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5 Steps Your Company Needs To Take To Help Form Its Modern Slavery Statement

To many Australian businesses and consumers, modern slavery is an invisible problem: a problem that happens elsewhere in the world, that we are vaguely aware of. Perhaps we are concerned about whether our purchasing decisions may be enabling modern slavery but are unsure how to go about making more ethical choices.

However, despite common perception of slavery as something that happens overseas, or indeed no longer happens, it is a problem facing modern Australia. The Global Slavery Index finds that an estimated 15,000 modern slavery victims are living in Australia, and that over 40 million people live in modern slavery conditions around the world; an estimated two-thirds of these people live in the APAC region, to which Australia has close trade links. Because of the complex and opaque nature of modern slavery, these figures may be significantly higher; recently, the UK increased its estimated number of people living in slave-like conditions from 10,000 to 100,000 – a staggering ten-fold increase. If a developed country like the UK has had such difficulty in grasping the scope of its modern slavery problem, it seems likely that the figures for the developing world may also be much higher.

Modern slavery is pervasive across many industries which impact the average Australian: from fast fashion to the construction industry, food to electronic components and suchlike. : Many products and services purchased in Australia come from Australian companies with murky supply chains that have high exposure to modern slavery risk factors. Australian companies and consumers alike have become increasingly aware of this phenomenon, and concerned about it in recent years, especially in light of media scandals surrounding supply chain management, as well as the passage of the Commonwealth Modern Slavery Act 2018. This Act entered into force on 1 January 2019, establishing a national Modern Slavery Reporting Requirement. Large companies and other entities in the Australian market with annual consolidated revenue of at least $100 million are required to file annual Modern Slavery Statements, demonstrating that they are taking reasonable steps to identify and manage or mitigate key modern slavery risk factors in their supply chain. Companies of smaller sizes can also voluntarily submit Modern Slavery Statements evidencing their efforts in this matter.

Even with the best of intentions, combating modern slavery can initially seem an arduous task for companies, especially where supply chains span borders and are complex and multi-tiered in nature. Many companies delivering services also assume that modern slavery is only a problem in product & commodities-based industries; however, companies from diverse sectors can be exposed to modern slavery risks and must take proactive steps to ensure that they both identify these risk factors and combat them effectively. 

With this in mind, Informed 365 has compiled this list of five key steps which companies should take towards ensuring that their Modern Slavery Statements are more than words on a page; that they form a robust, strategic and proactive basis for an ethical supply chain which identifies, minimises and mitigates modern slavery risks as much as possible.

1. Adopt A People-Centric Perspective

Effective management of modern slavery risks involves placing ‘risks to people’ at the heart of your response. Taking a rights based approach to addressing modern slavery will assist your business to meet the increasing expectations of investors, governments, clients, consumers, business peers and civil society around business respect for human rights.

– Emeritus Professor Rosalind Croucher AM,

President of the Australian Human Rights Commission

 

As we have touched upon, human rights should be at the centre of an approach to combating modern slavery. People-centricity is critical to forming your modern slavery statement, taking an approach of identifying risks to people from a human rights due diligence perspective, and addressing the most severe risks to people first. Your company’s commitment to modern slavery should be based on a commitment to human rights and grounded in the due diligence framework outlined in the 2011 United Nations Guiding Principles on Business and Human Rights (UNGPs).

Your company’s commitment should be front-of-mind when they make decisions about choosing what suppliers you should do business with. By embedding a people-centric human rights perspective in your company commitment, training your people on their responsibilities, and sharing that this is something that matters deeply to your company, your people will be better placed to keep this commitment in mind when making important decisions that could otherwise expose your business to modern slavery risks.

2. Understand The Business Risks Of NOT Addressing Modern Slavery

Today’s consumers have unprecedented access to ethical purchasing information and will make purchases in alignment with their values; a company whose supply chain is even inadvertently linked to slavery may find themselves dealing with a scandal.

Failing to proactively identify and address modern slavery risk factors, as well as monitoring and reporting on this engagement, exposes your company to both reputational, ethical, and legal risk, as well as exposing people to horrifying conditions. A Modern Slavery Statement is a legal requirement for larger companies; but even where it is not a legal requirement, the case for a proactive approach to combating modern slavery is clear both for your company’s reputation, and from an ethical perspective so that your directors, employees, shareholders & stakeholders, and the people who purchase your goods and/or services can do so with pride, knowing they are buying from, working for, and investing in a company that lives by its values.

