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Legal and Constitutional Affairs Legislation Committee
02/08/2018

BEST, Ms Caroline, Interim Director, Corporate and Legal, International Justice Mission Australia

KAKOSCHKE-MOORE, Mrs Skye, Special Adviser, International Justice Mission Australia

[13:51]

CHAIR: Thank you both for coming along. We have your written submission, which we've numbered as submission No. 63 for our records. I think we have provided you with information on parliamentary privilege and protection of witnesses. I invite either or both of you to make some opening comments. Who's going to start?

Mrs Kakoschke-Moore : I will. On behalf of International Justice Mission Australia I thank the committee for the opportunity to give evidence before you today. IJM Australia is the Australian branch of the world's largest antislavery organisation. We partner with local authorities and organisations around the world to rescue victims of modern slavery, bring criminals to justice, restore survivors and strengthen justice systems. We're encouraged by the consultative approach the government has taken to drafting the Modern Slavery Bill 2018 and by the cross-party support that exists for eliminating slavery from Australian supply chains.

In our submission to this inquiry we've made a number of recommendations in relation to strengthening the bill that is before parliament today. However, we want to make this point very clear: we do not want the perfect be the enemy of the good, and we would like to see this legislation passed without delay. It is no exaggeration to say that the lives of millions of people stand to change for the better once Australian entities start investigating their supply chains, but given the opportunity still exists for this legislation to be amended, we would encourage this committee and the government to remain open minded about ways to enhance the effectiveness of this legislation and to ensure it achieves its intended aims.

IJM Australia supports the following features of the bill: government produced guidance material for entities required to report under the legislation, the establishment of a public register containing modern slavery statements, the extension of the reporting requirements to the public sector, the mandatory reporting on certain specified criteria—although we do question just how mandatory the reporting requirement is, given the absence of penalties, but I'll return to this point shortly—director sign-off on modern slavery statements, and the proposed legislative review of the act. IJM believes these elements provide a strong base on which to build a modern slavery reporting framework for Australian entities.

Opportunities to strengthen the proposed reporting framework exist in the following areas. A review of the effectiveness of the act should not wait until the proposed three-year time period; rather, the implementation plan for the act should be amended to include targeted, detailed and continuous feedback and communication between the business engagement unit and reporting entities to ensure adequate and detailed reporting, while drawing attention to best practice. This will help ensure the broader cultural shift the government plans to see is realised. The three-year review should also specifically consider: firstly, extending the reporting requirements to businesses operating in high-risk industries in Australia such as the massage and horticultural industries; secondly, lowering the reporting threshold to $50 million; and thirdly, implementing penalties for noncompliance.

IJM believes the government should consider penalties in order to discourage entities from taking a tick-box approach to reporting or failing to submit reports at all. We believe the case for penalties as a last resort is demonstrated by the gender equality reports required to be submitted to the Workplace Gender Equality Agency by companies with more than 100 employees. The vast majority of entities required to report under this framework do in fact report; however, there are persistent noncompliers who have failed to lodge reports for many years. Other than listing the company as noncompliant in the Workplace Gender Equality Agency's annual report, the agency has no other tool in its toolbox to compel compliance with this reporting requirement.

Related to this point is the issue of inconsistencies between the Modern Slavery Bill and the Modern Slavery Act that was passed in New South Wales in June this year. As Commonwealth legislation will prevail over state legislation where inconsistencies arise, this will mean penalties provided for in the New South Wales act will not be applied if the noncompliant entity is subject to both the New South Wales reporting regime and the federal reporting regime. IJM encourages the federal government to meet with the New South Wales government in order to discuss how to manage this and other inconsistencies further.

