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Modern Slavery Legislation: Verisk Maplecroft's recommendations for Australia inquiry

Modern Slavery Legislation: Verisk Maplecroft's recommendations for Australia inquiry

Verisk Maplecroft has joined global NGOs and businesses by submitting its expert recommendations to the Australian parliamentary inquiry, which is currently deliberating about the potential content of an Australia Modern Slavery Act. 

Our submission

Verisk Maplecroft is a data-driven global risk consultancy with a team of human rights specialists supporting businesses to identify, assess and manage risks in their supply chains. Our over 30 human rights and development indices are used by business, together with our expert analysis, to better understand and identify risks in their supply chain. The Modern Slavery Index that we built last year is used by some of the world’s leading multinationals in the risk assessments they conduct to identify where they need to focus their due diligence efforts.

As we work regularly with a range of companies across multiple sectors on modern slavery risk assessments and reporting, we would like to submit the following recommendations, regarding the potential Australian Modern Slavery Act, for consideration by the parliamentary committee inquiry.

Assessing the prevalence, nature and extent of modern slavery

Given the Commission’s interest in the prevalence, nature and extent of modern slavery, this section explains how we use data and analytics to help business better understand their risks of modern slavery across global supply chains.

In July 2016, we published our Modern Slavery Index which measures the risk of modern slavery across 198 countries – it revealed that 56% of all countries analysed fell into the extreme or high risk category for modern slavery.

In our index, Australia is categorised as medium risk relative to 198 countries. This places it in a similar category to countries in Europe and North America. Like those countries, Australia performs strongly on indicators that assess its ability to enforce the law; however, its overall risk ranking is weakened by multiple reports of violations, and gaps identified in the legal framework.

The Modern Slavery Index, like all our human rights indices, contains a set of questions which are scored on the basis of systematic answer criteria. These questions are grouped into three indicators, categorised as structure, process and outcome, which is in line with the UN ‘Protect, Respect and Remedy’ Framework and guidance from the Office of the High Commissioner for Human Rights.

In the structure indicator, we examine a country’s international and national commitments to a specific human right, including for example, international covenants and national laws. 

The process indicator assesses how effectively a country enforces its commitments to respect human rights. This covers, for example, resources assigned to oversight, training of personnel and penalties for non-compliance.

Lastly, the outcomes indicator assesses the severity and frequency of specific violations reported. The violations analysed - slavery, forced labour, servitude and trafficking - are in line with the definition of modern slavery in the UK Modern Slavery Act and usage by international organisations, such as the ILO. 

Using these three indicators – structure, process and outcome – we build a picture of the risk a business faces with regard to modern slavery in the workforce in a particular country. We then rank all countries relative to one another and this allows a business to identify in which country they may be more likely to have an adverse impact on rights holders. This quantitative analysis allows business to screen their suppliers in a first-step risk assessment, and to then prioritise their follow-up due diligence steps on these key countries of risk.

We also analyse the risks associated with the production of particular commodities by suppliers in top exporting countries. In this data set, we combine some of our index indicators with commodity-specific research to produce a risk ranking attached to a commodity in a country.

Recommendations for the content of a Modern Slavery Act

This section includes recommendations based on our expert analysis and experience of working hand-in-hand with companies complying with the UK Modern Slavery Act.

a. Scope and coverage

The Act should define business responsibility – and how it might vary - for the human rights violations that a business causes, contributes to or is linked to through business relationships, beyond tier 1. To be effective, the Act must recognise the complexity of global supply chains and narrow its focus on ways in which it can pragmatically incentivise business to take action.

The Act could widen its scope to include exterritorial jurisdiction over crimes of modern slavery and trafficking committed by Australian companies/nationals overseas. Including extraterritoriality in a modern slavery act would mean that if an Australian company commits a violation overseas the company could be held accountable in Australia under this law. The power of anti-bribery and corruption laws, in the UK, France, US and Canada derives largely from their ‘exterritorial’ clauses.

Exterritorial jurisdiction helps to stimulate improvement down the supply chain as there is more pressure on brands to ensure that their business relationships with suppliers are grounded in ethical standards.

Exterritorial jurisdiction also helps to tackle the money supply chain, preventing the profits from these illicit practices entering the Australian economy. 

