There are more than 40 million slaves in the world. This includes 24.9 million in forced labour and 15.4 million in forced marriages, according to the Global Slavery Index.
Of the almost 25 million slaves in global supply chains, more than half live in the Asia-Pacific region, meaning many Australian businesses may be unwitting victims of this crime. The products most at risk are all highly popular with consumers; the top five, and their import value into G20 countries, are:
- Laptops, computers and mobile phones (USD$200.1 billion)
- Garments (USD$127.7 billion)
- Fish (USD$12.9 billion)
- Cocoa (USD$3.6 billion)
- Sugarcane (USD$2.1 billion)
The Australian Government has, commendably, acted. The Modern Slavery Act 2018 (the Act), which came into effect on 1 July 2019, is “An Act to require some entities to report on the risks of modern slavery in their operations and supply chains and actions to address those risks, and for related purposes”.
In short, the Act requires businesses with more than $100 million in consolidated revenue, to report and address the risks of modern slavery in their operations and supply chains.
Are you at risk?
The risks for businesses throughout the Asia-Pacific are significant. Speaking in an Australian context, Arthur Moses SC, President of the Law Council of Australia, noted that “Too often we are tempted to think of slavery as a relic of the past, but the truth is it’s a problem alive and well.”
Significantly, Moses SC pointed out that slavery in supply chains “distorts global markets, undercuts responsible businesses, and poses significant legal and reputational risks for companies … this insidious practice … represents a false economy based on human misery”.
It’s not only the categories listed above that are at blighted by slavery. We have seen in recent years that other industries at risk include retail, mining, construction, food and health care.
It’s therefore critical that modern companies are aware of their exposure to modern slavery in their supply chains; the best way to gain this awareness is to implement Modern Governance.
Modern Governance is an approach that relies on implementing a unified governance platform that provides stable, secure, mobile access to data and insights about all aspects of an organisation’s performance.
An effective Modern Governance platform will include board governance tools (such as board papers, voting, secure communication, collaboration and document sharing), compliance tools and analytics capabilities to provide a clear view into the organisation’s processes and performance, as well as deep insights into risks, process optimisation and new business opportunities.
Sunlight is the best disinfectant
A government-operated database will house companies’ compliance statements and will be freely accessible to the public when it goes online in mid-2020. The Act does not include penalties, though the federal Minister for Home Affairs initiate inquiries if a company is non-compliant.
Penalties may be forthcoming at the State level, however. The NSW Modern Slavery Act 2018 (passed and assented to in June 2018) introduces penalties up to $1.1 million for companies that fail to prepare a statement; fail to publish their statement; or provide false or misleading information in their statement.
Thus, the risks of non-compliance may include a direct financial penalty. Even for businesses not in NSW, boards of directors should note the risks and costs of filing an adverse or inadequate statement, or not filing a statement at all.
These would include significant reputational harm, loss of market share, consumer boycotts and more.
Tellingly, the world is moving decisively against slavery. In 2018 the Liechtenstein Initiative was launched to coincide with the 74th session of the United Nations General Assembly. The report, Unlocking Potential: A Blueprint for Mobilizing Finance Against Slavery and Trafficking, sets five goals for the global financial sector to help end these practices:
- Compliance with laws
- Knowing & showing risks
- Using leverage creatively
- Effective remedy
- Innovation for prevention
These goals will be supported by Finance Against Slavery and Trafficking (FAST), which will review implementation in 2021.
How can you ensure your company is compliant with its obligations?
What can boards do?
For Australian businesses, the annual modern slavery statement is the cornerstone of compliance. This, however, necessitates effective governance and risk management at all levels of the organisation, from the board to line managers to field workers.
Creating a culture of compliance and effective risk management is critical, as this will significantly impact on-ground decisions around sourcing and supply and labour and materials.
The board must also have access to accurate, up-to-date information, which is where Modern Governance plays a key role. By implementing a governance platform, boards will be able to ask critical questions, assess risks, plan responses and assess the effectiveness of measures implemented. Modern slavery is a crime that stains any complicit organisation; fortunately, implementing best practices for governance and supply chain management will minimise your risk of exposure.
To learn more about modern slavery and how you can ensure your organisation is doing its part in ending the practice, see the following.
- ACSI Guide – Modern Slavery Risks, Rights & Responsibilities – A Guide for Companies and Investors: https://home.kpmg/au/en/home/insights/2019/02/modern-slavery-guide-for-companies-investors.html
- Inquiry into Establishment of a Modern Slavery Act in Australia. Parliament of Australia: https://www.aph.gov.au/modernslavery
- Modern Slavery Act 2018: Draft guidance for reporting entities: https://www.homeaffairs.gov.au/help-and-support/how-to-engage-us/consultations/modern-slavery-reporting-requirement
- NSW Government – Modern Slavery: https://www.nsw.gov.au/improving-nsw/projects-and-initiatives/modern-slavery/
- Modern Slavery Reporting Requirement. Australian Government – Department of Home Affairs: https://www.homeaffairs.gov.au/help-and-support/how-to-engage-us/consultations/modern-slavery-reporting-requirement
- A Blueprint for Mobilizing Finance Against Slavery and Trafficking: https://www.verite.org/finance-against-slavery/
- Finance against slavery and trafficking (FAST): https://www.fastinitiative.org/
October 22, 2019
Doing right and doing well: Why modern slavery hurts your business
There are more than 40 million slaves in the world. This includes 24.9 million in forced labour and 15.4 million in forced marriages, according to the Global Slavery Index. Of the almost 25 million slaves in global supply chains, more than half live in the Asia-Pacific…
March 22, 2019
Role of the Board in Corporate Governance
“Running a business is a bit like driving a car, very fast and at night. Your headlights only show you what’s out there in the dark with a lot of potholes and other hazards that could damage your vehicle or worse, ”…