The proposed modern slavery register should facilitate comparisons between reporting entities and include a list of noncompliant entities. The business engagement unit should also be tasked with undertaking and publishing analysis of modern slavery statements once submitted. Both of these proposed measures will advance public awareness of the Modern Slavery Reporting Requirement and assist in achieving cultural change among businesses. IJM also supports the appointment of an independent antislavery commissioner and the establishment of a national compensation scheme for victims of modern slavery in Australia. We acknowledge the government's position that the focus of the Modern Slavery Bill 2018 is supply chain transparency. If the government is not minded to amending this legislation to include a commissioner and a compensation scheme, we strongly encourage the government to introduce new legislation providing for these reforms as soon as possible.

Finally, we would emphasise to the committee the importance of not leaving all of the heavy lifting to business in relation to addressing modern slavery. Where business does identify slavery in their supply chains, simply shifting production from one factory to another in the same overseas country may not actually lead to a reduction in slavery-like practices, particularly where enforcement of laws is weak. The Modern Slavery Act, once in force, is only one part of the equation to end modern slavery. Strengthening justice systems abroad where modern slavery exists—for example, through the delivery of programs funded by Australian foreign aid—should be a priority for the government. Thank you once again for the invitation to appear before you today. Ms Best and I welcome your questions.

CHAIR: Thank you very much. Ms Best, you don't want to add anything to that?

Ms Best : No thank you.

Senator PRATT: You've drawn attention to the NSW penalties, but you've also said that in your view simply naming a company isn't a sufficient penalty.What kind of penalty regime do you think would be effective?

Mrs Kakoschke-Moore : In relation to naming and shaming I think the example that we gave in our submission about the Workplace Gender Equality Agency demonstrates the need for penalties where you have a reporting framework that is not in fact mandatory. The penalties that we think may be effective are financial penalties, perhaps phased in over time, giving companies some flexibility in coming to terms with their new reporting requirements under this regime. They may act as a sort of sword of Damocles hanging over the head of the companies to say, 'If you don't do this, this is what you're up for.' Nonfinancial penalties such as exclusion from tendering for government contracts may also be effective, but it is certainly our position that we don't think the naming and shaming of a company will be a sufficient penalty, particularly where the business engagement unit may have the same experience as WGEA where you have persistent noncompliers who, despite every effort by the agency, still either fail or refuse to submit their reports they're required to.

Senator PRATT: It appears in this instance we don't even have the ability to necessarily create a public list of those who need to be compliant and haven't complied. Isthat your understanding as well?

Mrs Kakoschke-Moore : Creating the list, I know, is subject to some contention amongst submitters and the government. One of the submitters to this inquiry proposed that perhaps what the government could do through the business engagement unit is put together a list of entities that they think would be subject to the $100 million annual turnover threshold, contact those companies and say: 'Based on the information we have from the ATO or ASIC we believe that you meet this threshold. We will give you two months to demonstrate to us, if you believe you're not required to report, why that's so.' Once that company has had the opportunity to rebut the position put to it by government then a list of entities could be published on the website of the business engagement unit or wherever it is that the government plans to list these companies, but without knowing who should report, and if the business engagement unit isn't able to publish a list of companies who aren't reporting, how is the public supposed to know whether or not this regime is effective, and even besides the public, how is the government to know that the entities that they intend to capture with this legislation are in fact complying?

CHAIR: Was your group involved in the consultation with government before this bill came in?

Mrs Kakoschke-Moore : IJM Australia was, yes.

CHAIR: Do you know if that suggestion about having a prospective list that you then send to people and ask them to deny it, which I think is quite a good one, was raised?

Mrs Kakoschke-Moore : Not by IJM Australia, and I'm sorry—I've read most of the submissions for this inquiry, and I can't remember exactly who proposed it, but it was one of the earliest submitters who proposed this.

CHAIR: Someone else did convey it, alright.

Senator PRATT: How does the gender compliance unit work out its list of organisations that need to comply?

Mrs Kakoschke-Moore : Their reporting framework is based around the number of employees, so they look at organisations that have 100 employees or more. I suppose in some senses it's more straightforward.

Senator PRATT: It wouldn't be any more or less difficult to work out than turnover though, surely?

