Implications of Australian Anti-slavery Law for Contract Management & Supplier Management

The enslavement and exploitation of people has been happening since time immemorial.

Despite centuries of societal, economic and industrial growth, including the passage of laws between 1777 and 1981 to ban slavery practices in the applicable jurisdictions, it continues to be a scourge afflicting millions across the world, just about everywhere.

Modern slavery and its enablers are well-documented. Its modern forms are well-known:

• Trafficking in people
• Slavery
• Servitude
• Forced marriage
• Forced labour
• Debt bondage
• Deceptive recruiting for labour or services

The worst forms of child labour, where children are subjected to slavery or similar practices, or engaged in hazardous work.

Several countries and states have enacted laws to try to deal with the problem. Others are in the process of doing so.

All these laws recognise that dealing with modern slavery will be a long haul, that results can only be produced slowly because it will take time for organisations to develop, implement and scale up demonstrably effective approaches to the problem.

By using the supply chain as the attack vector, governments are relying on the premise that the perpetrators of modern slavery practices will eventually be denied opportunities for profiting from those activities by the refusal of organisations to do business with them unless proof of cessation of such activities is available.

The desired consequence is that the perpetrators will find life becoming way too hard, that they will find it much less risky to obtain money by legitimate means, that there will eventually be a sustained and marked reduction in modern slavery practices.

The impact of these legislative changes on businesses is to necessitate both new working practices and improvement in the recording and enforcement of those working practices. It is the second part of this in particular that will likely require investment for a suitable software solution to make this process as seamless, automated and defensible as possible.

The Australian response

As one element of the Australian Government’s response to modern slavery wherever it occurs, its Modern Slavery Act (the Act) came into effect in early 2019.

Its focus is on exploitation of people anywhere in the operations or supply chains of any Australian entities, or foreign entities operating in Australia or its external territories, with a consolidated annual revenue of at least AUD100 million. There are about 3,000 such entities.

Its intention is to use public, private and Australian Government entities at the top end of town to drive change across their operations and supply chains in order to minimise the occurrence of modern slavery practices.

Its presumption is that these entities have the capacity to comply with the Act, the capability to address shortcomings in their operations, and the leverage to drive change in their supply chains.

Its approach is to raise awareness both inside and outside these entities that modern slavery practices may be occurring in their global and domestic operations and supply chains, and to oblige them not only to determine if that is indeed the case but also to report on their intentions towards addressing such practices, either reactively or proactively, by way of a Modern Slavery Statement (the Statement).

Its response to an entity’s non-compliance with reporting requirements includes public naming-and-shaming but excludes any direct penalties.

Its expectation is that continuous improvement will be exhibited by entities in both the methods they use to deal with modern slavery practices, and their success in minimising those practices.

Its hope is that a groundswell of responsible business conduct will encourage many entities which don’t meet the revenue target for mandatory reporting to make their own efforts towards identifying their exposure and responses to the risk of modern slavery practices, and submit Statements in accordance with the legislation anyway.

Its requirement is for the first annual Statement to be submitted to the Australian Border Force for the reporting entity’s first full reporting period after 1 January 2019.

The Modern Slavery Statement

Required to be submitted annually, within six months after the end of the reporting entity’s financial year or other annual accounting period, the Statement must include seven mandatory items:

1. The reporting entity’s name
2. The structure, operations and supply chains of the reporting entity
3. The risks of modern slavery practices in the operations and supply chains, within Australia and overseas, and
4. Extending beyond direct suppliers, of the reporting entity and any entities that it owns or controls
5. The actions taken during the previous annual reporting period by the reporting entity and any entities that it owns or controls, to assess and address those risks, including due diligence and remediation processes, development of policies and processes, and training for staff about modern slavery
6. How the reporting entity assesses the effectiveness of such actions
7. The process of consultation between the reporting entity and any entities that it owns or controls
8. Any other information that the reporting entity considers relevant.

The principal governing body of the reporting entity (like the Board of Directors) is responsible for the accuracy and approval of the Statement. It must be signed by a responsible member of the reporting entity (like a Director).

A Guide to the Act

The Australian Government provides comprehensive guidance (the Guide) about what a reporting entity needs to do to comply with the Act. While lengthy, the Guide contains many useful examples and explanations, and is well worth the effort to study it.

