Modern Slavery: Why your organisation needs to address the issue

One in every 150 people in the world today is living in modern slavery and New Zealand is not immune with an estimated 3,000 people here in some form of bonded labour. On top of this households here spend an average of $34 a week on industries with products linked to slavery. PwC partner Andrew Jamieson tells Management what local organisations need to know about modern slavery and why addressing the issue is so important.

Could you give a brief description of modern slavery – and perhaps an example of how it might occur/manifest itself?

Modern slavery is an umbrella term that encompasses a range of practices including human trafficking, debt bondage, forced marriage, forced labour and child labour. It also includes concepts such as descent-based or traded slavery. These are situations where a person is exploited and cannot leave because of violence or violent threats, coercion, deception or abuse of power. This often includes having the means of leaving taken away – such as having ID documents withheld, or being unable to navigate within a foreign country or region because of language, cultural or legal barriers.

In Aotearoa New Zealand, modern slavery sits at the extreme end of a spectrum of conditions that are illegal here under employment and immigration law. At one end there are breaches of employment law, such as requiring someone to pay to receive a job, while the other end of the spectrum includes human trafficking and sexual exploitation.

Being aware of these definitions is an important step to addressing how modern slavery is relevant and important to Aotearoa New Zealand businesses. Examples of manifestation include workers being underpaid for the hours worked – commonly found in agriculture, construction, factories, hospitality and retail services such as liquor stores, car washes and beauty salons.

Globally are there any figures around the estimated number of people who are deemed to be ‘modern slaves’ and what nationalities/countries are the most at risk?

The latest figures are contained in the 2021 Global Estimates of Modern Slavery report, released by the International Labour Organisation, Walk Free and the International Organisation for Migration in September 2022.

The report shows the number of people living in modern slavery has jumped by 10 million over the past five years, putting the total figure at close to 50 million. That translates to one in every 150 people in the world living in modern slavery. Key findings show:

  • 49.6 million people are in modern slavery, forced labour accounts for 27.6 million and forced marriage for 22 million.
  • Of the 27.6 million people in situations of forced labour, 11.8 million are women and girls.
  • Forced labour affects all regions.
  • The Asia and Pacific region has the highest number (55 percent) of people in forced labour, while the Arab States have the highest prevalence.
  • More than half of all forced labour occurs in upper-middle income or high-income countries
  • Most forced labour happens in the private economy.
  • Five sectors account for 87 percent of forced labour: services, manufacturing, construction, agriculture and domestic work.
Has globalisation intensified, firstly the number of people in modern slavery and secondly the risk for New Zealand companies?

Absolutely. Interconnected global supply chains link modern slavery practices in less regulated or economically developed countries, with manufacturing and consumer markets in developed countries, including Aotearoa New Zealand.

Alongside this, global labour migration is a key factor in where and how modern slavery is perpetuated. People who experience forced migration due to conflict or climate-related episodes are more vulnerable and at risk to modern slavery.

However, global interconnectedness is also a driver for change. Increasingly consumers are informed about global issues and feel empowered to use their consumer choices to align with rapidly-developing global social and environmental consciousness.

Why should New Zealand’s corporate sector be concerned about this – surely it can’t happen here?
It’s happening here, and on a number of fronts. New Zealanders and New Zealand businesses are directly – and usually unknowingly – impacted by slavery occurring overseas, through imports and supply chains.

According to World Vision’s 2019 research, households in New Zealand spend an average of $34 per week on industries with products linked to slavery. This amounts to $3.1 billion per year of slavery linked-products being imported by New Zealanders. World Vision reports that these imports originate predominantly from China, but also Vietnam, Malaysia, and Bangladesh.

Equally, there is modern slavery occurring in New Zealand: in 2018, the international anti-slavery NGO Walk Free estimated that 3,000 people were, at that time, in slavery here.

The first ‘modern slavery’ conviction here was issued in 2020, when Joseph Matamata was found guilty on 13 charges of dealing with slaves and 10 charges of trafficking people. And, from an international perspective, in 2021 the US State Department lowered New Zealand’s rating from Tier 1 to Tier 2 as it was deemed New Zealand didn’t have sufficient safeguards against modern slavery in place.

Are companies that import goods more at risk than exporters or those with a domestic market?

