- Organisations based or operating in Australia with a consolidated revenue of more than A$100 million must report annually on the risk of slavery in their supply chains.
- Small-to-medium enterprises also may have to provide a level of supply chain transparency, in response to requests from larger organisations.
- Experts say stamping out modern slavery is a complex, multi-year undertaking for all organisations.
Story Susan Muldowney & Jessica Mudditt
Queensland-based Outland Denim was founded in 2011 with a goal of providing decent jobs for Cambodian women who had been the victims of sexual exploitation and human trafficking.
The company’s ethical way of doing business doesn’t come cheap. Nor do its jeans, which sell for about A$200 a pair. But the brand’s choices are resonating with consumers.
The Duchess of Sussex, Meghan Markle, donned a pair of Outland Denim jeans during a royal visit to Australia in October 2018. Sales shot up by 1000% in the week following. In the year since, online sales in Australia have grown 300%, with similar growth forecast for the year ahead.
“You can’t put a value on an endorsement like that: there’s simply no price tag,” says Outland Denim founder and CEO James Bartle. “There’s no way in the world she would have aligned with our brand if it wasn’t for the social and environmental impact attached to it.”
Bartle’s own consciousness raising came in 2008, when he saw the Liam Neeson film Taken, which depicts the abduction of two young women holidaying in France by human traffickers.
“It was the first time I became aware that humans are a commodity being illegally traded,” says Bartle.
He and his wife, Erica, a former journalist who is now the company’s communications director, began researching human trafficking. They found a truth far more horrifying and complex than the Hollywood fiction.
“We kept coming back to the same thing: that people are made vulnerable due to poverty, and that it’s sustainable employment that changes lives.”
The company has now expanded its hiring policies to focus on female workers at risk of becoming victims of human trafficking.
Picture: Erica and James Bartle.
Keeping the supply chain manageable
Outland Denim’s two production facilities in Cambodia employ 110 people. Each receives a ‘living wage’, which is higher than Cambodia’s minimum wage for the garments sector of US$182 per month. Wages are scaled according to skill level and are calculated using the Anker methodology for determining an amount that provides a ‘decent standard of living’ in a particular geographic region. Paid skills training is provided, along with financial literacy and health education classes.
“In a normal factory, a worker might make pockets their whole life, because they’d be fast and efficient at it. We train our workers to make the entire product so that if they marry and move away, they can still find work,” Bartle says.
But to live up to its promise of being exploitation-free, Outland Denim needs to look beyond its own factory to all the players in its supply chain. Bartle admits this is challenging.
“There’s a lot of smoke and mirrors. Someone might say that they produced something, but it was actually outsourced to old mate down the road who’s running a sweatshop.”
It took him years to find denim supplier Bossa, which uses cotton sourced from a Turkish farm where working conditions are regularly audited. Outland Denim works with nine suppliers – a number deliberately kept low so as to be manageable.
“We’ve not had a staff member visit every part of our supply chain. But myself and our brand manager have been to Bossa, and there are audits on all our suppliers’ methods of employment,” Bartle explains. “We can’t use a supplier unless we can prove they are free of exploitation: that is our internal policy and commitment.”
“We can’t use a supplier unless we can prove they are free of exploitation: that is our internal policy and commitment.”
The growth in modern slavery reporting
As of 1 January 2019, organisations based or operating in Australia with a consolidated revenue of more than A$100 million must report annually on the risks of such practices in their operations and supply chains under Australia’s Modern Slavery Act 2018, which is modelled on the UK’s Modern Slavery Act 2015.
New anti-slavery laws in New South Wales also require reporting from commercial entities based in the state with annual turnover above A$50million (although its implementation has been delayed). Non-compliance risks penalties of up to 10,000 penalty units (equivalent to A$1.1 million).
While the new reporting requirements only apply directly to larger organisations, their effect will be far-reaching. Smaller enterprises in Australia and New Zealand that do business with those big companies will need to answer questions about their own practices and those of their suppliers. Already companies around our region are having to respond to requests for more detailed information from international clients reporting under the UK’s Modern Slavery Act.
