In recent years there has been an increasing global trend to address modern slavery risks with the introduction of legislation in the UK, Australia and more recently Canada and New Zealand. This article focuses on the Australian position, but is equally relevant to other jurisdictions.
In Australia, the Modern Slavery Act 2018 (Cth) (the “Act”) requires businesses with a revenue of more than one hundred million dollars per annum to conduct a review of their organisation and supply chains and identify and report on the risks of modern slavery within their organisation and supply chains, and what they are doing to address such risks.
There is no doubt that the Act has been successful in raising awareness of the issues related to modern slavery, but the question must be asked, is it making a real difference to the lives of those affected by slavery and human trafficking, or are many corporations missing the point?
The reality is that modern slavery is a very real and serious issue, which can have a devastating impact on those who are affected by it. It is vital that we remember that each individual affected by modern slavery has a story, and their experiences should be at the forefront of our thinking when it comes to addressing this issue. With that in mind, when addressing modern slavery risks, those in charge of corporate governance should ensure they carefully consider the purpose of the legislation and the impact they can have if a meaningful approach to the legislative requirements is taken.
The Explanatory Memorandum to the Modern Slavery Bill 2018, as it was, states that:
- “…the Bill’s primary objective [is] to assist the business community in Australia to take proactive and effective actions to address modern slavery. This will help mitigate the risk of modern slavery practices occurring in the supply chains of goods and services in the Australian market.”
- “The Bill will support large businesses to identify and address modern slavery risks and to develop and maintain responsible and transparent supply chains. It will drive a ‘race to the top’ as reporting entities compete for market funding and investor and consumer support. The Bill also aims to increase awareness of modern slavery risks among the Australian business community, and assist investors and consumers to make more informed decisions when using, buying and selling goods and services.”
So, what does this mean in practice?
Poor supply chain management can lead to human rights abuses, including forced labour, child labour, and trafficking.
There are numerous ways businesses can improve their supply chain management, including conducting audits, undertaking regular risk assessments, implementing software to assist with transparency, implementing policies and procedures to address the risks, consulting with stakeholders (such as offshore partners) and providing training to employees. In addition, they can improve on transparency and efficiency by dealing with other companies who take this issue seriously. But it is also important to address these matters with a meaningful approach.
It is evident that more and more contracts are including inappropriately drafted clauses with respect to modern slavery, demonstrating to us a misunderstanding of what modern slavery risks are and how to address them in the context of the supply chain.
For example, a contract that requires a simple warranty that there is no modern slavery in an organisation or its supply chains demonstrates a clear misinterpretation of the Act and the issue of modern slavery generally, and such a warranty would more than likely be impossible to provide. Such a clause can also shift the responsibility for management of modern slavery supply chain risks down the supply chain. Poorly worded clauses may also disincentivise suppliers in the chain from being honest about exposure to modern slavery risks (which can be industry and area specific) as they may fear losing a lucrative contract, effectively creating a situation where inclusion of such clauses reduces transparency and reporting when parties should be aiming for the opposite so that risks can be addressed.
The demonstrates that corporations need to really consider what it is that they are trying to achieve, rather than taking a tick-a-box approach which fails to consider the complexities of the issue. Furthermore, it fails to provide a framework for meaningful action.
To address modern slavery effectively, businesses need to understand the business drivers of modern slavery relevant to their industries and supply chains, or the areas in which they operate, and have a clear understanding of what risks there are in their supply chains, so that a suitable approach towards addressing the risks can be taken, rather than simply taking an approach which shifts the onus to suppliers.
If the human tragedy of modern slavery is not enough to motivate businesses to take a human centred approach, businesses ought to consider that a failure to properly address these issues carries a high risk of exposure to consumer criticism and boycotts if failures are publicised, as other more savvy businesses strive to “race to the top” with a more meaningful approach that resonates with consumers and investors.