporate         … engagement with stakeholders and the                practices through its business partnerships and
Affairs           community to understand expectations and              affiliations, including joint marketing initiatives
                  manage reputational risk exposure.                    or co-investment in ventures alongside other
                                                                        entities. While the scope of the Act is limited
Where the statement is prepared by siloed teams, there is a             to operations and supply chains, the breadth
greater risk that it will not accurately reflect the practices          of the group’s activities may create
and policies applied by the relevant reporting entities or              reputational risks extending beyond its own
appropriately disclose the modern slavery risks present in their        activities and procurement.
operations and supply chains.

Moreover, there is also a risk that the modern slavery statement
will not have the same level of legal scrutiny and oversight as
other types of corporate reporting – or be adequately tested to
ensure the grounds on which statements are being made are
defensible and robust.

DIRECTOR TOOLS: ORGANISATION                                                              For more information visit aicd.com.au 7
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                                                                Questions to ask management before signing
  Board considerations for better practice                      off on a modern slavery statement
  modern slavery statements
                                                                Reporting for corporate groups
  • In approving a joint modern slavery
    statement, the board is making                              • Determining reporting entities
    representations about the practices,                            - Has analysis been undertaken to accurately
    risks and policies which apply across the                         identify all reporting entities within the
    corporate group.                                                  corporate group?
  • Particular areas of risk arise where the                        - Will each reporting entity be preparing a
    statement omits particular risks or                               standalone modern slavery statement, or will
    discloses practices or policies, which are not                    they be covered by one or more joint statements?
    consistently applied across the business.
                                                                • Ensuring accurate disclosure
  • Where specific aspects of the business
    are subject to different risks, these should                    - If a joint statement is being prepared, does
    be specifically identified to ensure that                         it accurately reflect the modern slavery risks
    all relevant risks are being disclosed and                        and actions of all of the reporting entities?
    that the joint statement addresses the
                                                                    - Are there differences in practice between
    mandatory criteria for each reporting entity.
                                                                      business divisions or geographies that need to
  • Where practices and policies do not apply                         be reflected in the statement?
    in relation to certain parts of the business,
                                                                    - If a business division has been recently
    these should also be specifically identified.
                                                                      acquired, has it been integrated into the
    Similarly, where diligence processes are only
                                                                      corporate group? If not, does the modern
    followed for part of the supply chain, this
                                                                      slavery statement explain this?
    should be noted.
                                                                • Understanding operations and supply chain
  • The modern slavery statement should be
    backward-looking and address activities in                      - Does the description of the reporting entities’
    the relevant financial year being reported                        supply chains consider both direct suppliers
    on. Great care needs to be taken                                  of goods and suppliers of services, as well as
    with any forward-looking or aspirational                          deeper-level suppliers?
    disclosure made by the reporting entity from
    a legal liability perspective.                                  - Does the modern slavery statement adequately
                                                                      capture less obvious parts of the reporting
  • A working group comprised of different                            entities’ operations (for example, financial
    functional and business leads should                              lending and investments, non-operated joint
    be convened, to ensure modern slavery                             ventures, leasing activities, research and
    statements accurately reflect the practices,                      development, and charitable activities)?
    risks and policies across the entire group.
                                                                    - If the reporting entities are involved in
                                                                      investing and financing activities, is the level
                                                                      of disclosure in the modern slavery statement
                                                                      appropriate in the circumstances? Does it take
                                                                      into account factors such as the significance
                                                                      and level of risk of those activities and the
                                                                      group’s level of ownership/control?

                                                                • Considering joint ventures

                                                                    - Do joint ventures (JVs) included in the
                                                                      statement have any different modern slavery
                                                                      risks or risk management processes to the
                                                                      rest of the corporate group?

                                                                    - Does it make sense to include JVs in the joint
                                                                      statement or should they individually report?

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Minimising potential areas of risk                              Better practice
• Strong consultation across the group                          • Building the right team

  - Have the reporting entities consulted with the                  - Has the modern slavery statement been
    entities that they own or control, and each                       prepared with contribution from different
    other, to ensure the disclosure is accurate?                      parts of the organisation: for example,
                                                                      Finance, Procurement, Risk, Company
  - Has this consultation process been described
                                                                      Secretariat, Human Resources and Legal?
    in the modern slavery statement?
                                                                    - Did the contributors adequately collaborate
• Legal risk associated with aspirational or
                                                                      with each other in preparing the modern
  forward-looking statements
                                                                      slavery statement? What were the key points
  - Is the group confident it can deliver any future                  of tension, if any?
    commitments made in the statement?
                                                                • Linkages to governance and risk management
  - Are there reasonable grounds for any                          processes
    forward-looking statements about risks
                                                                    - Does the modern slavery statement explain
    affecting the corporate group (or its
                                                                      how modern slavery risks are managed
    management of those risks)?
                                                                      through the governance structure and policies
• Disclosing potential modern slavery incidents                       and risk management system?

  - Is the group comfortable disclosing                         • Considering broader reputational risks
    when it has/ has not uncovered modern
                                                                    - Does the modern slavery statement
    slavery incidents?
                                                                      explain how the reporting entities manage
  - Has legal input been obtained on any such                         the risk of being linked to modern slavery
    disclosure or case studies regarding the                          practices through their customers,
    group’s response to modern slavery?                               partnerships and affiliations?

• Verifying information for disclosure                          • Market benchmarking

  - What process has been undertaken                                - In preparing our statement, have we
    to check the integrity of the modern                              considered modern slavery statements
    slavery statement?                                                from others in our market/industry? How do
                                                                      we compare?

                                                                    - What engagement with external
                                                                      stakeholders has taken place in preparation
                                                                      of the statement?

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S I G N I N G O F F O N M O D E R N S L AV E RY S TAT E M E N T S

  About the Author
  Tim Stutt is the Australian lead for Herbert Smith Freehills’ ESG, Sustainability and Responsible Business
  practice, a senior member of the firm’s Head Office Advisory Team (HOAT) and a member of the firm’s global
  Business and Human Rights practice. Tim specialises in corporate governance and has over 10 years’ experience
  helping large corporations with environmental, social and governance (ESG) matters, particularly with respect
  to market disclosure, risk management and shareholder engagement/activism.

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DIRECTOR TOOLS: ORGANISATION                                                                                                     For more information visit aicd.com.au 10
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