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At the outset of implementing a modern slavery risk management framework you need a high level project plan that will guide how you will manage the risk of modern slavery in your supply chain and operations as well as prepare for reporting under the Modern Slavery Act 2018 (Cth) (Act).
Who will be responsible for the project? You should establish a project team and hold an initial briefing session about the Act and obligations and workshop potential areas of risk.
In this initial stage, it is important to understand your external legal and regulatory obligations as those obligations will inform the structure and content of your modern slavery risk management framework.
As a foundation for your program, your business should make a commitment to manage the risk of modern slavery within its operations and supply chain. This commitment is significant as it demonstrates to your stakeholders and competitors, that your business is committed to minimising the risk of modern slavery and adverse human rights impacts.
Once this commitment is made, the work to embed the commitment into the operations of your business needs to start. You need to look at relevant policies and procedures and consider whether they uphold the commitment. For example, what commitments do you require of your suppliers and is modern slavery risk a factor in supplier selection?
The mandatory reporting criteria require that your modern slavery statement describe the:
Reporters are therefore obliged to assess the risks of modern slavery in their operations and supply chain (and those of their owned and controlled entities). To do so, you need to know who your suppliers are, what they supply you with and where the people involved in that supply are located. Your statement needs to be underpinned by a reasonable risk assessment, or you will risk publishing a misleading statement in contravention of the Australian Consumer Law.
While many businesses will be familiar with their immediate, larger first tier suppliers, the same may not be said of smaller suppliers or those further down the supply chain. However, it is these suppliers that often carry the greatest risk of modern slavery due to a range of factors such as lack of transparency and the nature of the work that they may do such as providing raw materials and manufacturing components.
Have you mapped your supply chain and operations?
To begin assessing the modern slavery risk of your business, a good starting point is to map out/identify your operations and supply chain (including those of owned/controlled entities). This should include all direct suppliers (first tier suppliers), including providers of labour hire and sub-contractors, as well as known second tier suppliers. How many suppliers do you have? What do they supply you with – can they be grouped for assessment purposes? Your statement will need to be transparent in relation to your understanding of your wider supply chain (beyond the first tier).
Don’t forget that you need to look at your own operations as well.
Have you assessed the risk of your suppliers and operations?
Once you have mapped your supply chain and operations, a risk assessment should be carried out utilising a pragmatic, reasonable methodology. Very few businesses will have the resources to assess each of their suppliers individually. Processes need to be adopted to permit identification of those suppliers that require a closer look. Our experience globally has been that this risk assessment process becomes increasingly sophisticated as businesses better understand their supply chain. No one expects you to know everything about your supply chain in year 1.
Click here to read about our on-line risk assessment tool, Risk Sonar.
The mandatory MSA reporting criteria require that your modern slavery statement describes the actions taken to address the risks of modern slavery practices in your operations and supply chain. In our experience, once you have identified and described your risk, you are going to want to explain what you are doing about it. This is the section of your statement that can differentiate your business.
You will need to engage your internal stakeholder group (which you called together for resolution 1!) from the relevant business areas such as procurement and supply chain management, and to work together to develop a strategy for:
The controls may include:
It is important that your controls are responsive to the risks of exploitative practices that you identified in your modern slavery risk assessment. This is not a cookie cutter situation.
Once a strategy has been adopted, the reporting entity can start to engage with its suppliers and internal stakeholders.
It is likely that you will identify a number of suppliers that you need to have a conversation with. Best practice is typically to use leverage to extract change from higher risk suppliers, rather than just terminating the relationship.
It is important to ensure that suppliers are informed of why they are required to comply with any additional requirements and the consequences that may follow from non-compliance. These details will vary from business to business, depending on its chosen approach.
Read our global report on Best Practice in Managing Business and Human Rights here.
Once your business has implemented strategies to manage its modern slavery risk, you need to decide how to monitor their effectiveness. Finding meaningful ways to judge effectiveness of a modern slavery framework is challenging.
One option is to adopt a KPI in respect of each strategy you have adopted, such as training completion rates, or the percentage of suppliers that have adopted a modern slavery commitment. If you decide to issue questionnaires to suppliers as part of your risk assessment, you could compare results year-on-year. Monitoring effectiveness will position your business to keep track of its progress, as well as identify areas for improvement. It will also help you to work out whether what you are doing actually makes a difference.
Entities are required to report upon how they assess the effectiveness of the actions they have taken – so you need to give some thought to how effectiveness should be assessed now. Your business may also choose to describe its findings in relation to effectiveness in its statement, as well as highlight improvements or new strategies that are likely to be implemented moving forward. This demonstrates that your business’ understanding of, and action to tackle, its modern slavery risk is evolving. If strategies adopted in earlier years are no longer being utilised, it is also good practice to explain why. If your strategy is working well, put that up in lights! Consider describing discrete occasions where what you did made a difference with a particular supplier or in relation to your own operations.
Ongoing engagement with business stakeholders and seeking periodic feedback on strategies, policies and training programs relating to managing modern slavery risk also helps tracking effectiveness. It also provides your business with suggestions for enhancement of existing processes and scope for new ideas, which are imperative due to the ever-changing landscape of modern slavery risk areas.
Stay tuned for resolution 5 – plan how to respond to modern slavery if identified.
On 1 January 2019, the Modern Slavery Act 2018 (Cth) commenced, heralding a new statutory modern slavery reporting requirement.
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