The scope of the Act should include the public sector as well as private sector. Government procurement is an effective way of extending modern slavery due diligence into the private sector.

Banks and institutional investors have a key role to play in combating modern slavery through the leverage they hold as lenders or investors. The Act should clearly explain what steps financial businesses must take in order to demonstrate that they are doing their part to combat modern slavery not just in their own operations or supply chains, but also through their financial relationships.

Police, Migration and Social Services offices/agencies also have a key role to play in combating modern slavery, in particular in detection, investigation and support to victims of violations. The crime remains on rise mainly because the perpetrators are able to escape prosecution and victims remain vulnerable to recruitment due to lack of state support. The Act should ensure adequate resources are set aside to investigate and prosecute perpetrators and support victims.

b. Content of the law

The UK MSA only requires the disclosure of due diligence efforts taken. Australia may wish to consider requiring that certain companies actually conduct due diligence. Disclosure is effective in bringing modern slavery to the attention of the board and setting a direction of travel toward due diligence as a standard. However, companies also benefit from certainty and clear guidance. Making due diligence mandatory for certain companies and providing guidelines for what constitutes adequate due diligence may be more effective for all long-term.

Focusing on modern slavery enables business to focus on the most severe human rights impacts with which they may be associated. It would be helpful though to emphasise in guidance that preventing modern slavery requires robust human rights due diligence in general because this reduces workers’ vulnerability to exploitation. At a minimum, companies should be conducting due diligence covering the 8 fundamental ILO conventions (freedom of association, collective bargaining, forced labour, child labour, equal remuneration, and discrimination).

The Act should mandate, rather than recommend the type of information a business is required to cover in an annual statement. Providing clarity about what information needs to be provided simplifies the reporting burden for responsible sourcing managers. It also facilitates systematic analysis of the information supplied - this promotes the effective use of this information by policy makers, NGOs, business and the media, to better combat modern slavery across sectors or countries.

The Act should require that companies provide information on the most important steps in the due diligence process, in order to ensure that businesses adopt this process. These steps should include a) having a policy commitment on modern slavery and embedding it in company culture and procedures; b) assessing the risk of actual and potential adverse human rights impacts on rightsholders c) taking action to address those impacts d) tracking the effectiveness of those actions e) reporting on actions taken and f) remediation.

In particular, the Act and accompanying guidance should highlight the importance of conducting a robust data-driven risk assessment. This should include a) identifying key areas in the business or supply chain where the risk of adverse human rights impacts is greatest; b) prioritising these risks according to the severity of the potential impact on rightsholders and c) identifying the business’ relationship to that adverse impact.

The Act should identify a model or a limited set of due diligence models that are internationally recognised as adequate, based on the clear steps given in the UN Guiding Principles. In addition to ensuring that they are taking the right approach, this due diligence model can be used by companies to provide assurance to investors that they are taking the appropriate steps to manage their risks. This means that efforts to comply will result in gradual convergence around a standard and the integration of human rights due diligence into business practices.

c. Phased approach

It is important to create a framework that is pragmatic and encourages business to gradually integrate modern slavery due diligence into their supply chain practices over time, rather than require an all-at-once solution. Our customers are all at entirely different stages of sophistication with regard to due diligence – they need time and guidance to implement new procedures, to build the business case and to resource their plans sustainably.

d. Tracking effectiveness

The Act should establish an independent Anti-Slavery Commissioner, with a clear mandate, resources and personnel to respond effectively to modern slavery crimes. This should include the effective collection and analysis of modern slavery data and monitoring of business statements.

The Act should establish an independent central registry to collect and manage the submission of annual slavery and trafficking statements. This registry should be publicly accessible.

The registry should provide analytics to businesses that comply to help them improve their due diligence steps over time, by for example: telling business how the information they have provided compares to that given by business peers and how they perform with regard to official guidance; using information given to identify areas where business can collaborate to address risks; linking business to relevant NGOs working in the field.

Verisk Maplecroft hopes that these recommendations are helpful to the Committee as it proceeds with its inquiry. 

If you have any comments on the above or would like to understand more about the way we help companies mitigate modern slavery risks please do contact us at info@maplecroft.com.

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