Paul Dobson CA, risk advisory partner at Deloitte, says accounting and finance should be involved in a supply chain assessment. “Finance [teams] have very good insight into a supply chain because they know who’s being paid,” says Dobson, who leads Deloitte’s Asia Pacific sustainability services practice. “When you put that data together with procurement information, you get some pretty powerful insights.
“The finance function is also very influential in terms of business practice and often has oversight of procurement functions as well as compliance, risk and regulatory functions; that’s why finance should be involved in an assessment of a supply chain,” Dobson adds.
Supply chains are complex
Dr David Cooke, Konica Minolta Australia’s chair and managing director, says all companies in Australia and New Zealand need to realise they may be exposed to modern slavery in some way.
“There is a complex web of processes that end up in the goods that we all buy, such as office furniture or even uniforms,” says Cooke. “Where was the cotton grown and how were those workers treated? What about your office cleaning contractors? Can you be sure there is no labour rights abuse going on there?”
Cooke is chair of the Global Compact Network Australia, the regional arm of the United Nations Global Compact, which is a leading advocate for anti-modern slavery reporting. Its local members include ASX-listed companies such as Lendlease, Transurban and Brambles.
Vanessa Zimmerman, CEO of human rights consultancy Pillar Two and a director of Global Compact Network Australia, says many companies are struggling to understand the complexity of their supply chain.
“They know that they need to understand who their direct suppliers are but the questions I’m often asked include, ‘How far do we need to go? When do we stop? Will we ever know that we’ve caught every instance [of modern slavery] that we might be linked to?”
Zimmerman says that in the interim, organisations need to at least understand who their direct suppliers are and establish practices to reduce risks.
Lendlease committed to keep digging
Property group Lendlease began reporting under the UK Modern Slavery Act that came into force on 29 October 2015.
Ro Coroneos, senior manager risk, supply chain at Lendlease, says achieving supply chain transparency is a complex, multi-year process. Lendlease, for example, spends globally about A$12billion each year in its supply chain across some 20,000 suppliers.
“We’re a project-based organisation and we sub-contract, so getting line-of-sight deeper into our supply chain is something that we are taking very seriously,” she says. “We’re working closely with our direct suppliers to improve that, but it’s going to take more time to get into the layers of tier two, tier three and beyond.
“Have we identified anything? In short, no. But that doesn’t mean that there might not be anything there. We just don’t have enough information yet,” says Coroneos.
Coroneos says Lendlease has changed the way it communicates with suppliers. “You really need to change the tone of the relationship from transactional to collaborative,” she says.
“We have major suppliers with whom we have long-standing relationships and, in some respects, we consider them to be an extension of our business. There are also some suppliers where we may need to support their capability development.”
Transurban builds a dialogue with suppliers
Zimmerman says the first step to stamping out modern slavery in the supply chain is to raise awareness of what it may look like.
‘Modern slavery’ is a broad term that covers human trafficking, slavery, servitude, forced labour, debt bondage, forced marriage, deceptive recruiting for labour services and the worst forms of child labour.
“Do some training and don’t assume that internal stakeholders know what the term ‘modern slavery’ means,” she advises.
For toll road operator Transurban, raising awareness was a first step in embedding human rights within its sustainable procurement program 18 months ago.
Deepen Somaiya, Transurban’s infrastructure procurement manager, says it was important to establish the human element of this program. “By establishing that human element of the program first, we were able to get buy-in and this made the work that came after much smoother.”
Somaiya and his team prepared case studies of instances of modern slavery around the world for key personnel in departments such as procurement, risk, legal, internal audit and corporate affairs.
The company also engaged a consultant to assist with a gap analysis of its existing governance and procedures. It used ISO 20400,the guideline on sustainable procurement published by the International Organization for Standardization.
“Risks may be nested deep within the supply chain, and that’s why it’s so important to work in collaboration with your suppliers,” Somaiya says. “You can’t understand the depths of your supply chain by sitting on your own at your desk. We’ve built a dialogue with our suppliers in the past 12 months that we would never have had before.”
Konica Minolta’s roadmap to ethical sourcing
Small-to-medium enterprises (SMEs) also may have to provide a level of supply chain transparency.
“It can be challenging because some of the big companies are asking SMEs for a human rights policy and they just don’t have them,” says Zimmerman.
