Construction industry a key sector of concern for modern slavery

By Scott Crabb, Lauree Coci

29 Mar 2018

A failure to engage on modern slavery may result in severe disruption to your business and damage to your reputation and brand, not to mention market and operational risks.

The construction industry is one of the sectors where modern day slavery can be an issue. Low-skilled, manual, low-waged work been identified as an area where workers are more likely to be subjected to forced labour. Temporary agency work is common. Workers filling such jobs are often poorly educated, lack decent work options and come from high-risk countries. The construction industry is also characterised by long and complex supply chains, stretching across many countries.

Building materials and products are often sourced from high-risk countries. For example, a lot of cement is sourced from Indonesia; steel is sourced from China; bricks can be sourced from Afghanistan, China, Nepal or India; timber is sourced from Cambodia, Brazil and North Korea; and workwear can also be sourced from countries with a high risk of modern slavery.

Modern slavery in supply chains - reporting requirements coming

The Federal Government has announced an intention to introduce a "Modern Slavery in Supply Chains Reporting Requirement" in Australia to combat modern slavery. Modelled on the UK Modern Slavery Act 2015, the proposed reporting requirements will be used as a means to combat the human trafficking, forced labour and slavery-like practices which exist in some business supply chains. Draft legislation will be put before Parliament by 30 June this year with a view to enacting final legislation by the end of the year. The Act has already received bipartisan support.

The Government has proposed that large Australian entities (including government bodies and agencies) headquartered in Australia, or entities that have any part of their operations in Australia, with an annual turnover of more than AUD$50 million will be subject to the reporting requirements. Entities covered by the reporting requirements will need to publish an annual Modern Slavery Statement, within five months after the end of the Australian financial year, reporting on the steps they have taken to combat modern slavery within their supply chains and operations. Those entities in the construction industry will need to pay particular attention as supply chains become increasingly global. This will be particularly important for entities engaging in large scale infrastructure projects, or those with complex supply chain networks.

The Modern Slavery Statement must at a minimum include information about the:

  • the organisation's structure, its business and its supply chains;
  • its policies in relation to modern slavery;
  • its due diligence and remediation processes for modern slavery in its business and supply chains;
  • the parts of its business and supply chains where there is a risk of modern slavery taking place, and the steps that it has taken to assess and manage that risk;
  • its effectiveness in ensuring that modern slavery is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate;
  • the training about modern slavery available to its management and staff; and
  • finally, any other actions taken.

Further, the Modern Slavery Statements will need to be:

  • approved at the equivalent of board level;
  • signed by a director of the company;
  • published on the company's website; and
  • filed in a public accessible central repository.

Timeframe for the first Modern Slavery Statement

Assuming that the Modern Slavery Act is enacted by the end of 2018, organisations will need to publish their first Modern Slavery Statement within five months of 30 June 2020, to allow for a full financial year following the enactment of the legislation.

What the Modern Slavery Act means for your business

To prepare for these reforms, you need to take steps now by:

  • updating your existing codes of conduct, human rights policies and supplier contracts to address modern slavery issues and tasking a member of the senior leadership team with the responsibility for implementing and administering the policies and procedures, monitoring compliance and reporting to the board;
  • mapping your supply chain and identifying which suppliers are most vulnerable to modern slavery, including high risk sectors and high risk goods, then investigate and engage with those suppliers to ensure that they will accept and adhere to your company's new anti-slavery policies and procedures;
  • undertaking an internal audit of your business and external audits of those high-risk suppliers to monitor compliance with your company's anti-slavery policies and procedures;
  • immediately providing modern slavery training to employees, contractors and suppliers;
  • collaborating with other companies within your industry to establish best practice – both in terms of the modern slavery work being conducted as well as the resulting transparency; and
  • implementing a whistleblowing policy to encourage company staff to come forward if they find any evidence of slavery or risks of slavery.

Consequences for a failure to comply

Ignorance will not be an excuse for non-compliance, as all failings will become public knowledge. A failure to engage on modern slavery may result in severe disruption to your business and damage to your reputation and brand, not to mention market and operational risks. With media interest and social media campaigns, it is often enough that an organisation is associated with allegations of modern slavery for damage to occur. We have seen that outcome already. Take, for instance the reputational damage suffered by the French construction company, Vini, in relation to the poor conditions for workers employed to construct the Qatari World Cup sites - on top of the proposed penalties and compliance measures for non-compliance with the Modern Slavery Act.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.