The recent filing of a lawsuit against Ansell and Kimberly-Clark in US Federal Court has thrown the pervading issue of forced labour and modern slavery in supply chains into sharp focus. The case has been filed by 13 Bangladeshi workers who allege that these companies knowingly profited from the forced labour of individuals at Brightway, one of their key suppliers. US Customs and Border Protection banned Brightway’s products from entering the US at the end of 2021 as a consequence of an investigation finding it met 10 out of 11 of the UN’s indicators of forced labour. [1]

Ansell responded to media reports flagging concerning conditions at Brightway in January 2021 by pointing to a third-party audit for compliance it had carried out in 2019. It has now stated it is investigating how the working conditions at Brightway were not picked up in this audit.

The outcome of this case is yet to be determined. However, this raises important questions for companies regarding their potential responsibility and liability when it comes to eliminating modern slavery from supply chains.

This is especially concerning where audits being carried out are potentially overlooking or failing to pick up on forced labour practices. How can companies ensure they are ready for the teeth soon to come in Australia?

Australian law poised for change

Currently, Australia’s Modern Slavery Act (2018) does not include non-compliance penalties or enforcement measures. Unlike the US, there is no mechanism to prohibit imports of certain goods or suppliers. But this is very likely to change soon.

The ALP has stated that the current legislation does not go far enough and intends to amend the Modern Slavery Act to introduce penalties for non-compliance and mandatory reporting requirements.

Currently, it has been reported[2] that over 90% of Australian Businesses have identified potential slavery risks in their supply chains, but nearly 85% of 404 company statements submitted under the Modern Slavery Act failed to show any response to actual or alleged slavery in supply chains. A Human Rights Law Centre analysis found that 77% of companies examined (all sourcing from sectors with known risks of modern slavery) failed to comply with basic legislative reporting requirements. 52% failed to identify obvious modern slavery risks in their operations and supply chains. Only 27% of companies appeared to be taking some form of effective action to address these risks.

We have reviewed modern slavery statements – publicly available on the Australian Customs and Border Control Website[3] and can’t find fault in this assessment. Most of them do not comply with the intent of the legislation or are baseless. Companies are at risk that the ACCC will start here when beginning their enforcement blitz[4] – and the defects are not just in technicalities – many of them make grandiose statements of efforts being undertaken, or there is reliance on voluntary reporting mechanisms to produce low risk designations. That’s not what the legislation is asking companies to consider and to mitigate.

The newly elected ALP has stated in its election policy[5] that it intends to appoint an independent Anti-Slavery Commissioner within the Attorney General’s Department to coordinate work across government and industry to eliminate modern slavery in Australian and global supply chains in conjunction with the introduction of non-compliance penalties and mandatory reporting requirements. The 85% of companies failing to respond to forced labour in their supply chains, and 52% overlooking obvious risks, will be running the risk of breaching the Modern Slavery Act, and facing penalties as a result. Now is the time for companies to conduct risk assessments referencing global data sets and then get deeply involved in at least your high-risk supply chains. This effort needs to be resourced properly. Internal alignment is also critical. If you put too much price pressure on your suppliers, then you increase the likelihood of issues arising.

We have conducted countless supply chain audits for both modern slavery and illegal logging and can frankly state that we have NEVER failed to identify some form of smoke and mirrors by suppliers from countries that score below around 50 in the Global Corruption Perception Index[6]. If you’re looking into supply chains from these countries and haven’t found issues, with the extent of the global crisis in play, then you’re not looking hard enough. It’s time to get out your best detective lens and find and eradicate it.

In the last couple of years a desktop audit has only been possible. But we still find things in even desktop audits, all the time. In some of the supply chains to Australia’s largest companies, we’ve found:

• ‘dark factories’ – simply by matching turnover of a supplier with the number of items coming off a line, and the price. Sometimes it is simply not possible for a single factory to produce the number of items that would represent the turnover. You can also find this by paying close attention to addresses on shipping documentation, legal entities, and comparing these against international certification databases, invoices and export permits. If you look closely you can often find closely related names or addresses, but they are not exactly the same. And be aware of engaging ‘auditors’ in country. There are brown paper bags being traded in these countries, and they will give you the answer that they know you want and be paid twice for the pleasure.
• ‘alternative workforces’ – factories stating that they work regular working hours and the people on the ‘day shift’ working with all the PPE, conditions, uniforms and pay packets that the auditors see, then with a 30 min changeover period, the (predominantly migrant) labour brought in for the night shift working on piece rates and without any of those protections. All it took was to sit outside the factory following a suspicion – that they were simply producing too much to do it during ordinary working hours or from a single factory.
• ‘threats and coercion’ – if assessments are being done and the management are leading you around, just watch the body language of the people you speak to. Suppliers with nothing to hide will let you on the floor to speak to whoever you like. Oh, and bring your own translator that you trust…that’s another way things are hidden. The translator they provide for you is coached and tells you what you want to hear.
• ‘umbrella information’ – they tell you they know their supply chain and have assessed it for modern slavery risks. But when asked for some evidence of this, they point to a voluntary disclosure regime as if it is a certification. And, we have even found a report in relation to a well-known international toy company where the sticker on the product had the image, and that’s what they therefore assessed – never mind the actual source of the product. Another kind of ‘umbrella information’ we have discovered is suppliers advising they have some form of certification and therefore they comply with the Australian Modern Slavery Act. There are gaps in the reliable third party audited certifications between what the law requires and what is assessed. In addition, sometimes suppliers have stated certifications like FSC, PEFC, MSC, ASC, RSPO etc cover off on all of the requirements. Again, the devil is in the detail – what are these schemes assessing and how does it map to the certification? Is the certification reliable and third party or is it a voluntary reporting mechanism?
• ‘blatant falsification of records’ – if something is valuable, it will attempt to be copied or falsified. We have found certification certificates that were obviously falsified when you know enough about the schemes. For example, FSC has a validity period of 5 years, so a ‘certificate’ provided for a period less than that should ring alarm bells. There is an international database that is the way suppliers’ certifications are verified. We have also found licenses with the stamps in exactly the same place, sequential or identical numbering and even SMETA reports that have been edited and identified harm redacted, but then referred to later in the report, so it is clear something is missing.

Ansell and Kimberly-Clark’s current case is evidence of the potential consequences of not looking hard enough. Despite this filing being within the US, it is more than likely that with the impending changes to the Australian legislative framework, action is soon to follow here as well.

It is almost guaranteed that Australian companies will need to undertake serious review of their compliance and act accordingly. This is especially important for businesses operating globally. Without significant change in their supply chain due dilligence, companies like Ansell facing action in the US are now facing a much higher risk of being stung twice by penalties in Australia as well.

[1] Ansell is accused of ‘knowingly profiting’ off the labour of slaves. Shuvo is one of them – ABC News

[2] https://www.hrlc.org.au/news/2022/2/3/new-report-shows-companies-failing-to-comply-with-modern-slavery-laws

[3] https://modernslaveryregister.gov.au

[4] https://hikarisolutions.com.au/can-you-substantiate-your-sustainability-claims/

[5] https://www.alp.org.au/policies/tackling-modern-slavery

[6] https://www.transparency.org/en/cpi/2021