Modern Slavery: A real risk in the Supply Chain – Federal and NSW requirements

I wrote this article after coming across an unsettling case (1) for these modern times. The case tells the story about Abdul, a man from Indonesia who was offered a tradesman job in Australia in the construction sector. The job seemed like a good opportunity for Abdul to earn a better wage overseas and use his earnings to provide a better education for his four children in Indonesia. After arriving in Australia, his reality was very different. He found himself forced to work on a construction site six days per week and undertake additional work with no extra payment at his employer’s farm. He lived on this farm under cramped conditions and had no opportunity to leave the property at other times. His earnings were as little as $250 per week of which $100 were deducted to cover food, accommodation and a weekly call to his family.

After doing more research, it is clear that Abdul’s story is not an isolated case. More stories showed up on the internet. It is estimated that in the world, there are 40.3 million people live in modern slavery and this act often hides in homes, restaurants, farms and building sites(2). In Australia, there are at least 1500-1900 victims of modern slavery and currently, only 1 in 5 victims are ever detected(3).

As modern slavery gains more awareness across the world, governments are driven to create legislation and policies to minimise it and protect those who are victims of this outrageous act. Australia is one of the countries who has developed an act to combat this inhumane practice.

 The Australian Government Initiative

The Modern Slavery Act 2018 (the Commonwealth Act) came into force on 1 January 2019 and set the requirements for entities with a consolidated revenue greater than $100M. Under the Commonwealth Act, these entities must provide a Modern Slavery Statement to the Ministry specifying the modern slavery risks identified within their supply chain and the actions taken to address those risks every reporting period. The Act also dictates the criteria under which these reports must be prepared.

The Commonwealth Act requires entities to provide their reports to the Ministry within 6 months of that reporting period. These reports must be provided in a manner approved by the Act and are made publicly available on the Modern Slavery Statements Registry here.

The New South Wales State Government Initiative

NSW was the first state to issue a state-based legislation: The Modern Slavery Act 2018 (the NSW Act). The NSW Act was amended in November 2021 through the Modern Slavery Amendment Act 2021 (NSW). The NSW Act came into effect on 1 January 2022.

The NSW Act operates in conjunction with the Commonwealth Act. The NSW Act has enabled an Anti-Slavery Commissioner, providing them with a range of powers including the power to refer modern-slavery findings and matters to the police or other government agencies. The Commissioner also advocates for action to monitor risks and support victims of Modern Slavery. The NSW Act also establishes a Modern Slavery Committee who is required to enquire and report on these matters.

For Government Agency procurements, the NSW Act allows the Commissioner to regularly consult with the Auditor-General and the NSW Procurement Board to monitor the effectiveness of due diligence procedures put in place by government agencies to ensure that goods and services procured are not the product of modern slavery.

In the case of State-owned corporations (definition here) that do not fall under the definition of a reporting entity under the Commonwealth Act, the NSW Act requires them to volunteer to comply with the reporting requirements under the latter.

All reporting entities in NSW must publish their modern slavery statements on a website that is publicly accessible, kept by the entity and provide the Commissioner written notice that the statement has been published.

What are the consequences of non-compliance under the Commonwealth Act?

The Act does not have any financial penalties for reporting entities or any criminal liability. The impact on non-compliant reporting entities relies more on reputational consequences as the information provided on non-compliance may become public if disclosed by the Minister.

If a reporting entity fails to provide a modern slavery statement to the Minister, this may result in the Minister publishing information on how remedial actions were requested and how the Minister is satisfied that the entity has failed to comply with this request.

Conclusion

Modern Slavery is a real issue that we must acknowledge. Although legislative requirements have been put in place in Australia, these target mainly large entities (with a revenue of $100M) and government agencies.  It’s important to note that the responsibility is not only for large entities and must lie with all organisations procuring goods and services, as well as with the common public consuming them.

Within organisations, Procurement Functions are responsible to embed modern slavery risks in their supply chains as a business-as-usual practice. Procurement processes and contracts must address and minimise these risks and implement controls to monitor them. These practices must not only be part of the Procurement Function but should be passed on to suppliers, and their suppliers, all the way up the supply chain.

As consumers, we can also make a difference by not taking part in consuming products that come from businesses that provide no clarity on where their products come from. Although consumers must do more active research, an easy way to do this is to identify a product with labels such as ‘Child labour free’ or ‘Slave Free Trade’, to provide an example.

Fighting modern slavery is a joint effort where we all bring our grain of salt to build that mountain. In the end, as a procurement professional, I like to ensure that businesses I help consider the integration of anti-slavery practices in their processes.

(1)     https://antislavery.org.au/abduls-story/

(2)     https://antislavery.org.au/modern-slavery/

(3)     https://www.iom.int/news/more-40-million-modern-slavery-152-million-child-labour-around-world