Mrs Kakoschke-Moore : No, I don't think so.

Senator PRATT: For naming and shaming to be an effective part of compliance, first of all you need the list of who's supposed to comply. Do you think, though, in this instance being named as not complying with your slavery reporting obligations might be a greater hit to your public reputation than with your gender participation? For example, should Wittner Shoes not comply with slavery reporting, you would probably expect that there'd be at least enough consumers for that to have some impact on them. That is a reputational judgment in part.

Mrs Kakoschke-Moore : Any company that doesn't report will carry a reputational risk with that decision. From conversations I've heard in the NGO sector and with business, there is this perception that the cost of not complying will actually exceed the cost of complying in the sense that the risk you carry to your business by being seen to be lazy or inactive in addressing modern slavery would be quite high, so I do think that the reputational risk will exist and will be quite significant, but my only concern is that, where there is no other penalty for failing to comply, some organisations may decide, 'We'll just risk that.' Repeated noncompliance has no outcome.

Senator PRATT: Repeated noncompliance has been seen in the UK. What kinds of companies are doing that? Have we seen that it is in effect masking real slavery? Is it an issue where they haven't looked into their supply chains adequately, so they don't want to report? What do we know from nonreporting as opposed to reporting?

Mrs Kakoschke-Moore : I'm afraid I won't be able to comment too broadly on that, as I'm not as familiar with the UK framework, but certainly from the feedback that was gathered during the parliamentary joint committee inquiry for the Hidden in plain sight report, lack of awareness around the requirements to report and perhaps the lack of guidance to companies around their reporting requirements were identified as key reasons why the reports weren't submitted that the government expected would be under that particular reporting regime.

Senator PRATT: So the best way of overcoming that is a compulsion to report, in your view, attached to—what kind of support should be required?

If people are saying that they don't have the support that they need to report and that they don't know how to do it and they need to work through those issues, it seems that creating compulsion to report is only going to go so far in creating quality reporting.

Mrs Kakoschke-Moore : That's right, and that's why it's our position that penalties should only be applied as a last resort. Where you have a company that puts its hand up and says, 'We really want to do this properly, but we don't know how to do it; we lack the people on the ground or we lack the expertise,' it shouldn't be punished for that. It should be given every opportunity, whether that's through improved guidance material through the business engagement unit or through introductions by the business engagement unit to other organisations who have a better grasp of their reporting requirements. That should happen. We certainly don't believe companies who want to do the right thing but aren't equipped to do it should be penalised. At least they should be given every opportunity to improve their practices before any penalties are considered.

Senator PRATT: So how would you legislate to create that hierarchy or threshold of when we opt in to create a penalty for someone? Could you perhaps say, 'We're going to penalise you in three years time if you've had three years of missed reporting'? What does that look like to you?

Mrs Kakoschke-Moore : Yes, it could be saying: 'You have three years to get your act in order. We won't impose penalties before that date.' It could be communication between the business engagement unit and the entity, if the business engagement unit has taken all reasonable steps to ensure that the business has at its disposal what it needs in order to comply and it still fails to comply. Perhaps some of the drafting around 'reasonable steps' could be an idea.

Senator PRATT: It's interesting. We've had a lot of people tell us they'd like to see penalties, but there hasn't been a lot of coalescence around exactly what kind of penalty they'd like to see, other than perhaps to point to what's happened in in New South Wales. So I'm interested to see if we can have some clarity around that question.

Mrs Kakoschke-Moore : Certainly.

Senator PRATT: In your submission you've raised issues around the level of detail required in reporting. How do you think the current legislation stacks up in terms of the information likely to be provided by reporting entities being useful and sufficient in identifying real risks of slavery in their supply chains?

