A practical guide
Sustainable procurement initiatives are back on the agenda after something of a hiatus during the pandemic period. Perhaps the most important plank of sustainable procurement efforts is a mandatory one – MODERN SLAVERY federal legislation, which is now joined by the long-awaited NSW bill and, even, a second federal initiative, the Forced Labour Bill.
Jonathan Dutton FCIPS offers Supply Clusters members SEVEN pragmatic tips on how to get back on track specifically with their MODERN SLAVERY policy post-Covid:
Sustainable Procurement momentum 2019-20
As we have covered in a previous article (June 2021), many sustainable procurement and MODERN SLAVERY initiatives went on the back-burner during the pandemic lockdowns, as many procurement people focused more on business continuity, supply side risk and then fiscal repair.
With the end of lockdowns in sight, many procurement teams are picking up their sustainable procurement initiatives again. And, wondering how to reprioritise and galvanise their previous efforts to gain a new momentum that is as relevant as possible for their organisation and likely new priorities?
The Modern Slavery Act 2018 (MSA)
The tenant’s of this federal legislation are well known throughout the procurement industry:
MODERN SLAVERY ACT 2018 – KEY POINTS:
- Federal Act passed in November 2018
- Effective 1 January 2019 onwards, reports due within 6 months of EoFY
- Minimum reporting threshold is AUD$100million annual turnover
- Applies to some COMMONWEALTH departments and agencies too
- All applicable organisations to publish their Board approved modern slavery policy and public statement
- And actively seek modern slavery instances in their own supply chain
- Mandatory annual reporting required
- No financial penalties but a Ministerial ‘show cause process’ is included – and downstream penalties are expected at some point for non-compliance
- Some small leeway on reporting deadlines due to Covid – three month extensions mostly
Many organisations are well advanced with their policies and statements. Yet, anecdotally, few organisations have so far readily demonstrated real action up their supply chain to uncover modern slavery and address it. In fact, it appears that most organisations have reached ‘first base’ but few have made ‘second base’ as yet.
This is the premise of a forthcoming PASA conference to be held ONLINE 7/8 December 2021 – SUSTAINABLE PROCUREMENT TODAY. A wide range of sustainable procurement initiatives (including modern slavery) will be addressed from this precept. SUPPLY CLUSTERS members can attend free of charge by registering as a buyer.
The new NSW bill 2021 (MSAB)
The long awaited New South Wales Modern Slavery Amendment Bill was released 14th October 2021 and, obviously, applies within NSW:
NSW MODERN SLAVERY AMENDMENT BILL 2021 – KEY POINTS
Key changes include:
* Commencement Date – 1 January 2022
* Expands the definition of Modern Slavery offence
* Clarifies the position in respect of State-Owned Corporations
* Confirms that the Act will not apply to Local Councils within NSW
There is much more analysis and consideration of this bill to come as yet, of course.
Forced Labour Bill 2021 (FLB)
This federal bill has been tabled in parliament (23 August 2021) but is not yet law. It seeks to amend the Customs Act to prohibit the importation into Australia of goods produced or manufactured, in whole or in part, particularly through the use of forced labour.
Yet as The guardian put it, “There is no specific reference to China, despite concerns about human rights abuses in Xinjiang being the initial trigger for the proposal – and something that was mentioned repeatedly in Monday’s Senate debate.”
According to CiteLegal* the Bill, if passed, would add the following provision to the existing federal Customs Act:
50A Prohibition of the importation of goods – goods produced by forced labour
“The importation into Australia of goods produced or manufactured, in whole or in part, through the use of forced labour (within the meaning of the Criminal Code) is prohibited absolutely.
A breach of the provision would be ‘subject to the penalties that apply to the importation of other goods designated as prohibited imports by regulations made under the Customs Act’. Currently, a person convicted of the offence of importing a prohibited good can be subject to a fine up to an amount three times the value of the goods in question or $222,000, whichever is greater. The offence is one of strict liability.”
With each of these three MODERN SLAVERY related drives, the original MSW, the NSW MSAB, and the FLOB, buyers are urged to seek their own advice and prepare their approach according to the laws as passed and their own organisations requirements and needs.
Managing supply chain risk simultaneously
Yet, in addition to both actual and likely MODERN SLAVERY regulation, many buyers are taking the opportunity to map their inbound supply chain for multiple risks.
The pandemic has just driven many buyers to reassess their inbound supply certainties compared to the cost advantages of souring overseas. Why not accelerate supply-chain mapping and include all forms of sustainable procurement risk, supply risks and business risks, and not just modern slavery risk?
The TOP SEVEN Tips on building Traction on MODERN SLAVERY
Naturally, it is humble procurement practitioners who are in the front line of implementation regarding MODERN SLAVERY. Finding practical ways to meet the requirements of the MSA is key, as this is legislated requirement, and not just a business requirement. It is the basis of the inbound supply-chain mapping in the first pace for many.
