Reputation, reputation, reputation! If recent news is anything to go by, your reputation is only as good as the performance and reputation of your global suppliers (and their suppliers in turn): Any connection with a supplier that has been found to engage in ‘below-board’ dealings can have a significant effect on the reputation of your business. And in the 2021 court of public opinion, ethical consumerism reigns supreme, which means your end-customers are paying closer attention than ever to the way you do business and the suppliers you choose to engage.

Now more than ever is the time to ensure that your global supply chains are clean-handed: not only for your own reputation, but to ensure that you can continue to meet the expectations of your customers. This article touches on what you can do to ‘close the link’ on a potentially fragile supply chain.

Global context

The term ‘slavery’ is one that some businesses may be surprised to find associated with 21st century supply chains. However, those dealing with suppliers and customers based in Australia and the UK – which already have obligations under modern slavery legislation – may be familiar with the concept of ‘modern slavery’.

In general terms, ‘modern slavery’ encapsulates illegal physical coercion, forced labour, restriction of movement, and debt bondage in the context of workplaces, and is particularly pertinent in the case of low-skilled manufacturing and subcontracted service sectors.

Large organisations in the UK and Australia that meet a certain turn-over threshold are required to publish a ‘modern day slavery statement’ in each financial year. Generally, in publishing the statement, a supplier is required to report on their supply chains and to state the actions that they have taken to address the risk of slavery. If an organisation has taken no actions, then they are required to make a statement that this is the case.

As opposed to seeking to punish non-compliant businesses through a penalty regime, the regimes in the UK and Australia rely on public pressure and scrutiny to incentivise companies to improve the transparency of their supply chains.

What about in New Zealand?

A recent open-letter to the Government – signed by more than 85 companies, including some of New Zealand’s largest businesses – demonstrates just how relevant the issue is for businesses here in Aotearoa. The letter calls on the Government to introduce legislation to help combat modern slavery.

Action looks to already be on the horizon. The New Zealand Government has indicated in a report (released on the day after the open-letter was published) that legislation addressing modern slavery could be on the way. The Government’s Plan of Action against Forced Labour, People Trafficking and Slavery (which you can read here) indicates that one action point for the Government in combatting modern slavery will be to ‘consider introducing’ legislation. We’d expect such legislation to be along the lines of that already in place in Australia and the UK. The Workplace Relations and Safety Minister has also reinforced that the Government remains ‘committed to exploring modern slavery legislation’ and has indicated that businesses should expect a decision on whether to proceed with legislation by the end of this year.

Our view is that reform along the lines already enacted abroad would demonstrate support to those New Zealand companies already leading the charge in this space. Legislative change would also reinforce that the Government is attuned to the ever-increasing global context of supply chains, as well as the problems in our own backyard. The message is clear: catch up, or be left further behind.

But even if legislation along those lines is not ultimately enacted, the combination of pressures from consumers, business customers, and suppliers means that now is the time to make sure you are protecting your business from the risks of association with modern slavery practices.

New Zealand consumers already expect suppliers to have a firm grip on their supply chains and to explain their connections when called upon. This is particularly the case in industries commonly associated with poor practices: as is the case with fashion, demonstrated by the popular media attention that Tearfund’s annual Ethical Fashion Report elicits each year.

For businesses seeking to deal with Government, the Government Procurement Rules, Government Procurement Charter, and the Supplier Code of Conduct already set the Government’s expectations when purchasing goods, services or works, including expectation that businesses will monitor and address modern slavery issues in their supply chains.

How should I prepare?

With all that in mind, now is the time to implement practices into your business that could not only help you save face further down the track, but also help you ensure you’re ahead of the curve should modern slavery legislation be introduced in Aotearoa.

We’ve set out below our top tips for actions you can take now:

• Do your homework: Undertaking diligence before entering a supply agreement can make all the difference. If you take the time to understand the true nature of the arrangement now, matters that you might take for granted – such as ‘who is doing this work?’ and ‘who is the end-customer?’ – won’t bite further down the track. Key matters to think about are whether the supplier (or, in some circumstances, the customer) has any internal supply-chain risk management policies, what the supplier’s employment structure looks like, and whether the supplier is already required to comply with modern slavery legislation in other countries (and, if so, what their track record is like).
• Know what you need to know (and how to know it): Before you even get to the diligence stage, it is important to have a firm grasp on the types of issues likely to be of concern in your industry as well as how to examine whether that concern is a real one for the specific supplier you’re seeking to do business with. This involves figuring out the practical steps you’ll need to take to uncover the information you need. COVID-19 adds another twist here: When conducting an in-person site inspection for overseas suppliers isn’t possible, how do you otherwise manage the risk? We can help you make a plan.
• Build in protections: Once you’ve made a plan, and have done your homework, the next step is to ensure that you have the right contractual mechanisms in place to manage your risk. This might involve incorporating provisions in your contracts with suppliers that require those suppliers to disclose their organisational structure, supply chains, anti-slavery policies, risk management and training programs. The modern slavery statement required by UK and Australian legislation provides a useful reference point for the types of information you might require. A right to audit the supplier can be a useful way to ensure that your suppliers mean what they say.
• Time for a refresh?: While the above steps are largely aimed at suppliers with whom you are yet to engage, it is never too late to conduct a review of your existing arrangements to ensure they still pass muster. Of particular importance will be the ‘roll-over’ arrangements that you have had in place long-term. Even if you’ve done business for years, the relatively new interest in supply chain transparency means that you may need to revisit these arrangements. We regularly assist clients to check that the risks to their business and contractual risks are appropriately managed.

Do you need help making a plan to ensure supply chain transparency in your business? Or are you keen to understand your risks – contractual and reputational – when dealing with your suppliers? We can help. Contact Hayden Wilson, Hayley Miller, or Campbell Featherstone.