News & Thinking

Combatting modern slavery – proposed new duties across the supply chain

Contributed by:

Chris Dann
Partner

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Chris Dann


Anne Wilson
Partner

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Anne Wilson

Giuliana Petronelli

Giuliana Petronelli
Associate

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Giuliana Petronelli


It is difficult to believe that slavery still exists in today’s society, but the unfortunate reality is, it does.

Modern slavery and worker exploitation remains in both the domestic and international supply chains and whilst our current laws on exploitation by employers goes some way towards combating modern slavery, the Government considers that that focus is too narrow.  In a recently issued Ministry of Business, Innovation and Employment (MBIE) Discussion Document, the Government proposes to create new legislative responsibilities to identify and combat exploitation across the operations and supply chains of all types of organisations in New Zealand.  If adopted, the proposed responsibilities will go several steps further than comparable Australian and UK legislation and will have significant and far-reaching implications for New Zealand businesses.

We urge you to get up to speed on what is proposed, and have your say here.

Globally, the International Labour Organization estimates there are 40 million victims of modern slavery, including 25 million people working in forced labour. There have been examples of modern slavery and worker exploitation in New Zealand and many of us are unwittingly (and regularly) buying goods and services made by exploited persons here and overseas.

MBIE defines modern slavery as the severe exploitation of a person who cannot leave [work] due to threats, violence or deception. It includes forced labour, debt bondage, forced marriage, slavery, and human trafficking. Worker exploitation is defined as being “non-minor” breaches of employment standards in New Zealand.

Not in our backyard, surely…?  International human rights group “Walk Free” estimated that in 2016 around 3,000 people in New Zealand were in conditions of modern slavery. World Vision estimates that an average New Zealand household spends approximately $34 each week on industries whose products are implicated in modern slavery.

Employment New Zealand continues to find cases of temporary migrant worker exploitation, with the worst example in recent times being that of Joseph Matamata who was sentenced in 2020 to 11 years in jail for 10 charges of human trafficking and 13 charges of dealing in slaves in New Zealand that had occurred over 24 years.  Just this week, the Employment Court ruled that three former residents of Gloriavale were employees from the age of six until they left the community, and confirmed that a person “working in slave-like conditions” may still fall within the definition of employee.

Modern Slavery and worker exploitation in supply chains: “creates an environment based on unfair competition, in which exploitative practices can be leveraged to get ahead. While more New Zealander’s want to buy from responsible businesses and support responsible entities, it is not always easy to determine which organisations have put effective measures in place.”

Proposed Legislative Response

The Government committed in its 2020 Election Manifesto to continuing “work to stamp out migrant worker exploitation with a focus on exploring the implementation of modern slavery legislation in New Zealand to eliminate exploitation in supply chains”.

While MBIE acknowledges examples of some organisations taking voluntary action to address exploitation (e.g. though supplier codes of conduct), it concludes “the evidence suggests that relying on the status quo and non-legislative options will not sufficiently address modern slavery and worker exploitation here or around the world”.

The proposals in the MBIE Discussion Document are based on the UN Guiding Principles on Business and Human Rights (UNGP) and go several steps further than comparable Australian and UK legislation. The proposed new laws would:

  • apply to all organisations, regardless of size, including companies, sole traders, partnerships, state sector organisations, local government, charities, trusts, incorporated societies and Maori trusts and incorporations
  • require all organisations to take reasonable and proportionate action if they become aware of modern slavery in their domestic or global operations or supply chains or worker exploitation in their domestic operations or supply chain
  • create a due diligence obligation for all organisations to prevent, mitigate and remedy modern slavery and worker exploitation by New Zealand entities where they are the parent or holding company or have significant contractual control
  • require all medium and large organisations (over $20m annual revenue) to disclose the steps that they are taking to address modern slavery in their operations and supply chains at home and abroad and also worker exploitation in its New Zealand operations in accordance with mandatory reporting criteria
  • create enhanced due diligence obligations for large reporting entities (over $50m annual revenue) to prevent, mitigate and remedy modern slavery in their international operations and supply chains and modern slavery and worker exploitation in their domestic operations and supply chains – whether or not they have any structural or contractual control or influence over such matters.

Where an entity becomes aware of modern slavery or worker exploitation, examples of taking action could include: reporting a case to the appropriate authority; working with the supplier to address the harm; changing suppliers; and/or any other action that may be appropriate under the circumstances.

“In cases where no reasonable or proportionate action can be taken, including where there is no ability to change to a different supplier, the expectation would be that the entity nonetheless ceases their engagement with the supplier. We acknowledge the possibility that in some cases this could mean that the entity’s ongoing operations become unviable”.

Due diligence requires a process to identify risks of exploitative action across an entity’s operations and supply chain, and then taking “reasonable and proportionate” steps to prevent and mitigate that exploitation, which could include: surveying or auditing suppliers; establishing a hotline or whistleblowing mechanism; pre-approval assessments of potential supply chain partners; and educating suppliers about relevant rights and obligations. How far the due diligence obligation goes is not clear.  Is the duty discharged by issuing a survey requesting confirmation of adherence to minimum employment standards?  What if a supplier does not or refuses to respond?  Is the New Zealand organisation required to somehow verify responses?

The requirement to “remedy” slavery and exploitation (in addition to penalties for non-compliance) is perhaps the most controversial aspect of the proposed reforms.  “Depending on the specific harm, remedy may take a number of forms including an apology, compensation (financial or otherwise), the cessation of a particular activity or relationship, arrangements to ensure the harm cannot recur, or another form agreed upon by the parties and which meets the effectiveness criteria set out in [the UNGP]”,

Further than most of our trading partners…

Unlike other recent reform, what is proposed does not simply follow Australia (which has a prescribed disclosure/transparency regime).  Due diligence approaches (like those in France, Germany and Norway and proposed for the EU) move a step further than disclosure by requiring that regulated entities undertake particular actions, in addition to making disclosures.

“[We] consider that a due diligence approach would better meet the policy objectives … compared to a disclosure-based approach as it would: provide a more direct means of ensuring that appropriate action is taken to address modern slavery and worker exploitation across operations and supply chains; be more responsive to changes in best practice over time; and reflect the approach currently being considered and adopted by a range of jurisdictions internationally.”

The aim of the proposals is laudable, and we acknowledge that real (and necessary) progress requires more than “box ticking”.  However, at a time when it is widely accepted that we have a cost of living crisis and recognised vulnerabilities in our supply chain, these are bold proposals which could add complexity to the supply chain.  Certainly a great deal more detail will be required to enable businesses to have confidence in the requirements.  We query the necessity and practicality of a remediation regime.  We question whether the proposals adequately recognise the limited ability of New Zealand businesses to meaningfully control or influence outcomes – particularly in parts of their international supply chains.  We wonder whether imposing significantly greater requirements than Australia will result in a competitive disadvantage for New Zealand businesses against their Australian counterparts.

Submissions on the proposals are due by 7 June 2022.  These proposals will affect all businesses so it is vital to understand them and we encourage you to also take the opportunity to have your say.

Please get in touch with us if you would like to know more or for assistance with making submissions.

[This article is Part 1 of a two-part series on current Government supply chain proposals.  Next time, we will report on another white paper – this time from Te Manatū Waka/Ministry of Transport titled: “New Zealand freight and supply chain issues paper”]