3. Identify Modern Slavery Risk Factors

The opaque nature of modern slavery means that your efforts to combat it must be more than a plan on a page. It is very easy not to find modern slavery for companies that do not go out looking for it. But assuming a lack of risks and reporting accordingly is not enough to meet the reporting requirements of the Modern Slavery Act; beyond that, it is not enough to rest assured that you have done your best to ensure an ethical supply chain. Due diligence is key.

When forming your company’s first Modern Slavery Statement, you may find yourself struggling to map beyond Tier 1, particularly as it takes time to build up the capacity of your Tier 1 suppliers to identify and address risk factors of their suppliers, and so on. This is a problem faced by many companies, and is somewhat to be expected, but this should not be left on the too-hard shelf; rather, your company should act with transparency, note any areas that still need to be addressed moving forward, and plan accordingly. Be honest about what you do not yet know, clarify how you intend to fill these gaps, and set timelines for when you expect that you will be able to do so.

Working with relevant external experts who specialise in helping companies to identify this risk is an important step. Your business is expert at what it does, but you are unlikely to have the in-house expertise or capabilities to combat modern slavery effectively without outside help. It is, however, important to note that combating modern slavery is not a task that can be wholly outsourced or set-and-forget; again, you are the expert on your business, and should work collaboratively with the experts you engage with, and relevant stakeholders making supply chain decisions to explore and map areas of modern slavery risk to your company, and more broadly in your industry (naturally, these differ significantly between industries).

Working collaboratively with other companies in your industry where possible can help you to distribute the workload and costs involved in some aspects of risk identification and management; for example, the Property Council of Australia has launched a supplier platform dedicated to delivering a consistent, streamlined approach to Modern Slavery reporting.

Executives often perceive the process of mapping supply chains and identifying risk factors to be difficult, costly, and unmanageable; after all, large companies often deal with hundreds if not thousands of suppliers, especially by the time that lower tiers are mapped. However, modern slavery overwhelmingly lurks in the lower tiers – out of sight and out of mind unless businesses proactively pursue the issue. Conventionally, many of the processes involved in identifying modern slavery risk factors have been manual and arduous; however, agile tech solutions such as Informed 365 allow difficult and time-consuming tasks such as monitoring, tracking and visualising supply chain management to be largely automated, enabling your company to provide reliable & meaningful data more efficiently and effectively as you transform both your Corporate Social Responsibility and Environmental, Social, and Corporate Governance responsibilities from plans-on-a-page to real-life practices. 

Lastly, it is of critical importance to meticulously document your risk-mapping processes, both to ensure that you can prove due diligence, and so that you can grow your knowledge base of what your supply chain looks like and identify and minimise, manage, and mitigate risks moving forward.

4. Develop Minimisation, Management, And Migration Strategies

Your tactics to reduce exposure to modern slavery risk factors will not look exactly the same as those of any other company; however, certain strategies will apply generally across industries. These include ensuring that the entire organisation is trained to understand what modern slavery is, and what their responsibilities are; evaluating risks of both existing and new suppliers; mapping and auditing your supply chain; and sanctioning or cutting off contracts with suppliers who do not meet requisite standards. You should make policy commitments for remediation if it is identified that modern slavery has been detected in your supply chain.

Having identified risk factors and developed strategies to address these, you are now better positioned to structure a robust, strategic Modern Slavery Statement.

5. Structure Your Modern Slavery Statement

Your company’s Modern Slavery Statement should clearly describe your commitment to tackling modern slavery and demonstrate the steps you have taken to act upon these policies: your risk-mapping processes, your policies & procedures, actions that you have taken and intend to take, training that relevant stakeholders have undergone, relevant parties that you have engaged with, and your action plan moving forward.

You should include the mandatory seven key components that a Modern Slavery Statement, which are:

• Name of organisation
• Structure and operations
• Key modern slavery risks
• Actions taken
• Effectiveness of actions
• Consultation within your organisation (incl. overseas)
• Other initiatives.

The resulting Modern Slavery Statement will vary considerably from company to company, and industry to industry, but if you have carefully addressed the previous steps, then your Statement will be based a robust strategy that has taken reasonable steps towards identifying and acting upon risks and planned for how to address these.

To understand the actual format of a Modern Slavery Statement, we suggest visiting the Australian Government’s Online Register for Modern Slavery Statements, where you can see almost 250 Statements lodged to date, covering almost 500 entities. It is, however, important to note that a robust Modern Slavery Statement is not a copy-paste job; unfortunately, an analysis of 121 modern slavery statements cited in the Australian Financial Review finds that only 8% of Australian companies are going beyond a basic analysis of modern slavery in their supply chain. While this register can help you understand the general format of a well-written Statement, it is no substitute for due diligence. Remember, your Statement is not just words on a page: it is a commitment towards ethical behaviour and a key part of your business strategy, informing the decisions you make as a company.

