Managing modern slavery risks: Top 6 New Year's resolutions 2020

Publication Updated March 5, 2020

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Resolution 1: 
I will design and implement a modern slavery risk program

 

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?

 

 

Modern Slavery Act New Years Resolution - 2

Resolution 2:
I will assess the risk of modern slavery in my supply chain and operations

The mandatory reporting criteria require that your modern slavery statement describe the:

  • operations and supply chain; and
  • risks of modern slavery practices in the operations and supply chain of the reporting entity and those entities it owns or controls.

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.

 

 

Modern Slavery Act - New Years Resolution 3

Resolution 3:
I will adopt strategies for addressing identified modern slavery risks

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:

  • developing and implementing effective controls; and
  • communicating with suppliers and internally.

The controls may include:

  • HR processes to ensure staff are not subject to exploitative practices (for example, underpayment, non-payment of wages, excessive overtime);
  • supplier selection processes;
  • supply agreement terms and codes of conduct;
  • contractual rights to assess performance of suppliers;
  • on-site visits to suppliers;
  • education of suppliers with specific risks;
  • bespoke responses to specific high risk suppliers;  and
  • training.

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.

 

 

Modern Slavery Act New Years Resolution 5

Resolution 4:
Monitor and review the effectiveness of strategies adopted to manage modern slavery risk

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. 

 

Modern Slavery Act New Years Resolution - 4

Resolution 5:
Plan how to respond to modern slavery if identified

During the process of your business undertaking its assessment of modern slavery risks, you may identify modern slavery.  How you respond to that information is critical.  

It is good practice to establish a high level policy that outlines how you will respond to identifying modern slavery.  Who needs to be told?  Who is responsible for the response?  How will internal and external communications be managed?  It is critical for relevant stakeholders in your business to be familiar with the policy and adequately trained to know what steps to take when modern slavery is identified. Each business’ policy will be unique, and reflective of factors such as industry area, geographical location, and size.  

When an instance of modern slavery is discovered, it is crucial that your business addresses (as a priority) any harm that may have occurred as a result, keeping in mind the need to keep the victim or victims safe.  This can only be done on a case-by-case basis.  Get advice if you need it – in many parts of the world, you will have identified a serious crime and there will be specific jurisdictional issues you need to consider. If your business has caused or contributed to the modern slavery occurrence, it is important to take steps to rectify the harm caused.  You can do this collaboratively with other parties involved. For example, if this harm occurred in your supply chain, your business should engage with the supplier in question without delay to assess the impact, whether they are committed to remediating and taking action to address the root cause(s). This engagement will need to be ongoing until you are satisfied that there has been meaningful change in order to maintain the ongoing relationship with the supplier.  Best practice says that in most circumstances, you should try to work with the supplier to improve the conditions of workers rather than immediately terminating your relationship. 

A communications plan will really assist.  You need to assume that, somehow, the media will hear about the modern slavery identified.  Take control of the dialogue.  A statement that outlines your modern slavery program and your commitment to managing modern slavery should be three quarters drafted, so that you can act swiftly.   

Ultimately, if you identify modern slavery, that means a person connected to your business is being seriously exploited.  If your response focuses on remedying the crime of modern slavery, and your response plan is ready to go, public perception is much more likely to be with you. 

 

 

Modern Slavery Act New Years Resolution - 6

Resolution 6: Implement appropriate mechanisms for internal and external reporting

Businesses required to report pursuant to the Modern Slavery Act 2018 (Cth) (Act), will need to submit a modern slavery statement annually addressing the mandatory criteria (Statement).  All of the work you have undertaken by adopting our other 5 new year’s resolutions should make drafting this Statement much easier.  

The Statement must cover the following mandatory criteria:

  1. the identity of your business;
  2. describe the structure, operations and supply chains of your business, including your owned and controlled entities;
  3. describe the risks of modern slavery practices in the operations and supply chains of your business, and any entities that your business owns or controls;
  4. describe the actions taken by your business and any entity that your business owns or controls, to asses and address those risks including due diligence and remediation processes;
  5. describe how your business assesses the effectiveness of such actions;
  6. describe the process of consultation with any entities your business owns or controls or is issuing a joint modern slavery statement with; and 
  7. any other information that your business, or the entity giving the statement, considers relevant.

Remember that your business is required to have a reasonable basis for any opinions expressed in your Statement; it is crucial to adopt and document a robust process to assess risk and to ensure that process extends to owned and controlled entities. Part of this process should include:

  • the output of resolutions 1-5;
  • review of the Statements and practices of your competitors and suppliers;
  • training staff and other stakeholders in relation to modern slavery and seeking input;
  • developing a formalised and documented consultation process within your corporate group;
  • encouraging reporting of modern slavery concerns by staff and suppliers pursuant to your Whistleblower program;  
  • if a report has been made, take appropriate action in response to the report, which will differ on a case-by-case basis. It is also important to carefully monitor the situation, and seek appropriate advice.

Your Statement must be approved by the Board and signed by a Director before it is formally lodged with the Australian Border Force for inclusion in the publicly searchable portal of Statements. We recommend that you identify who is going to sign your Statement at the outset and report to them regularly.  Board members and Directors will take a particular interest in ensuring that the Statement put before them for approval has been prepared with due care and is accurate, so as to avoid any potential allegations of misleading or deceptive conduct.   

Non-compliant entities can ultimately be included in a register published by the Minister. The Minister is also planning to highlight Statements that demonstrate best practice. Public interest groups, super funds, shareholders and other stakeholders will be analysing the Statements with a view to naming and celebrating or shaming reporting entities. Most businesses that have approached us for assistance have sought out best practice, so the Act is well on its way to achieve its intended purpose, which is to encourage a ‘race to the top’. 

This Resolution is the final instalment within our 6 part series detailing how businesses should be managing their modern slavery risks ahead of the first reporting deadline. Should your business require any assistance preparing its modern slavery strategy or statement, or have any enquiries, please get in touch with Abigail McGregor or another member of our specialist team.



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