Over recent years, media research and social outrage have levied close scrutiny on the supply chain ethics of the textile industry which has been marred by modern slavery allegations. Shockingly, the International Labour Organisation estimated that almost 21 million people are victims of forced labour, of which 19 million are exploited by private individuals, generating US$ 150 billion (AU$ 200 billion) in illegal profits annually. With most slavey activity occurring throughout Asia, and migrant workers and indigenous people particularly vulnerable to forced labour within industries ranging from manufacturing, agriculture and construction, Australian companies and their supply chains must consider this risk.
The Regulatory Framework
While there has been an extensive suite of voluntary standards on human rights and anti-slavery practices for some time, there is a move to formal regulation. The California Transparency in Supply Chains Act 2010 and, more recently, the UK’s Modern Slavery Act 2015 (MSA) set precedent.
The UK’s MSA came into effect from 29 October 2015, and applies to businesses with a commercial presence in the UK and a world-wide turnover in excess of GB£36 million (equivalent to AU$61 million) to annually report their actions to ensure that their business and supply chains are free from slavery and human trafficking. All obligated businesses must prepare a slavery and human trafficking statement annually, which must be ‘public facing’ and written in plain English. This statement should set out the steps that the business has taken to ensure that slavery and human trafficking is not taking place in its business or supply chains. Perhaps strangely, organisations that have not taken action to ‘regulate’ their businesses must also clearly state this (the comply or explain regime which is used in EU and UK for non-financial reporting). However, companies that have made positive statements in their annual report are obligated to undertake thorough due diligence before reporting.
While the MSA is not prescriptive in what should be in the statement, it does specify a number of broad areas that should be covered including:
- The organisation’s structure, business and supply chain,
- corporate policies relating to slavery and human trafficking
- Key risk areas, how risks are identified and how they are addressed
- Any due diligence and steps taken to prevent human trafficking and slavery
- An opinion on the effectiveness of those steps measured against performance indicators and
- Any anti-slavery and human trafficking training available to staff.
A member of senior management has to sign-off on the statement, and any misrepresentation could result in a breach of director’s duties or market misconduct. Not to mention offences pertaining to slavery, servitude, forced and compulsory labour and human trafficking now carry a maximum penalty of life imprisonment in the UK.
Slavery in the Waste Management and Recycling Industry? That could not possibly happen in our industry I hear you cry!
However, it has and it continues to. As an example, in September 2016, three men at scrap yards in the West Midlands, UK, were arrested as part of an investigation into modern slavery. The men were arrested and charged of working a group of Polish nationals like slaves and paying them just £1 (AU$1.70) an hour. By contrast, the men taking advantage of these people were living luxury lifestyles whilst playing on the vulnerabilities of their workers by plying them with alcohol and keeping them in isolation.
Some 11 Polish men were found at two related businesses, three at a flat and another two (living) in a van outside one of the perpetrator’s addresses. While the other men were sleeping at one of the recycling units, bedding down on waste cardboard. One of the Polish men was working despite having a broken shoulder for which he had not received any medical attention, while others were displaying signs of malnutrition and severe alcohol dependency.
And how far away is this example from the media publicized activities in Australia of some of our well-known chains, prosecuted of systematically and deliberately underpaying their staff, particularly vulnerable members of our community such as young workers and overseas students? Walk Free estimate that there are at least 4,300 slaves in Australia right now.
Enslaving people, forcing them to work for little or no reward while under threat of physical and emotional coercion and control, is abhorrent and must not be tolerated. Tell-tale signs of possible exploitation included large numbers of people staying in multi-occupancy houses and people being transported from the address in vans or minibuses early in the morning and returning late at night. Or in some cases, workers living at commercial premises.
On Wednesday, 15 February 2017 the Attorney-General, Senator the Hon George Brandis QC, commenced an inquiry into establishing a Modern Slavery Act in Australia. This inquiry examining if Australia should adopt a comparable Modern Slavery Act with particular regard to:
- The nature and extent of modern slavery (including slavery, forced labour and wage exploitation, involuntary servitude, debt bondage, human trafficking, forced marriage and other slavery-like exploitation) both in Australia and globally;
- The prevalence of modern slavery in the domestic and global supply chains of companies, businesses and organisations operating in Australia;
- Identifying international best practice employed by governments, companies, businesses and organisations to prevent modern slavery in domestic and global supply chains, with a view to strengthening Australian legislation;
- The implications for Australia’s visa regime, and conformity with the Palermo Protocol to Prevent, Suppress and Punish Trafficking in Persons, especially Women and Children regarding federal compensation for victims of modern slavery;
- Provisions in the United Kingdom’s legislation which have proven effective in addressing modern slavery, and whether similar or improved measures should be introduced in Australia; and
- Whether a Modern Slavery Act should be introduced in Australia.
The final report by the Joint Standing Committee on Foreign Affairs, Defence and Trade’s inquiry was tabled in Parliament on the final sitting day for 2017.
The report adds details to its earlier recommendations released in August, including provisions for mandatory supply chain reporting requirements for large business to report on modern slavery risks in their supply chains. Despite objections by large business, the revenue threshold for mandatory reporting is $50 million. 2018 will see further labour hire reforms and another review of visa classes and conditions.
With increasing social awareness of the issues, and late, nascent regulatory controls, companies and individuals are being held accountable for any breaches of worker rights or slavery practices. I urge all companies in Australia’s waste management and recycling sector to ensure their labour practices meet not only current regulations but to ensure their due diligence and risk management practices are as rigorous as possible in checking the practices of subsidiaries, overseas and domestic facilities and even suppliers. This is the new frontier of our licence to operate. Not only are there the increasing threat of serious legal penalties from human rights breaches but the reputational risk from adverse human rights impacts is ‘off the chart’. All Boards and Executives must recognise that human rights risks are now at the forefront of modern corporate risk management.
Some Australian and international companies operating in the UK or Californian will already be obligated to, and indeed have already complied to annually reporting (for example, preparing a UK MSA statement) on their actions to combat slavery if they have a commercial presence in an obligated jurisdiction such as the UK.
However, even without a regulatory obligation (yet) in Australia, I would advise that it is prudent for waste management and recycling companies to demonstrate leadership in this area and as a minimum practice, undertake the following steps:-
- A publicly stated commitment on the issue (incorporating this into the Code of Conduct, Company Values, Sustainability Standards and Reporting, ERM Framework and a specific Risk Assessment Framework etc.);
- Have robust and broad stakeholder engagement, grievance mechanisms, workers committees and whistle blower services – essential good practice HR procedures;
- Proactive community development programs particularly in regional areas and overseas communities;
- Contractor management standards (or a Contractor Code of Conduct), contractor requirements and supplier surveys and audits, supported in all contracts;
- Internal and external audit programs particularly in areas identified as high risk in the risk assessment processes;
- Human-rights specific training;
- Voluntary adoption of GRI reporting including on human rights issues and management approaches in workforce and supply chains.
It will be interesting if the Australian Government proceeds with new anti-slavery regulation and where the jurisdiction with the existing Fair Work Ombudsman and potential new powers and organizational control will be defined.
There are already plenty of resources to assist risk management and reporting human rights compliance including the United Nations Guiding Principles on Business and Human Rights – see Guiding Principle Number 17. These principles recommend that businesses undertake a ‘human rights due diligence’ which should include assessing actual and potential human rights impacts, integrating and acting upon the findings, tracking responses and communicating how impacts are addressed. Companies can also utilise the GRI Guidelines, where reporting organizations disclose their most critical impacts (positive or negative) on the environment, society and the economy.