Risk professionals have long checklists to actively review with vendors to assess operational status and supply chain risks during Covid-19. But have the pandemic’s urgent business priorities moved reviews of the vulnerability of workers in global operations out of sight?
In a recent survey conducted by the Governance Institute of Australia, which surveyed almost 400 risk professionals and governance leaders, only 22% of respondents have incorporated modern slavery obligations in their risk management framework, while 37% said that it was not part of the framework.
Under the Modern Slavery Act 2018, there are statutory reporting obligations for Australian entities that must outline modern slavery risks, actions taken to address them, and effective management and outcomes of actions taken. 77% of the respondents fall into the category of entities that are required to submit a report.
What this tells us is that Australian risk and governance professionals are overlooking or are unaware of the new risk challenges when it comes to modern slavery. Adding modern slavery to operational risk management frameworks should be considered as a matter of urgency to ensure compliance with these new obligations under the Act. SAI360 previously called out the critical role that organizations play in the fight against human trafficking.
A statement by the United Nations, issued May 5, 2020, warned why the risks for human trafficking in 2020 are high: “The severe socio-economic effect of the COVID-19 pandemic is likely to increase the scourge of modern-day slavery, already impacting over 40 million people before the global pandemic”, said Tomoya Obokata, of Contemporary Forms of Slavery.
Understanding what modern slavery is and what it looks like
Modern slavery can take shape in several forms, including forced labor, debt bondage, human trafficking and slavery. With recent lockdowns across the world, the sudden workforce reductions and changes to the supply chain can affect vulnerable works and unfortunately opens the door to exploitation.
You might be wondering how modern slavery can happen in 2020. With an estimate of 40 million people who have succumbed to modern slavery worldwide, an individual can easily become vulnerable to severe exploitation for personal or commercial gain. This can happen when a vulnerable person is in a situation where they fear of losing their income, they have a low awareness of workplace rights, they are required to work excessive overtime with no additional pay, or they have the inability to return to their home country safely.
“In this type of environment, temporary measures have a chance of becoming systemic, potentially creating forced labor conditions for millions of displaced workers,” the Society of Corporate Compliance and Ethics (SCCE) stated in a report on June 1, 2020.
So, while organizations are assessing third-party vendors and supply chain contracts and reviewing how they’ve been impacted due to COVID-19, the ability to identify modern slavery risks throughout any global operation should be an imperative for any business continuity plan.
Steps must be taken to ensure the opportunity for modern slavery does not arise in the supply chain, despite a compelling need for operational resilience in the time of COVID-19 crisis. This includes, but is not limited to:
- Understanding that tone towards this issue starts at the top; create corporate governance guidelines covering ethical and corporate responsibility including modern slavery, ensure members of your team participate in corporate responsibility, and provide awareness training on this topic.
- Identifying any risks in the supply chain where modern slavery could be an issue.
- Developing relevant policies and integrating them into operational risk frameworks [see example checklist].
- Review and refine any vendor and supply chain procurement agreements or processes.
- Assess what supplier engagement activities are ongoing or planned to include relevant onboarding, training, activities or communication being facilitated, to include information on the safety and well-being of vulnerable individuals within the supply chain.
To get an inside look at how some businesses are combating modern slavery in the supply chain, UK Retailer Marks & Spencers has an excellent Modern Slavery Toolkit for Suppliers and Partners.
Whether these types of activities have stalled during the COVID-19 pandemic paralysis, entities within Australia are still responsible for outlining how COVID-19 has impacted key actions taken to combat modern slavery (i.e., face-to-face training, supplier engagement activities due to border restrictions) as part of the new reporting obligations for entities operating in Australia, as part of the Modern Slavery Act 2018.
Managing compliance with supply chains and third-party vendors during a crisis
Organizations are undoubtedly impacted by COVID-19, including how they report on their ability to assess, mitigate and report on risks of modern slavery. As per the guidance of the Australian Border Force, key steps that organizations can take to protect and support workers in their operations and supply chains can include:
- Maintaining ongoing contact with third-party vendors and suppliers; this includes honoring contracts where possible to reduce risks of worker vulnerability.
- Purchase practices such as last-minute or short-term orders, or discounted offers can increase modern slavery risks for workers (increased overtime, decrease in pay).
- Engage with suppliers to understand how they are protecting their workers:
- From COVID-19 (access to PPE, increasing cleaning of facilities)
- How they are supporting affected workers (guaranteeing workers’ wages and leave conditions), how supply chain capacity changes will affect workers (overtime or hiring more staff), if workers have access to hotlines, union support
- How workers are redeployed (if applicable) to mitigate the impact of workforce reductions (and how)
- Supporting the safe return of migrant workers, and whether supply chains understand what modern slavery looks like during COVID-19
While the government announced an extension to the deadlines for reporting entities to lodge modern slavery statements under the Modern Slavery Act 2018 (Cth), the ABF does recommend that reporting entities address how Coronavirus has impacted their capacity to assess and address the risks associated with modern slavery.
Corporate responsibility and modern slavery risks within the supply chain
While more entities are becoming more aware of human rights issues and violations, unfortunately, Covid-19 pandemic paralysis can lead to the most vulnerable being forgotten.
As Paul Johns mentioned in his article on modern child slavery, “with a clear mandate to manage modern slavery risks, instill awareness, and improve business ethics and conduct, corporate responsibility can help mitigate the risks of modern slavery within the supply chain”.
While certain Australian entities have a mandatory legal obligation to identify how they are tackling this, this should not be viewed merely as a tick-the-box exercise. Nor should it continue to go unchecked and ignored as we face new challenges, whether it's today's pandemic yesterday's bush fires exacerbated by climate change. Risk management technology can help organizations tackle the oftentimes overlooked risks within supply chains and third-party vendors, such as modern slavery.
Senior leaders and risk professionals have the ethical and corporate responsibility to ensure that workers that are involved are not being exploited and that human rights and standards are being adhered to on an ongoing basis, despite recent events.
It’s time for Australian enterprises to step up and include modern slavery to corporate risk frameworks, practice greater due diligence on the supply chain and enforce a greater commitment to combatting modern slavery.
KnowTheChain is a resource for businesses and investors to understand and address forced labor risks within their global supply chains. Benchmarking is used as a tool to identify and share best practices, and as a way to harness the competitive nature of markets to create a “race to the top” that encourages businesses to adopt standards and practices that protect worker’s well-being. See their benchmark reports.
Western Power has joined other high-profile Western Australian energy, mining and resource companies (including South32, which is an SAI Global customer) to develop a practical toolkit to pre-screen for modern slavery risks within supply chains. Central to the toolkit is a self-assessment questionnaire (SAQ) with 18 core questions that the group has agreed to ask suppliers to identify modern slavery risks, improve transparency and identify areas for further due diligence.
STOP THE TRAFFIK is a pioneer in human trafficking prevention. Working to unite people around the world by inspiring, informing, equipping and mobilizing communities to; know what human trafficking is, know how to identify it and know how to respond appropriately if they saw it. Utilizing the power of people and technology, STOP THE TRAFFIK is working to prevent human trafficking globally through our innovative Intelligence-led approach.
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