6 critical trends: the first 446 published Modern Slavery Statements

FairSupply | 24 June 2021

This document provides a high level analysis of the first 446 Modern Slavery Statements (Tranches 1-4) published under the Modern Slavery Act 2018 (Cth). It discusses major challenges and best practices in key areas.

 

Mandatory Reporting Criteria

 

Section 16(1) Modern Slavery Act 2018 (Cth)

  1. Identity of reporting entity 
  2. Description of structure, operations and supply chains 
  3. Description of identified modern slavery risks 
  4. Description of actions taken to assess and address modern slavery risks 
  5. Description of how the reporting entity has measured effectiveness of those actions 
  6. Description of the process of consultation with owned or controlled entities 
  7. Other relevant information 

 

This paper documents six important trends among the first four tranches (446) published statements. For the first four we simply note the trend and cite examples of best practice where appropriate. 

The last two trends we see as carrying particular significance. The bulk of this report is dedicated to addressing the final trend – the deficiency in Board training regarding the issue of modern slavery. 

 

1. Clauses in supplier contracts that address modern slavery are the primary way reporting entities have described addressing modern slavery. (Over 50% of entities). 

 

2. 75% have a reporting system in place for grievances. Only 3% report that this grievance mechanism was used. 

 

Example: Microsoft Pty Ltd 

Information technology and telecommunication. 

Professional and administrative services and supplies, including legal, consulting and accounting services. 

Microsoft reported that during FY20, the Workers’ Voice Hotline that is open to factory workers in China received 163 cases, 4 of which are in the follow-up stage and the rest of which have been resolved. The majority of cases involved wages and benefits, humane treatment, working hours, freely chosen employment, legal and customer requirements, sanitation, food, housing and transportation, injury and illness, industrial hygiene and disclosure of information. All were investigated with the support of third-party auditors and Microsoft worked with suppliers to address cases in a timely manner and mitigate risks. Within this, 5 cases were possible allegations of forced labour which were confirmed after investigation. All confirmed cases were addressed with factory-led corrective actions and compliance with this process was managed by the third-party Hotline Operator. 

 

3. 70% of entities conducted due diligence on high-risk suppliers. 

 

Example: Myer Holdings Limited 

Durable consumer goods, including electronics and appliances, home furnishings and other accessories. 

Fashion, textiles, apparel and luxury goods. 

Myer reports it conducts due diligence on all private brand suppliers prior to onboarding and on suppliers seeking renewal. This includes a third party ethical audit report after which Myer conducts audits every 12 months for suppliers considered extreme risk and 2 years for suppliers considered high risk. 

The entity also conducts supplier questionnaires, a review of internal policies and procedures, on site visits and engages with issues raised by grievance mechanisms. Myer conducted 411 factory ethical audits across 274 tier 1 suppliers. 

 

4. 27% of entities engaged in remediation strategies

 

Example: Zimmermann Holdings Pty Ltd, Zimmermann International Pty Ltd, Zimmermann Wear Pty Ltd 

Fashion, textiles, apparel and luxury goods. 

Where site visits or independent audits identify issues that require remediation, the entity discusses the issues with the supplier, agrees on a plan and time-frame for rectification, and then checks in with the supplier for progress reports. Example of remediation: The entity noticed that one of its suppliers were using an unauthorised subcontractor in breach of its code of conduct. 

 

5. Only 6% of entities assessed the risk of modern slavery beyond Tier 1 of their supply chain. 

 

Why this has our attention: 

 

Modern slavery is often hidden deep within supply chains. Tier 1 visibility, only, is deeply deficient. The parliamentary inquiry into the Customs Amendment (banning goods produced by Uyghur forced labour) Bill 2020 is indicative of the broad recognition of the need for companies to ensure modern slavery is not present in their supply chain. 

Best practice involves a data-led process of supply chain mapping, identification and assessment of modern slavery risk. 

 

6. Only 10% of Boards have been trained in modern slavery compliance issues.

 

Why this has our attention:

 

Section 13(2) of the Modern Slavery Act 2018 (Cth) requires that a reporting entity’s Modern Slavery Statement be approved by the principle governing body of the entity. Even where there is no penalty under the Act for non-compliance, in circumstances where Board approval is required, Directors should be aware of the following risks associated with approval.

 

 

How we got our numbers

 

FairSupply’s Research Lab analysed each of the first 446 modern slavery statements published under the Modern Slavery Act 2018 (Cth). We used 22 different criteria to evaluate each statement.

Contact FairSupply to better understand our method and how FairSupply can help your organisation develop a robust approach to addressing modern slavery in its operations and supply chains.

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