Because modern slavery takes so many forms it can be found within almost every sector, region and industry – so the risk is for all businesses. Companies supplying a domestic market aren’t immune from risks, particularly those reliant on migrant labour, as demonstrated by the Joseph Matamata case.

In 2018, the international antislavery NGO Walk Free estimated that 3,000 people were at that time in slavery here. Research from Auckland University’s Centre for Modern Slavery shows the industries where labour exploitation rates remain persistently high are agriculture, horticulture and viticulture, construction, hospitality, international education and telecommunications.  As mentioned, industries highly reliant on migrant labour are especially susceptible, due to immigration policies that tie a migrant to their employer as a condition of their work entitlements, and cultural drivers where speaking up against an employment hierarchy is discouraged.

Exporting companies also need to be aware that countries they are selling into may require them to prove their goods are not made with the use of modern slavery, or demonstrate the actions they’re taking to ensure their supply chains are free from modern slavery. This means New Zealand exporters need to have documented transparency into their supply chains to maintain access to these export markets, particularly in the EU and USA.
 
What sectors/types of companies do you think would be the most exposed to this in New Zealand?

Because of the higher risks associated with imports, some businesses will be more exposed based on the nature of their overseas supply chains. For example, modern slavery within palm oil supply chains impact New Zealand businesses that import agricultural feedstock or manufacture food products such as chocolate. Cotton products produced in China’s Xinjiang region are now barred from being imported into the USA due to forced labour concerns, which can impact New Zealand businesses importing cotton for products destined for USA markets.  

Auckland University’s Centre for Modern Slavery Research has released several reports documenting migrant worker exploitation. They have identified the five most at-risk sectors in Aotearoa New Zealand are: construction, agriculture, horticulture and viticulture, hospitality, telecommunications and international education.

The WalkFree Foundation has highlighted the interaction between migration and modern slavery, where workers migrating from lower income countries to higher income countries are generally more susceptible to modern slavery and exploitation. Therefore, industries highly reliant on migration from lower income countries are at greater risk from modern slavery.

How would the legislation the Government is considering now, change anything in New Zealand?

The New Zealand Government has a proposed legislative response to modern slavery and worker exploitation, as part of its five-year Plan of Action, that started in 2021.  It proposes revenue-based graduated requirements, with the strongest applying to entities with over $50 million annual revenue. These entities would have due diligence obligations to prevent, mitigate and remedy modern slavery and worker exploitation.

If adopted, this would see many companies required to report on actions to address modern slavery, and some to conduct and disclose due diligence on modern slavery in their supply chains.
 
Ultimately, the proposed legislation signals a push towards stronger measures. In both Australia and the UK, current measures are seen as insufficient, with legislation in Australia criticised by some as allowing companies to shirk mandatory reporting requirements, and responsibilities to identify, disclose and address obvious modern slavery risks.

For Aotearoa New Zealand businesses, these act as clear indications of what businesses need to focus on for a future-proof approach to modern slavery.

We see this as an opportunity for businesses to proactively consider and manage the risk of modern slavery, before legislation is passed.

Now that the consultation has closed, all submissions received will be analysed and the results will be reported to the Minister for Workplace Relations and Safety for consideration.

On the international front are other countries ensuring supply chain transparency for both their own companies and for goods imported into that country?

Many of our key trading partners, including the UK, USA and Australia already have laws requiring companies to take action on modern slavery and due diligence in their supply chain. Both the UK and Australia have laws requiring companies to disclose the actions they are taking, and there are increasing calls in both countries to strengthen this, from disclosing actions, to tightening up the actions companies are required to take and increasing enforcement for companies who aren’t disclosing or providing insufficient disclosures.

The EU Green Deal and Due Diligence laws look to be going further than both the UK and Australia, advancing a proposal for a corporate sustainability due diligence directive.

This will require companies to identify and, where necessary, prevent, end or mitigate adverse impacts of their activities on human rights, such as child labour and exploitation of workers.

This directive would also include impacts on the environment, for example pollution and biodiversity loss, and represents a supply-chain due diligence approach, rather than a narrower focus on only modern slavery. In addition, there is also legislation proposed that would ban imports of goods made from slave labour

The USA has some of the most long-established laws, which place obligations on companies from a slightly different angle. The USA Border Security agency has been given the power to stop imported products at the border if they suspect modern slavery was involved in production.

