Posted: 25 Nov. 2019 05 min. read

You are not immune to modern slavery

Act now on new legislation

Slavery is more prevalent today than at any point in human history and, just as in earlier eras, businesses are complicit both directly and indirectly in perpetuating abuses. The 2018 Global Slavery Index conservatively estimates that on any single day in 2016, 40.3 million people were victims to some form of modern slavery including forced labour, bonded labour, and human trafficking. Additionally, the International Labour Office (ILO) estimates that in 2016 there were 152 million victims of child labour globally, of which almost half were in hazardous work. Profits from modern slavery add up to $150 billion annually.

This is a world-wide crisis and is not limited to third world nations. In Australia alone, there are more than 15,000 victims living in conditions of modern slavery found predominantly in industries such as agriculture, construction, domestic work, meat processing, cleaning, hospitality, and food services.

Even if your company’s own operations are free from conditions of slavery, victims of human rights abuse can be hidden in your supply chain, directly linking you to enslavement. The UN Guiding Principles on Business and Human Rights describe three types of business complicity:

  • Cause, e.g. you may own or run a factory that uses exploited labour.
  • Contribute to, e.g. you may ask a contractor or supplier to meet unrealistic cost targets that could only be met by exploited labour.
  • Directly linked, e.g. an entity in your supply chain or linked to a business partner may use materials sourced from another entity using forced labour.


Australia’s Modern Slavery Act

In November 2018, Australia introduced the Commonwealth Modern Slavery Act, creating a transparency requirement for Australian entities with annual consolidated revenue of more than AU$100 million. The Act came into effect on 1 January 2019. It requires organisations to submit a public statement with the aim to drive businesses to take responsibility for and address labour exploitation in their supply chains. The first public statements are due from 1 July 2020. Statements must describe the operational and supply chain structure, the modern slavery and child labour risks, organisation’s policies, processes and due diligence in addressing and mitigating those risks and the method by which effectiveness of these actions is assessed.

In addition to the federal Act, the NSW Modern Slavery Act passed in June 2018 but is not yet enacted. Based on the NSW Act, entities with a lowered revenue threshold of AU$50 million will be required to report and failure to provide a complying statement will incur a financial penalty.

It’s time to act now

Non-compliance with the Commonwealth legislation exposes companies to a number of significant risks:

  • Reputational Risk: As customer scrutiny and expectations of an organisation’s corporate social responsibility heightens, companies must take responsibility to identify and address the possibility of human rights violations in their supply chain and mitigate reputational risk. 
  • Operational Risk:  By not complying with the Act, businesses face the risk of losing their Social Licence to Operate (SLO). Potential impacts may include:

     Investors vote against management/leadership;
     Communities restrict project development;
     Employees may choose to work for more progressive companies;
     Competitors capitalise on the advantage to strengthen their own licence;
     Community groups and local governments increase pressure. 

  • Market Risk: If a company is found accountable for conditions of modern slavery or child labour in its supply chain and they have taken no action to identify and remediate such conditions, they are at risk of losing consumer confidence and jeopardising their position in the market. This could potentially affect the overall performance of the company in the financial market and hence lead to a loss for the investors. 
  • Financial Risk: Non-compliance with the Act can lead to unexpected expenses such as legal fees, investors’ withdrawal of capital and/or penalties. Moreover, the financial implications are compounded as a result of the reputational, operational and market risks associated with non-compliance. 


What’s next?

In order to meet obligations under the Commonwealth Modern Slavery Act, companies need to act now and take a series of steps over three horizons (see the figure below). Impact of these steps will manifest in organisations’ readiness in response to the Act:

  • Short to medium term: Identify modern slavery risks in operations and supply chains and raise awareness of modern slavery internally within the entity, and externally to suppliers within the business
  • Medium to long term: Engage all aspects of operations and  supply chain including procurement, contracting and recruitment
  • Long term: Report & support continuous improvement activities
The journey ahead and next steps
The journey ahead and next steps

A key driver for successful organisational transformation is sustainable change which arises from careful assessment, design and implementation of strategies, whilst adopting a long-term perspective. Consistent effort and progress needs to be made towards eradicating human exploitation from the supply chain operations. Altering policies and standards cannot happen overnight; now is the time to take action to prepare your business and reduce your risk of contributing to the global modern slavery crisis.

References:

  1. https://www.globalslaveryindex.org/
  2. https://www.ilo.org/global/topics/child-labour/lang--en/index.htm
  3. Profits and Poverty: The Economics of Forced labour, ILO, Geneva, 2014
  4. https://www.globalslaveryindex.org/2018/findings/country-studies/australia/
  5. https://www.legislation.gov.au/Details/C2018A00153
  6. https://www.legislation.nsw.gov.au/#/view/act/2018/30

Meet our authors

Tina Northcott

Tina Northcott

Director, Consulting

Tina is a senior business transformation professional with a focus on the procurement and supply chain functional areas. Whilst her extensive experience has been across industry sectors from rail, bulk transport, CG&S and defence, Tina’s client base over the recent years has been in asset-intensive organisations. Her work has included identifying and implementing business-led and system-enabled change. Tina is passionate about digital innovation and embedding sustainable business change through collaboration and coaching.