Highlight your policy commitments, including how you will handle any mistakes or oversight; as mentioned earlier, admit what you do not yet know and where you have room for improvement. Act with transparency, with due diligence and in good faith, and you will be best positioned towards fulfilling your reporting requirements, protecting your supply chain from modern slavery risk factors, and protecting the human rights of people who are involved in your supply chain in Australia and overseas.

Moving Forward

Modern slavery is what is commonly known in policy circles as a “wicked problem”, with multiple, inter-related drivers. As an ethical company, you should show what you are doing to commit to the solution, rather than taking the all-too-common approach of saying the bare minimum and hoping that the invisible modern slavery risk factors remain invisible. Sadly, many companies who adopt human rights policies surrounding modern slavery, human trafficking and so on take very little action to act upon these policies.

Having read this far, we think it is safe to say that you want your company to be different; that you want to take practical action to be a good corporate citizen and are not satisfied with joining others in burying your head in the sand. You understand that policy alone is not enough to protect human rights, and that practical action is necessary. As such, your Modern Slavery Statement should be a guiding light for your company, based on detailed planning, recognition of the complexity and opacity of the modern slavery issue, and proactive strategies to prevent modern slavery from occurring in your company’s supply chain, identify modern slavery where it does occur, and sanction & remediate accordingly.

With Informed 365, you will be more able to achieve this. Our solutions help organisations to more efficiently turn their CSR and ESG policies into practice, including tackling modern slavery, by automating traditionally manual data gathering, visualisation and reporting processes. With an ever-increasing focus on companies acting in a socially and environmentally responsible manner, CSR and ESG have become integral to doing business in today’s world; we help companies who want to do more than pay lip service.

With Informed 365, it is easier for organisations with a turnover of over $100m to meet their annual Modern Slavery reporting requirements, as well as smaller organisations who voluntarily choose to combat modern slavery in their supply chain. With our agile Business Intelligence systems, you can easily track, calculate, monitor, visualise and report against any data, through a highly automated process requiring very little time or resources from you. With our support team and onboarding assistants at the ready, we can offer an end-to-end solution for companies who are committed to doing good through their work.

Want to know more about Informed 365 and how we can be of service to your company? Explore our resources on modern slavery, ethical sourcing and supply chain management, and CSR reporting and certification, including a recent webinar on Modern Slavery Implications & Case Studies hosted by Shark Tank’s Andrew Banks, and contact us to assist with any enquiries, demo requests and suggestions.

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Combating Modern Slavery – Why You Need A Tiered Approach

Australian companies of all sizes are increasingly realising that modern slavery is not just something that is happening elsewhere, or a problem for the developing world to face alone. Australia’s close trade links to the APAC region, where approximately two-thirds of victims of modern slavery are based, result in many opportunities for modern slavery to permeate our supply chains. Despite this, an analysis of 121 modern slavery statements cited in the Australian Financial Review finds that only 8% of Australian companies are going beyond a basic analysis of modern slavery in their supply chain. As well as being murky waters ethically, this opens companies up to litigation. 

We have seen examples recently in the US with high-profile lawsuits against companies like Mars, Cargill, Nestlé, and Hershey, all of whom pledged almost 20 years ago to end modern slavery and child labour in their supply chains. You can read more about these cases in the Washington Post, where they assert that “the odds are substantial that a chocolate bar bought in the United States is the product of child labour”, and identify that a significant barrier facing these companies in eradicating child slavery is that they still cannot identify the farms where all their cocoa comes from, let alone whether slavery was involved in its production.

Unfortunately, modern slavery in Australia is all-too-often an invisible problem. With the increasing shift from vertical integration to sourcing more inputs from developing countries to save costs and retain a competitive edge, leaving companies more open to the potential of modern slavery in their supply chain. We sporadically hear of high-profile cases, for example when media shines a spotlight on the pervasive nature of human trafficking and abuse of workers in the global supply chain of the canned tuna that ends up on our supermarket shelves; indeed, a parliamentary inquiry in 2017 estimated that almost $2 billion of seafood imported to Australia in the previous year was produced with a high risk of forced labour. 

From the clothes we wear, the food we eat and the suppliers we choose, Australian consumers and businesses are most likely unwittingly benefiting from modern slavery through many of our purchasing decisions.

Slavery Lurks Deep in the Shadows of Australian Supply Chains

How is Australia reacting to this issue, so clearly against our values yet so complex and opaque? With the passage of the Modern Slavery Act in January 2019, Australian entities and entities which carry out business with Australia with a minimum annual consolidated revenue of $100 million now have modern slavery reporting requirements under the Act. However, as mentioned earlier, the majority of Modern Slavery Statements do not involve robust, strategic supply chain analysis beyond Tier 1 suppliers.