“You don’t need to have a fancy policy or a complex supplier risk-assessment tool in this case, but you can have thought about your approach to ensuring there is no forced labour in your supply chain and you can have considered what you would do if something came up.”
SMEs can also opt in to the Modern Slavery Act and produce a voluntary statement.
In 2016, Konica Minolta Australia released its Ethical Sourcing Roadmap, which other companies can use to develop their own plans for achieving an ethically sourced supply chain.
The office machinery seller’s ethical sourcing manager Nicole D’Souza joined the company in 2018 bringing her knowledge and experience as a human rights lawyer and advocate to the role.
Konica Minolta Australia uses technology platforms to increase visibility within the supply chain. These include Sedex, a global membership organisation that helps buyers and suppliers to share and exchange data to better manage social and environmental risks.
“You initially start the process with your tier one suppliers and identify gaps and risks you wish to focus on,” says D’Souza.
“You initially start the process with your tier one suppliers and identify gaps and risks you wish to focus on.”
Picture: Nicole D’Souza.
“We also use the FRDM platform, which is a heat mapping tool that uses data analytics and specialist information to create a map of the risks of forced labour and child labour in your supply chain right down to the raw material stage.”
Her boss Cooke stresses the need to work with existing suppliers to educate them, as workers in situations of forced labour will ultimately benefit more from a change in poor practices.
“I’ve said to a lot of suppliers that we are prepared to move our business elsewhere if we can’t work on this issue together,” he says.
“Equally, I tell them that if they want to make the relationship a deeper and richer one, and tackle this challenge together, they’ll probably have our business for life because this is becoming more important to us than price.”
Expect to find slavery in your supply chain
The reputational risk of having slavery in the supply chain is front of mind for many businesses. So when an organisation uncovers human rights abuses, or the serious risk of them, in their supply chain, what should it do? Probably the best answer is ‘whatever it can to improve the situation for the people involved’.
Robin Mellon, a member of the Australian government’s Modern Slavery Expert Advisory Committee and CEO of Better Sydney, which consults in areas including human rights and supply chains, says modern slavery disclosure should not be viewed simply through a lens of reputational risk.
“It’s not a matter of if you find modern slavery in your supply chain, it’s a matter of when,” he says. “The whole conversation should be about risks of harm to people.”
“One thing I strongly believe is that if you look after the people in your supply chain, then you will look after your reputation in the long term. If you fight to protect your reputation first and foremost, people will end up being harmed.”
Jenn Morris, CEO of Walk Free Foundation, stresses that stamping out modern slavery is a complex, multi-year undertaking for all organisations.
“Shockingly, there are more slaves in the world today than at any other time in history,” she says. “It exists in Australia and we also import US$12billion of products at high risk of being produced by slave labour.
“A high percentage of slave labour occurs through organised crime and we know from analysis that where you find organised crime and slavery, there’s also a link to corruption and quality issues.
“If you look [for slavery], you will find it,” she says. “We are very pro-business, but we support having legislation in place that requires action. We know that it takes significant effort internally for organisations to understand their supply chain, but they need to look, to find and to do something about it.
“We don’t want to punish companies who find it as that would just push the problem further under the covers. It’s something that needs to be out in the open.”
What if you find slavery in your supply chain?
- Ensure protection of victims from further harm and enable access to justice.
- Compensate and apologise to workers subjected to labour rights abuses.
- Identify and act on changes to working practices.
- Ensure workers know their rights, including freedom of association and collective bargaining.
- Build relationships with trade unions and independent worker representatives to pre-empt labour rights violations from occurring.
Source: UN Global Compact, Business: It’s Time to Act
Tools to help
These are just some of the supply chain assessment tools available.
Home Affairs’ Commonwealth Modern Slavery Act 2018: Guidance for Reporting Entities
Sustainability ratings and scorecards for global supply chains. ecovadis.com
Evaluate supply chain risks. Track supplier and factory performance. elevatelimited.com
Produce heat maps of human rights risks in your supply chain. frdm.co
A global membership organisation for supply chain assessment. sedexglobal.com
Has indices for Child Labour, Forced Labour, Working Conditions and more. maplecroft.com