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What Businesses Need to Know about Modern Slavery Act

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Last month saw Australia’s Modern Slavery Bill introduced into Parliament, with the legislation expected to be finalised and coming into effect by the end of this year. Meanwhile, New South Wales has already passed its own Modern Slavery Act. 

Deloittle has identified the construction industry as one of the sectors where discovering there is slavery in the supply chain is not a question of if but a question of when. An analysis by Deloitte experts has found that two major areas where slavery exists in the industry are in the procurement of materials and labour.

“Modern slavery has become a massive problem,” Dr Leeora Black, Principal Sustainability Services at Deloitte says.

“Modern slavery has become a massive problem,” Dr Leeora Black, Principal Sustainability Services at Deloitte says. “It’s an unwanted by-product of globalisation through our need to move things around the world, and it can and has resulted in underpricing a key resource—labour.”

Black says the time for businesses to take action is now, claiming, “They can’t be complacent and assume that this risk doesn’t happen in their business. Our experience is that it is more than likely to.”

Among the practices defined as offences under the Bill are slavery, servitude, forced labour, deceptive recruiting, trafficking in persons, and debt bondage. The Global Slavery Index estimates there are approximately 4,300 people trapped in modern slavery within Australia alone.

A report by EY for the Supply Chain Sustainability School specifically on modern slavery in Australian construction, property and infrastructure supply chains documents examples of slave labour. These include children in India working in quarries that may supply stone products destined for Australian projects and offshore labourers brought to Australia. The latter are forced to work for minimal wages and are unable to leave due to their passports being confiscated by the labour hire contractor.

Robin Mellon, CEO of the Supply Chain Sustainability School, tells Jobsite there are a number of ways the incoming Australian and NSW modern slavery legislation will affect companies.

The legislation will require companies to make annual public statements about where modern slavery might exist in their supply chains and exactly what they are doing about those risks. The crucial point is that companies will need to be transparent about how they are managing the risks, he says.

The crucial point is that companies will need to be transparent about how they are managing the risks, he says.

For example, a major retail centre operator might identify there are risks of modern slavery within the supply chains of the cleaning service, around any construction contractors they engage, and with individual tenants, such as fashion or beauty retailers.

A construction company itself would need to look at the people coming on site, the materials coming on site, and the supply chain behind those materials and components. For example, let’s say the company procures offshore manufactured glazing units. It would need to be conscious of who manufactured the units, the suppliers involved, and the conditions in which people were working.

Once the risks have been identified, the company should then develop and document all the processes for engaging with those high-risk suppliers and a risk management plan for any potential issues.

Mellon says there are some materials and products that can be high-risk, in terms of the potential for modern slavery, for example, products using zinc, rubber, stone, or timber. Products with supply chains reaching into least-developed countries can also mean a red flag.

By analysing the degree of risk, a more informed management strategy can be developed. It should take into account how human rights abuses should be remediated and how severe the impacts of the discovery of slavery in that supply chain could be.

Where modern slavery has been identified, down engagement with that nation or sector is not recommended as it could increase the potential level of harm for vulnerable people. Instead, Mellon says, a willingness to work with those suppliers to foster improvements would be a best-practice approach.

“There needs to be a willingness to talk not just about human rights but also about price and value,” Mellon says.

“There needs to be a willingness to talk not just about human rights but also about price and value."

Not engaging effectively with the legislation’s requirements could be risky in a number of ways, Mellon says.

Once the laws become effective, he warns that there will be media outlets looking for those headline stories about companies that have slavery in their supply chain. This could cause major reputational damage for any companies caught out. For that reason an appropriate level of transparency and the development of sound management plans are crucial.

What is more, it is also likely to become a deal-maker or deal-breaker for some contracts. According to Mellon, “The more transparent you are and the clearer you are about what you are doing about the risks, the easier it is likely to be to attract finance for major projects.”

He believes we will see the Federal, State, and Local governments making it a condition of engagement for contractors to have addressed modern slavery risks.

This will not be without its challenges, though. For instance, major infrastructure projects have “incredibly complex” supply chains. However, this is exactly why it is imperative to start understanding the issues and taking the right steps even before the legislation becomes effective. The School has already developed resources specific to the construction sector to assist.

“The sooner companies get it done, the better,” Mellon says.

By being proactive, construction sector firms will be well-positioned to demonstrate that they are managing the risks, thus being compliant with the new regulations. This also means being on a sound footing in terms of attracting finance once the financial sector itself puts its supply chain under the modern slavery microscope.

Mellon points out there is another payoff for being proactive—by examining the supply chain for modern slavery risks carefully, a business may also be able to identify any inefficiencies it had been blind to before.

Overall, a thorough understanding of what is in the supply chain can be vital information for any business. After all, as Mellon says, “What you don’t know about your supply chain can take your business down.” 

Overall, a thorough understanding of what is in the supply chain can be vital information for any business.

The expectation is not that all businesses will achieve “perfect” slavery-free supply chains within the first year of the new regulations being in place.

That would be unrealistic, Mellon says.

The realistic expectation, though, is that companies will increasingly collaborate with their suppliers to achieve measurable, transparent improvements.

Investing the time and effort to work through all the levels within their operations will deliver multiple results—not least of which being that businesses will be able to say confidently that within their supply chains, human rights are being respected.

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