But, how to get to second-base? Quickly? And easily, cutting through red tape and long-winded process to get the crux of the matter?
- Focus on DIRECT spend
We have previously addressed the differences between DIRECT and INDIRECT spend categories in some detail. Few will castigate an organisation and challenge their reputation for using humble INDIRECT goods, as everyone does – laptops, stationery supplies, energy supplies, vehicles and the like
BUT, goods and services in your own DIRECT supply chain, that you have some control and influence over, are an other matter. These elements bring significant reputational risk if highlighted in public. Like NIKE using child labour in the past, or ZARA in their principal supplier’s garment factory.
- identify your most likely RISK areas
A simple first step for most is to map your most likely RISK areas – that is, those countries where slavery is more likely, and those industries where it is more often found. This can be done initially as a desktop exercise, next as a facilitated workshop approach. And can focus naturally on your DIRECT supply lines of course.
Once established which high-risk industries and which high-risk countries rest in your inbound supply chain, action can be much more targeted.
- Set up comparative data sources
Today, there are many organisations established to help busy buyers better track their supply chain. Some charge fees to help you (consultancy) other subscriptions (for online services) others are in-country and ready to help (outsourced procurement).
Once established, your best mix of supply chain ‘listening-stations’ can be plugged into your (usually small) centrally located team to pick-up the incoming leads and patch together the fuller picture of your true supply chain mapped, pegged and monitored. The challenge is to prevent instances or, at least, be able to react and remedy them quickly. This ESG agenda monitoring is increasingly common on the supply side of business here – as we have mentioned before, as a growing role for procurement:
Some typical sources of supply chain DATA tracking and services – available to Buyers in Australia currently
|Axis Group Int’l||FRDM||Informed 365|
|Media Monitors||Google alerts||Bureau Van Dijk|
- Get your primary suppliers on side
Lazy buyers in the past have sometimes ‘dumped’ the supply chain problem of managing down the supply chain on their prime contractors or their Tier 1 suppliers. “You sort out your suppliers and get them to sort out theirs“ was a refrain. No longer.
Getting your supplier on side to manage their suppliers, and so on down the supply chain, builds a team approach to addressing supply side risks – and MODERN SLAVERY. It also sets expectations for ‘your’ supply chain. Supply chains increasingly compete against each other. The primary buyer up the food-chain should have some influence to galvanise this team approach – pushing weak links out of your supply chain team, even.
- Get your stakeholders onside too
Aligning your modern slavery approach to your corporate strategy as well as your stakeholder’s needs is also advised. Working as a team with stakeholders to better determine how to best and fully implement your modern slavery policy. This unified approach will also reflect well in front of suppliers and, perhaps, improve those suppliers determination to so as much as they can up the supply chain.
- Agree KPIs with primary suppliers
As with any corporate objective – what gets measured gets done. Agreeing specific key results indicators (KPIs) and measuring progress monthly (even quarterly) can spur both suppliers and their suppliers in the right direction.
KPIs are quantifiable measures used to gauge performance against one or more objectives over a specified period of time. KPIs can be used to measure the effectiveness of an organisation’s anti-slavery actions, with illustrative examples of KPIs provided on a generic and sectoral basis.
The UK government’s official guidance on their own MSA in 2015, states in section 54 that organisations can report on key performance indicators (KPIs) in two broad ways by providing information on:
- existing KPIs and whether they make their business or supply chains more vulnerable to modern slavery; and
- KPIs introduced to measure the performance of anti-slavery actions undertaken
The official UK guidance stresses that ‘carefully designed KPIs could help a business to demonstrate as clearly as possible if they are making progress over time in preventing modern slavery in their business or supply chains’
Useful link – Lexus Nexus UK practice notes https://www.lexisnexis.co.uk/legal/guidance/modern-slavery-key-performance-indicators
- Put boots-on-the-ground
During the sourcing stage (or for contract renewals) supplier-appraisal visits should be obligatory for meaningful suppliers. Exercised against thorough checklists and with experienced buyers, supplier appraisals on site can reveal much more than simple desk assessments or remote screening and self-assessed declarations by suppliers or sub-contractors (with or without help from specialist tracking firms).
Post contract award, supplier audits should be essential for strategic suppliers and those suppliers in high-risk countries or high-risk industries. If this is too time or resource hungry for you and your team, outsource the work. Local procurement consultancies or specialist tracking firms, standards inspection providers or specialists like AXIS Group International can help.
Jonathan Dutton FCIPS has a non-executive role at SUPPLY CLUSTERS and writes a monthly column for the website. Jonathan is the CEO of PASA who run a wide range of procurement events and training programmes each year www.procurementandsupply.com and cover all aspects of sustainable procurement thoroughly including their forthcoming conference on the topic. He has also worked extensively in the past as a procurement consultant and is a former non-executive director for over four years of the Australian Centre for Corporate Social Responsibility (ACCSR). Jonathan also holds a non-exec role at Axis Group International based in Perth.