The onus is then on the importing companies to prove that the product is free from modern slavery. To prove this the company requires strong documentation and transparency throughout its supply chain.
Japan recently signed the ILO Forced Labour Protocol, which requires signatories to develop a Plan of Action (New Zealand signed this in 2019). Japan has also proposed new due diligence laws that require companies to monitor their supply chains for modern slavery and discrimination. They are then required to take steps to address issues found, including mitigating damage, prevention of issues occurring, and to publicly disclose their actions and efficacy.

Are there examples of New Zealand corporates that are proactively working in this space?

New Zealand has a number of businesses that have been proactively working in this space and a growing impetus from the business community for change.

This can be seen in the signatories of the 2021 letter to government calling for an inquiry into establishing a Modern Slavery Act in Aotearoa New Zealand. The letter, which was presented to Minister Wood, had 85 signatures from businesses including AS Colour, L’affare, ASB, Contact Energy, Foodstuffs and The Warehouse – and PwC.

The letter called for legislation to address transparency in supply chains, acknowledging that New Zealand businesses are part of an interconnected global economy and social ecosystem, and recognising the need for guidance and a level playing field.

 Many of the signatories have already begun their own work. The Warehouse Group, for example, has had an ethical sourcing programme in place for the past 17 years and actively monitors, reports on, and drives continuous improvements in its supply factories.

Another example is AS Colour, which has consistently had a strong focus on doing the right thing, and continuously develops its Responsible Sourcing Strategy that has a zero-tolerance position on bonded and child labour. The business has also achieved 100 percent transparency of its fabric sources and 95 percent transparency of yarn sources and raw cotton agents.

 I understand from your report that global investors are also taking a stance on this?

Yes, that’s true. In general, investors are taking a far greater role in addressing a wide range of ESG issues that pose a risk to capital or financial systems, as well as being driven by an increasing desire from consumers to invest ethically.

The sustainable finance universe in general is expanding, and this includes growing investments that are demonstrably free from modern slavery. Even in mainstream investment circles there are growing initiatives such as Finance Against Slavery & Trafficking (FAST) and Investors Against Slavery & Trafficking (IAST).  Most recently, the ‘Coalition of 88’ investor group, which represents US$5.3 trillion of assets under management, has adopted the United Nations Guiding Principles Reporting Framework to manage and reduce modern slavery risks across its portfolios.

As regulations increasingly require companies to disclose, investors are also seeing absent or inadequate disclosures as a risk in their investments. Consequently, large global asset managers such as AllianceBernstein, BNY Mellon, Abrdn and Lazard have publicly stated they will seek to remove modern slavery from their global portfolios.

If you were a CEO of a major corporate in New Zealand what steps would you be taking to ensure you were not aiding and abetting modern slavery within your supply chain or locally?

 If it wasn’t already underway, I’d want to ensure my organisation had started the process of developing an approach to managing modern slavery, ensuring the tools and systems were in place to identify exposure and risk. I’d be focused on turning red flags into roses, in particular:

  • Governance: Developing new, modern slavery-specific policies or redrafting existing policies (e.g. supplier codes of conducts).
  • Risk assessment: Performing a high-level risk assessment and mapping where the greatest risks likely reside.
  • Due diligence: Enhancing supplier processes.
  • Training: Training their employees, normally targeted within their human resources and supply chain teams.
  • Supply chain discovery: Who is included within the value chain and where are they geographically positioned and what are the key components?
  • Regulation analyses: Analysis of regulations in key supply chain jurisdictions and how they impact the supply chain and modern slavery risks.
Finally I am wondering if the term ‘modern’ slavery actually minimises the sheer awfulness of what it would be like to be in this position – what, in the bigger picture, could Management readers do to take a stance?

As with anything, education and understanding is key. It’s easy to think that modern slavery happens elsewhere, in other industries, to other people. World Vision and WalkFree have informative and relevant resources that shine a light on the issue globally and locally.  As consumers, we can exercise our influence by choosing to support businesses that are ethical and transparent. As business leaders we can lead the conversation and force others and governments to take action.  

Andrew Jamieson is Strategy and ESG Partner at PwC New Zealand. The recent PwC report Modern slavery: What Aotearoa New Zealand organisations need to know is available at www.pwc.co.nz

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