This is the second part in a two-part series on Modern Slavery. Read Part One here.

Allegations of modern slavery constitute a serious risk to the goodwill and reputation of a business and can result in loss of consumer confidence and market share. These are risks which businesses can face if they fail to prepare for the NSW Modern Slavery Act 2018 and the Federal Modern Slavery Bill 2018 (collectively the ‘Australian modern slavery legislation’).

Effective actions can enhance corporate reputation and image, and, taking an active role now, in preparation for the Australian modern slavery legislation, will bring benefits to businesses, including:

  • improved risk assessment and management
  • attractive policies for new investors, clients and business partners, impacting positively on investor relations
  • increased customer dividends from an increasingly ethically conscious market
  • improved employee engagement, recruitment, retention and motivation, and
  • more sustainable business relationships.

Following are some simple steps which will help businesses prepare for the introduction of the Australian modern slavery legislation, and any further amendments as the Federal Bill passes through Federal Parliament.

Structure and Supply Chain Analysis

Businesses should begin by mapping their current supply chains to analyse potential modern slavery risks and identify any efficiencies. Indicators of a higher risk of the presence of modern slavery practices may be associated with the operational context or the nature and location of the work performed within the supply chain, for example:

  • lack of visibility of work practices within third party suppliers
  • lack of government regulation and/or poor enforcement of labour standards
  • the presence of cheap labour and/or high numbers of vulnerable workers
  • the absence of effective and representative workers’ organisations / collective agreements
  • reliance on low-skilled or unskilled labour
  • workforces with high numbers of temporary, seasonal, or agency workers
  • work of a dangerous or physically demanding nature
  • worker isolation and lack of access to information, and
  • home-based workers and workers employed in informal enterprises.

The business structure itself should also be assessed in relation to whether the inherent nature of the business model may pose an increased risk of modern slavery.

Business models with the following core features have been identified as having an increased risk of the presence of modern slavery practices:

  • sub-contracting and complex supply chains
  • extended or complex employment relationships
  • the presence of labour recruiters in supply chains, and
  • high flexibility and low profit margins.

Risk Assessment and Amendments to Existing Policies

In preparation for the Australian modern slavery legislation, businesses should audit existing policies and procedures, and allocate reporting responsibilities to relevant departments or people. This may include the corporate social responsibility, operations management, procurement/supply chain management or human resources teams.

Businesses should analyse their existing policies and codes of conduct to determine if they already address some of the risks related to modern slavery. While a business may not have a specific policy on human rights or modern slavery, it is likely to have at least some policies in place which relate to these issues – some of the policies a business may wish to review could include their:

  • procurement policy
  • whistleblowing procedures
  • migrant labour policies
  • supplier code of conduct
  • recruitment policy
  • employee code of conduct
  • complaints procedures, and
  • staff training/awareness-raising policies.

Businesses should also consider implementing a clear policy statement of the business approach to combating modern slavery, what is expected of employees in this respect (and relevant disciplinary actions if the policy is breached) and how responsibility for monitoring compliance with the policy is allocated.

Risk assessment can also be commenced for identified business risks in relation to current supply chains and current practices. Some risk categories which have an influence on risk assessment for a business could include:

  • Labour cycle risks – recruitment practices are increasingly a risk flag for modern slavery.
  • Country specific risksThe Global Slavery Index provides a good overview of high risk countries for modern slavery with the highest risks identified in India and China.
  • High risk industries – In general, high risk industries include manufacturing, agriculture,

construction, mining, electronics, food processing and service work.

Due Diligence on Suppliers

The due diligence process in relation to suppliers involves identifying medium and high-risk suppliers and performing an audit of the identified suppliers to evaluate their compliance with the proposed new legislation.

Businesses could consider performing an evaluation on site of suppliers, and implementing measures to establish a supplier’s credibility, legitimacy and ability to manage labour rights on initial engagement and through a continuous compliance process. Businesses can also take steps working with their current suppliers to minimise the risks of modern slavery as identified in the businesses’ risk assessments and due diligence processes.

Next Steps

The Australian Modern Slavery legislation requires businesses to report on, among other factors, the steps it has taken to assess and manage identified risks of modern slavery within its supply chains. Reporting is not expected to commence until 2020, however, change takes time. Businesses should consider preparing to act now so any risks are identified well in advance, allowing for effective mitigation strategies to be put in place, and third-party supplier chains to be well managed. There is an increasing level of consumer awareness of this issue and the global responses of business, and it is not unreasonable to expect increasing consumer and investor pressure to ensure a business is not part of the global modern slavery problem.