Supply chains are divided into different tiers, with Tier 1 suppliers being contracted directly to provide goods and services, who may then subcontract to ‘Tier 2’ suppliers and so on. 

Because modern slavery by its very nature lurks in the shadows and is difficult to identify, there is all too much room for directors who take a “policy over practice” mindset and settle for only a Tier 1 analysis of their supply chain to become complicit in modern slavery. However, companies who wish to be proactive towards eliminating the risks of modern slavery from their supply chains must take a more in-depth look; modern slavery overwhelmingly occurs not at Tier 1, but at Tiers 3 and 4 as well. The Parliament of Australia finds that the risks of modern slavery are particularly prevalent at these lower tiers, particularly in developing countries with less regulation, oversight and/or enforcement. 

“We think we’re a good company in Australia, but the T-shirts worn by our engineers have come to us off the back of the suffering of other people.” – Dr David Cooke GAICD, MD, Konica Minolta Australia

While no company can ever be entirely certain that they have wiped slavery from their supply chain, only by mapping a company’s supply chain at a deeper level and working towards continuous monitoring and improvement can companies rest assured that they have engaged in due diligence, both from a corporate social responsibility perspective and potentially from exposure to lawsuits; Australia’s Modern Slavery Act makes it clear that a superficial approach is inadequate, and as we’ve seen in the high-profile cases in the US, ignorance is not necessarily an excuse. Furthermore, the reputational risk is great if slavery is identified in a supply chain; customers, employees and investors will be reluctant to purchase from, work with or invest in a business who espouses a commitment to combating modern slavery yet is caught facilitating it.

“The back of this shirt will say ‘made in Bangladesh’ but what that actually means is that this shirt was assembled in Bangladesh. The fabric, the cotton, the dye, if there is a zip in it, if there is a button in it—all of those materials that go into assembling that product in Bangladesh can be sourced from elsewhere, of which there is largely not a lot of transparency. It can be up to three tiers or four tiers in a supply chain, and that is where the workers are vulnerable to exploitation.” – Kate Nicholls, supply chain consultant, addressing a 2018 Parliamentary Inquiry into establishing a Modern Slavery Act in Australia

Barriers to A Multi-Tiered Approach

With such a clear ethical imperative and business case to proactively combating modern slavery, why do most companies not dive deeper? While the risk factors of modern slavery vary greatly between companies, the barriers to taking a multi-tiered approach are often similar even across industries. Many believe that going beyond Tier 1 would be difficult, costly, and unmanageable; many do not really know what their supply chain looks like beyond Tier 1. Furthermore, suppliers may be reticent to divulge the identities of their suppliers, for fear that they may be bypassed by the buyer.

With this conundrum in mind, how can we make sure that the supply chains we work with to engage in our business activities do not involve human rights violations? Policy alone is not enough to identify, prevent and end modern slavery; practical action must be taken to address modern slavery risk factors. This will look different for every company, and key risk factors may arise in surprising places.

Key Recommendations

In order to turn your company’s policy commitment to combating modern slavery into best practice, you must firstly recognise that modern slavery is a complex problem, and combating it is an ongoing process involving continuous monitoring and changemaking. Like many of your business strategies, your work in combating modern slavery cannot be perfect overnight, nor is it ever entirely done. Set an initial framework, including what you know now and what gaps you have identified, what you can do now and what you intend to do later (with timelines). Monitor and review the effectiveness of your strategy and tactics, and pivot accordingly.

Mapping your supply chain to ensure ethical sourcing is key. Larger companies of the size that are subject to modern slavery reporting requirements frequently have thousands, if not hundreds of thousands of suppliers by the time Tier 4 is reached, making this a complex but not impossible process; for example, Wesfarmers has ended contracts with twenty of its Tier 1 suppliers over concerns about modern slavery. 

Focus initially on areas of high risk, utilising external expertise to shine a spotlight on areas you may not have previously considered; after all, while your company is an expert on its business, it is unlikely that it has in-house expertise on modern slavery. 

Collaboration is also key to bringing about meaningful change, as individual organisations often do not have the resources or “buying power” to influence supplier behaviour. Rather, organisations should ideally work together in an industry-wide approach, forming industry-wide expectations on social and environmental matters in order to create a much greater impact while distributing costs. This consistent approach must be underpinned by awareness, training, and genuine cooperation with suppliers.