Be advised though that the Guide is quite high-level. It provides a good sense of the sequencing of actions needed, but understandably lacks any real notion of the inherent complexity, scale or do-ability of those actions because organisations come in all shapes and sizes.

Most reporting entities will have to figure out for themselves just how to do what the Guide suggests, possibly with varying degrees of external assistance.

Preparation

An organisation and its various entities can be in varying states of readiness for dealing with modern slavery practices and complying with various pieces of modern slavery legislation that might apply. Readiness can range from ‘first we’ve heard of it’ up to ‘we’re under way but need to improve’.

That’s because quite a lot of work is required at the organisational and individual entity level just to be in a position to start coherently attacking the problem. This work is totally dependent on how an organisation chooses to deal with its particular circumstances.

An indicative roadmap might include:

• Documenting the operations of each entity, in terms of industries and countries it works in
• Documenting the supply chains of all or some informative subset of suppliers used by each entity, by product / service and country
• Documenting the spend by supplier, industry and country, at both entity and organisation levels
• Understanding how and where modern slavery risk can occur in those industries and countries, and in each entity’s operations and supply chains
• Grading suppliers’ risk of susceptibility to modern slavery practices as low, medium or high. Once determined, the focus might initially be restricted to high risk suppliers
• Designing a survey for high risk suppliers to complete to refine their risk grading
• Discovering where the organisation itself might be causing or contributing to, or is directly linked to modern slavery practices
• Preparing policies and strategies covering the organisation’s position on modern slavery practices and its approaches for dealing with it consistently across the organisation
• Preparing contractual and management approaches for assessing and dealing with supply chain risk, and reporting on the outcomes and effectiveness of those approaches
• Developing suitable training material about modern slavery practices for educating staff, contractors and suppliers about the nature of the problem, the organisation’s response to it, and the implications for remediation of any occurrence of modern slavery practices
• Socialising intended modern slavery actions with key suppliers to determine impact, acceptability and any knock-on effects
• Designing organisational changes necessary for ownership of modern slavery practices risk management across the board Developing approaches for facilitating necessary coordination between internal business functions with key roles in modern slavery practices risk management, between those functions and the organisation’s entities, and between the entities themselves
• Developing approaches for assisting suppliers at level one in the supply chain to improve their game in respect of modern slavery practices, with the aim of achieving a flow-on effect to at least the next level down over time, where realistically achievable
• Considering collective actions with other users of the organisation’s supply chains, industry bodies and other interested parties to increase leverage for the purpose of improving modern slavery practices risk management further down the supply chain, for example by standardising supplier audits
• Investigating the types of technology that are available or needed to help deal with modern slavery practices
• Discovering the range of independent third-party organisations that have appeared or evolved to provide trusted expertise and credible information, introductions and hand-holding, scale and track records in fighting the good fight, and encouragement when the going gets tough. They have a massive contribution to make and ought to be well-patronised and well-supported
• Devising KPIs to measure the occurrence of modern slavery practices, and the effectiveness of action taken to remediate those practices by the roles tasked with doing so.

Various people from different parts of an organisation would be involved in working on many of these tasks, possibly with external help.

Implications for Contract Management and Supplier Management

So, what are the implications for people with responsibilities related to contract management or supplier management?

Well, a lot really. Remember that these people already have a day job, often fairly intense and pretty stressful. It all depends on the number of them versus the number of contracts and suppliers that need to be managed, regularly or more intermittently. Plus whatever fires need to be put out, right now.

Firstly, they are likely to be involved in specific aspects of the roadmap development activities mentioned above that are directly or indirectly related to contract management and supplier management.

Then they will almost certainly need to work on operationalising some of those parts of the roadmap.

In both cases, they would be working with key contract stakeholders: operational, legal and management.

For the sake of simplicity and example, we’ll separate the contract management and supplier management responsibilities for the operationalising work. This distinction might not be relevant to whoever ends up doing the actual work.

