This is an ACSI submission in response to the Attorney-General’s Department consultation on strengthening Australia's legislative response to Modern Slavery

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Summary Position
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The importance of robust legislation in Australia to combat modern slavery

ACSI strongly supports efforts to strengthen Australia's response to modern slavery. Our research and engagement with companies has reinforced our view that more needs to be done to improve the identification, prevention and remediation of modern slavery risks.

We recognise the policy intent underlying the proposed reforms. For long term institutional investors, an emphasis on prevention of modern slavery is aligned with fiduciary objectives, responsible investment practices and long-term value creation. Modern slavery presents material systemic, legal, operational, reputational and financial risks, and investors have a strong interest in promoting effective governance, due diligence and risk management systems capable of identifying and addressing severe human rights risks.
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Ensuring reforms achieve their intended outcomes

Our concern is not with the ambition or objective of the proposed reforms, but with whether the proposed mechanism will produce the intended outcomes.

Specifically, we are concerned the proposed ‘failure to prevent’ criminal offence may not, in practice, achieve the stated objectives and may lead to a range of significant unintended consequences. In our view, there is a real risk that the offence could shift corporate behaviour away from effective human rights risk management and remediation and towards corporate legal risk management and avoidance of criminal liability. This would undermine, rather than advance, effective modern slavery prevention.

A particular concern is that the proposal may adversely affect the transparency that is gradually emerging under the Modern Slavery Act 2018 (Cth). The Act has helped many organisations move towards an approach focused on identifying, understanding and addressing risks to vulnerable workers and rights holders. It has also helped foster collaboration between companies, investors, civil society organisations and industry bodies. The Act has encouraged greater transparency about modern slavery risks and increased engagement with suppliers and affected stakeholders. Rather than asking how modern slavery risks can best be prevented, mitigated or remediated, the proposed criminal offence incentivises organisations to focus on how to minimise criminal exposure.

This creates a risk that corporate human rights due diligence becomes more defensive. Rather than encouraging deeper engagement with modern slavery risks, businesses may seek to reduce legal exposure by limiting visibility of those risks. Companies may be less willing to investigate beyond first-tier suppliers, less willing to document concerns, and less willing to publicly disclose instances of modern slavery identified through their due diligence processes. Organisations will likely be risk averse and discouraged from proactively identifying and reporting harms.

The proposed offence also raises complex nexus and attribution issues, as modern slavery often occurs through interconnected value chains involving multiple actors, jurisdictions and commercial relationships. This may create uncertainty regarding the appropriate boundaries of corporate responsibility and limit the utility for people suffering in modern slavery.

The proposal may unintentionally incentivise practices that are inconsistent with the UN Guiding Principles on Business and Human Rights (UNGPs). If criminal liability arose from the existence of modern slavery within a business relationship, companies may respond by terminating suppliers, rather than engaging with them to improve conditions, build capacity or remediate harms.

Businesses may become more reluctant to establish accessible grievance mechanisms, engage openly with workers and affected communities, collaborate with civil society organisations or participate in multi-stakeholder initiatives. There is also a risk of increased reliance on audits, certifications and outsourced compliance processes as organisations seek evidentiary protection rather than meaningful prevention outcomes.
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A prevention-focused regulatory approach

We encourage Government to consider a mandatory human rights due diligence (mHRDD) obligation as a prevention-focused approach that could provide the primary framework for reform.

A mHRDD framework would require reporting entities to undertake substantive and reasonably proportionate human rights due diligence to identify, prevent, mitigate and address adverse human rights impacts throughout their operations and value chains.

In our view, mHRDD is more closely aligned with the preventative objective identified in the consultation paper and with the UNGPs and internationally recognised human rights due diligence frameworks. It would also align Australia with emerging international regulatory developments that increasingly focus on mandatory due diligence and risk-based prevention. Such an approach would better:

• incentivise early identification and prevention of risks;
• encourage meaningful stakeholder engagement;
• promote the use of leverage and remediation rather than supplier disengagement;
• support continued transparency and disclosure;
• avoid defensive behaviours associated with criminal enforcement models;
• avoid complex nexus questions of criminal attribution to corporate conduct in supply chains;
• build upon the progress achieved under Australia's Modern Slavery Act.

Whether the Government proceeds with the proposed criminal offence, or the mHRDD framework, significant guidance will be necessary to support efficiency and effectiveness. Clear thresholds and guidance, a clearly articulated reasonable-steps defence, recognition of good-faith identification and remediation, and appropriate treatment of different forms of corporate and investor leverage will be critical to ensuring the reforms strengthen, rather than discourage, effective modern slavery prevention and remediation.

Please click on the resources link to the right for detailed response to the consultation questions.