Mrs Kakoschke-Moore : As a starting point we think it's very good. Our only concern would be around the temptation perhaps to take a tick-box approach, given that the reporting requirements are quite prescriptive. We also need to keep in mind that simply reporting on your supply chain won't necessarily translate into affirmative action being taken to address slavery once it's identified. The current drafting is to report on risks identified and what steps you're taking to mitigate those risks. So I think it would be quite helpful to see some more information being included in reports about those specific steps so that we can be sure that we're not just shining a light on slavery where it might be occurring but actually tackling it once it has been identified.

Senator PRATT: Yes. So risk might be identified in reporting. How public that risk is made for others to shine a light on is also a remaining question. Should risks be identified, if someone reports a risk year after year after year, what kind of public debate will see real influence on that supply chain over time?

Mrs Kakoschke-Moore : That's a good question. Certainly we wouldn't want to be in a position where identifying risks is penalised by the public, particularly where the entity is actually taking steps to address it. We don't want to get to a situation where companies will feel threatened by the requirement to report if they feel like the country will turn against them or consumers will turn against them. If the company simply identifies the risks and does nothing to address them, yes, I think that they are opening themselves up to the risk of consumer backlash. But I certainly wouldn't want there to be a situation where you have entities that decide perhaps not to be quite as transparent.

Senator PRATT: So you would expect that in most cases, where a risk is identified, there'd be some kind of accompanying statement to it about what a company is doing about those risks?

Mrs Kakoschke-Moore : Absolutely.

Senator PRATT: And you would expect to see progress over time within the statements about how a supply chain has moved over time?

Mrs Kakoschke-Moore : Absolutely.

Senator PRATT: Thank you. You've got in recommendation 12 a rule-making power to make minor amendments. Why is the current legislation inadequate? Is it going to be too prescriptive in terms of being able to add future criteria, drafted as it currently is?

Mrs Kakoschke-Moore : That's a concern. This is new ground for the Australian government and it's relatively new ground for quite a lot of businesses operating in Australia. On paper, what might look to be reasonable, sensible, ordered steps that companies should take in practice might not turn out that way. It will take experience and I think it will take some time for companies to adjust and the business engagement unit to adjust. We wouldn't want to see the ability of companies or the business engagement unit to improve on practices hampered because the reporting requirements may need to go through the introduction of a new bill in the committee stage. If there is broad consensus about changes that should be made to improve the bill, and it could be made through a legislative instrument, then we would welcome that.

Senator PRATT: Do you think the bill would adequately allow for a smaller company to report, noting that it might be a supplier to much bigger companies and they want to point down in their reports to one of their suppliers who would otherwise be under the threshold? Does the architecture of the bill adequately allow for things like that to happen currently, as far as you can tell?

Mrs Kakoschke-Moore : The ability to opt in for these smaller companies would certainly be welcome. I wouldn't want to see any rule-making power used to change reporting thresholds, given the contentious nature of the reporting threshold that we're seeing now—there are a lot of conflicting views around whether or not $100 million is the right threshold to have at the start—but also the issue around high-risk industries or sectors in Australia, which Senator Molan mentioned earlier. The local massage parlour in the CBD or the nail salon are certainly not going to meet the $100 million annual turnover threshold. In terms of the risk of modern slavery practices occurring there, it may actually be higher.

CHAIR: So are you expecting the massage parlour to put in a statement?

Mrs Kakoschke-Moore : Not right now, no, but this is something that I think the government should turn its mind to, particularly in that we want to be seen as a world leader and we shouldn't be focusing all of our attention on supply chains of Australian entities that are located overseas. I think we do need to acknowledge that slavery-like practices can and do occur in Australia. We should be equipped to deal with that.

CHAIR: That's a criminal offence in Australia, though. The police should be able to deal with that, one would hope.

Mrs Kakoschke-Moore : It certainly is, but, in terms of shining a light on it, having high-risk industries included in the reporting framework is something that we believe should at least be under consideration as the reporting framework matures for higher-income industries or sectors.

Senator PRATT: Those are all my questions. Thank you.

CHAIR: Thank you both very much for your very helpful submission to the committee. We very much appreciate it.

Proceedings suspended from 14:14 to 14:25