Contract Management

Additional responsibilities might include:

1. Participate in development and updating of approaches for contractually managing risk related to modern slavery
2. Participate in development of model clauses for dealing with modern slavery practices, like:
1. Compliance with organisation’s modern slavery policies such as a Supplier Code of Conduct
2. Responses to non-compliance with modern slavery policies
3. Compliance with all applicable laws by the supplier, and maybe its own tier-1 suppliers
4. Responses to any discovery of the supplier’s modern slavery practices
5. KPIs to measure the effect of the supplier’s modern slavery-mitigating activities
6. Obtaining details about the supplier’s modern slavery-mitigation activities
3. Update contracts for suppliers at high risk of modern slavery practices to include relevant model modern slavery-mitigating clauses
4. Participate in updating model clauses to take account of latest developments and relevant laws
5. Develop approaches for incorporating modern slavery-related elements into RFx processes and practices
6. Update RFx documentation templates to include modern slavery-related elements
7. Maintain measurements of modern slavery-related statistics
8. Undertake regular modern slavery-related training
9. Maintain awareness of modern slavery-related profile of countries, industries and so on
10. Obtain and maintain high-level knowledge of modern slavery-related legislation applying to the organisation as a whole.

Supplier Management

Additional responsibilities might include:

• Participate in development and updating of supplier qualification approaches and practices
• Participate in development and updating of approaches for operationally managing risk related to modern slavery
• Include modern slavery-related performance in regular supplier meetings and reviews
• Organise / conduct surveys or on-site audits of suppliers’ modern slavery-mitigation activities
• Monitor suppliers’ implementation of modern slavery-related remediation actions
• Conduct annual supply chain mapping update, continually expanding the range of suppliers assessed if necessary
• Conduct annual supplier spend analysis
• Maintain measurements of modern slavery-related statistics
• Undertake regular modern slavery-related training
• Maintain awareness of modern slavery-related profile of countries, industries etc
• Obtain and maintain high-level knowledge of modern slavery-related legislation applying to the organisation as a whole.

How Gatekeeper can help

Gatekeeper is a comprehensive contract tracking system containing a number of features for assisting in the management of modern slavery risk:

Custom Fields: set up custom data fields to describe various elements of the organisation’s approach to dealing with modern slavery practices:

• Contract record: create commentary about the reporting entity, the organisation’s modern slavery risk attribution ( none, cause, contribute to, direct link), all the industries and countries where modern slavery exists in respect of the contract.
• Supplier record: create commentary about the industries and countries where modern slavery risk exists for this supplier, the nature of those risks and their severity, next site audit date, supply chain details.
• Supplier record: Automate third party data feeds to surface information on sub-contractors and the suppliers own performance globally.

Alerts: record critical dates related to supplier site audits, contract modern slavery risk review audits, all the activities required for the organisation to be able to prepare its Modern Slavery Statement.

Automated Workflows: triggered for new supplier qualification activities, triggered on critical dates to automate actions needed (eg supplier site audit), tracking of progress through audit, creation of checklists to assist with audit activities, escalation to key stakeholders if required.

Intake Forms: Configure publicly accessible intake forms to capture specific information, including certificates and other documents, in a secure fashion from suppliers. Store that information against records for future audit purposes and trigger further automated actions.

Risk Module: indicate the general state of supplier risk, including commentary about modern slavery in particular. Trigger actions based on risk profile or specific incidents and escalate with stakeholders.

Spend Module: At-a-glance reporting of spend by supplier, category or any other relevant grouping. Track spend directly at an invoice level to maintain total visibility over supplier relationships and conduct periodic reviews based on total spend data.

Summary

The legislative and business focus on modern slavery is relatively new, and so far, not widely spread. Inevitably, more countries will need to enact anti-slavery laws in order to achieve the critical mass needed to drain the cesspool of perpetrators and enablers of modern slavery practices.

Realistically, all these laws will need to be scoped more widely in terms of the size of participating entities, and be given bigger teeth to make non-compliance less attractive.

The modern slavery problem is vast and entrenched. It will take time, money, encouragement both positive and negative, some inevitable setbacks and a bit of showcase public shaming and vilification before any discernible improvement in dealing with modern slavery can be achieved.

While there will always be people who believe that might is right and the strong should rule the weak, hopefully over time it will become much, much harder, more uncomfortable and less profitable for them to do so.

We should all live in hope of witnessing such an outcome.

If you would like more information about contract risk and specifically how Gatekeeper can help in managing modern slavery risk, then contact us today for a free consultation.