Slavery in the supply chain
2019-20 will see Australian businesses lodge their first Modern Slavery Statements. So what does modern slavery look like?
- There are 40 million people living in slave-like conditions globally.
- Anti-slavery laws passed in Australia will see companies with annual turnover above A$100 million (above A$50 million in NSW) file annual Modern Slavery Statements from the 2019-2020 financial year.
- The statements must outline what measures companies have taken to ensure their business and supply chains are free of slavery and human trafficking.
By Stuart Ridley
More than 40 million people live in slavery today – more slaves than at any other time in human history. And the goods and services created from slave labour generate an estimated US$150 billion in profits every year, says advocacy group Freedom United.
Australia has followed the UK in enacting a Modern Slavery Bill, which means companies with annual turnover above A$100 million will have to detail the risks of slavery and workers’ basic human rights across their business structure and throughout their extended supply chain. Businesses earning less than A$100 million are encouraged to report voluntarily.
“It is crucial that reporting entities begin reviewing their supply chains and collecting data ahead of the introduction of reporting obligations,” says Norton Rose Fulbright partner Abigail McGregor.
“For Australian corporations, we anticipate that the first reporting year will be FY 19-20. Entities with an international financial year may have to report earlier, depending on the timing of their end of financial year and the timing of royal assent to the Bill.”
In New Zealand, many businesses already have to comply with the UK’s modern slavery reporting requirements and the new Australian rules are expected to impact many more local businesses.
“It is crucial that reporting entities begin reviewing their supply chains and collecting data ahead of the introduction of reporting obligations.”
What does modern slavery look like?
Definitions of slavery were updated at a UN convention in Geneva in 1956 to cover institutions and practices similar to slavery including:
Debt bondage (bonded labour) – being forced to work to pay off a debt, often with little hope of being freed. The person is usually coerced into working long after the loan is repaid. Often, the debt is passed on to the next generation. Debt bondage affects half of all the 25 million people in forced labour, according to the International Labour Organization.
Serfdom – living and working on land belonging to another person, without freedom to change status.
Forced marriage – a woman or girl, without the right to refuse, is promised or given in marriage in exchange for money; or is transferred to another person by her husband, his family or clan; or is inherited by another person when her husband dies.
Child exploitation – a child is delivered to another person whether for reward or not, with a view to the exploitation of the young person for their labour.
Worldwide, it’s estimated that one in four slaves are children, and 71% of slavery victims are female. Live-in migrant domestic workers are particularly vulnerable to exploitation.Although human trafficking is perceived as being related to sexual exploitation, the most common reason for trafficking people is for forced labour.
“Worldwide, it’s estimated that one in four slaves are children, and 71% of slavery victims are female.”
How are you connected to modern slavery?
Complex international supply chains mean all businesses are at risk of being connected to suppliers exploiting labour.
Global supply chains create employment and opportunities for economic and social development, yet their complexities can hide alarming issues including wage suppression and dire working conditions in poorly regulated markets.
The Global Slavery Index, published by Walk Free, highlights slavery risks across industries and countries. The 2018 Index reveals some of the most popular consumer goods at risk of being produced in slavery conditions, are:
1. Laptops, computers and mobile phones
5. Sugar cane.
What are the Modern Slavery reporting requirements?
Australia’s Modern Slavery Reporting Requirement compels companies with annual turnover over A$100 million to make an annual Modern Slavery Statement on what they have done to ensure their business and supply chains are free of slavery and human trafficking.
The statement must be approved by the company’s board of directors, signed by a director and published on the organisation’s website at the end of each financial year.
Anti-slavery laws in New South Wales require reporting from NSW commercial entities with annual turnover above A$50 million. Non-compliance risks penalties of up to 10,000 penalty units (equivalent to A$1.1 million).
The first reporting period for entities operating on an Australian financial year will be 1 July 2019 to 30 June 2020. Calendar year reporting entities will produce reports for the period 1 January 2020 to 31 December 2020.
In broad terms, to identify the risks of modern slavery, you should map your organisation’s supply chain, including direct and indirect suppliers, labour providers and contractors.
You should then identify low-, medium- and high-risk suppliers and partners. Possible red flags include suppliers located in countries previously affected by labour and human rights issues, and businesses that use a lot of temporary or unskilled labour, or rely on subcontractors or labour hire firms.
The Australian government has proposed setting up a Modern Slavery Business Engagement Unit in the Department of Home Affairs to support businesses in addressing slavery in their supply chains.
This is slated to happen before the first Modern Slavery Statements are due. However, at the time of writing, this new unit is still being established.
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