Technology for social good

Lastly, agile tech solutions such as Informed 365 are essential in order to provide reliable & meaningful data, turning both your Corporate Social Responsibility and Environmental, Social, and Corporate Governance responsibilities from plans-on-a-page to real-life practice. Our solutions help organisations to become more efficient through the automation of data gathering, visualisation and reporting processes that have traditionally been conducted manually (and taking up significant time and resources in the process).

With the Modern Slavery Act (Cth) requiring organisations with a turnover of over $100m to report annually, we can help make this process much more efficient. Moreover, with CSR & ESG requirements becoming more and more important, and internal and external stakeholders increasingly demanding that companies act in a socially and environmentally responsible manner, our agile Business Intelligence systems can benefit companies of any size and industry.

We help our clients to track, calculate, monitor, visualise and report against any data, through a highly automated process requiring minimal input from busy or resource-poor companies. We are positioned to offer an end-to-end solution with our support team and onboarding assistants, making it easier than ever to breathe life into your CSR & ESG commitments.

If you would like to know more about Informed 365 and our offerings, contact our friendly team; we would be more than happy to assist you with your enquiry, demo request and suggestions. If you enjoyed this article, you may be interested in our extensive resources relating to modern slavery, supply chain management and CSR reporting and certification, including our recent post on five steps your company needs to take to help form its modern slavery statement.

The Modern Slavery Act Australia: What you need to know

With the Modern Slavery Act fully operational, your organisation may now be subject to stringent annual reporting obligations. Here, we take a deep dive into everything you need to know about how the Modern Slavery Act may affect your organisation and what you need to do to stay compliant.

What is Modern Slavery?

While different countries use different legal terminology, ‘Modern Slavery’ generally describes the situation where coercion, threat or deception is used to exploit a person and to undermine their freedom. The term includes crimes of human trafficking, slavery and slavery-like practices such as servitude, forced labour, forced or servile marriage, the sale and exploitation of children and debt bondage.

How does Modern Slavery affect Australia?

Australian businesses may be unaware of the risk of slavery in their operation or supply chain. Globalisation has made it increasingly difficult to know if products offered in the Australian market profit from or exploit Modern Slavery somewhere within their production process.

In Australia alone, the Global Slavery Index estimated that 15,000 people were living in “conditions of modern slavery” in 2016.

On a global scale, it is estimated that over 40 million people are engaged in Modern Slavery and US$150 billion per year is generated from forced labour in the global private economy. An approximate two-thirds of the global slave trade is predicted to be occurring in the Asia-Pacific, with some of Australia’s biggest trading partners, including China, Malaysia, Indonesia and Thailand, as host to some of the most egregious crimes.

So even if the internal practices and tier 1 suppliers of your organisation may not display signs of Modern Slavery, there may be traces of slavery found in your deeper tiers. In fact, a 2015 survey of retailers and their tier 1 suppliers found a 71% likelihood of slavery in their supply chains. Unfortunately, this means that if you haven’t identified Modern Slavery in your operation, then it may be because you are not looking in the right places.

The Modern Slavery Act and who needs to report?

On 1 January 2019, the Modern Slavery Act 2018 (Cth) (Modern Slavery Act) became effective and its requirements are now fully operational.

If your entity is based or operating in Australia, with annual consolidated revenue in excess of $100 million, then you are now required to submit an annual Modern Slavery Statement within six months after the end of your financial year. This Statement requires board approval and is to outline the risk of Modern Slavery in your operations and supply chains (including any entities owned or controlled by your entity), the actions taken to address those risks and the effectiveness of your responses. Once submitted, these statements will be kept by the Minister for Home Affairs in a central registrar and may be accessible by the public.

It is estimated that over 3,000 Australian businesses will be required to report under these obligations. Other entities that are based, or operating, in Australia may report voluntarily.

What are the risks of non-compliance with the Modern Slavery Act?

While at this stage, there are no financial penalties for non-compliance, there is the risk of reputation damage for any organisation choosing not to comply. Additionally, the Minister is authorised to ‘name and shame’ any entity failing to meet the reporting obligations, which may risk public criticism and shareholder activism.

What should your affected organisation do?

If your organisation is required to submit a Modern Slavery Statement, then you should begin by considering the requirements of the statement and reviewing your policies, training, whistle-blower mechanisms and contracting practices. You should put in place a plan to meet the requirements of the Act, which will require input stakeholders from across the relevant business units of your organisation.

At Informed 365, we have been helping some of Australia’s largest organisations prepare for their Modern Slavery reporting statement. We would be most happy to walk you through the process we have taken with other reportable entities and assist you in your process. Please call us on 1300 552 335 to speak further.