Why You Need A Tiered Approach To Combat Modern Slavery

Can your company verify, trace and share every detail of your supply chain?

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.