Companies streak ahead as Government stalls on modern slavery

Saturday, 5 October 2024

You could have heard a pin drop as a police detective-turned modern slavery consultant to the country’s largest businesses told a packed room of fund managers about a heartbreaking moment in an operation to rescue children trafficked into a brothel in Cambodia.

Gary Shaw was undercover, posing as a paedophile tourist, when he was presented with two girls aged five and seven.

For $30 the brothel owner said he could have an hour to do whatever he wanted with one of the girls.

He paid a deposit, catching the transaction as evidence on hidden camera. As he made to leave, the older girl said something to him, which he did not understand.

Afterwards, he asked his translator what she'd said.

“The translator said, ‘She was asking you to choose her rather than her little sister’,” Shaw told the fund managers.

“It was the only thing she could do to protect her.”

Shaw says humanity’s “light shines brightest in the darkness”, but he has seen first hand that the darkness is deep in a world where the International Labour Organisation estimates there are 28 million people in forced labour.

Speaking at the Responsible Investment Association of Australasia conference last month in Auckland, Shaw told the money managers: “I share that story, not because you or your clients are investing in brothels, but because you come from an industry that's very logical, very rational.”

“Tragic as the story is, we know that human trafficking of this kind only accounts for 25% of what we call modern slavery. The other 75% is largely made up of forced labour, bonded labour.”

These people were “buried in the supply chains of businesses making products that we buy and use and consume every day,” he said.

“Modern slavery is in our food, modern slavery is in our clothing. It's in our technology.”

“Essentially, if you have chocolate in your diet, a ring on your finger, or a smartphone in your pocket, you have people in slavery making your lifestyle possible,” Shaw said.

And that’s where fund managers come in.

They decide where to invest large slugs of money for their savers, and can demand transparency from companies.

But lawmakers also have a role. And on this point, New Zealand has fallen out of step with some of its trading partners on modern slavery reporting laws.

Modern slavery is a term that covers a wide range of exploitation running from people forced to work on pain of punishment, or even death, to working conditions so awful, so dangerous, so exploitative, they break even the lax laws of the country in which the work is being done.

It also includes exploitative child labour.

Big companies in Australia, the UK and EU, including many that sell their wares in New Zealand such as Kmart, Bunnings, Woolworths, Nestle and Modelez, are required by law to make public reports on their efforts to tackle modern slavery in their supply chains.

But in New Zealand, there are no such laws, despite companies such as supermarket giant Woolworths calling for them.

Labour and the Greens failed to pass modern slavery reporting laws before getting voted out of office, and it isn’t a priority for the current Government.

“The work is on pause,” said Minister for Workplace Relations and Safety Brooke van Velden. “This Government’s priority is to get our economy and our country back on track so that all New Zealanders have a bit more in their pockets.”

That left New Zealand with a “don’t look, don’t tell” position on modern slavery, said Grant Bayldon, national director of Christian poverty alleviation charity World Vision in a letter to Prime Minister Christopher Luxon in April.

His request to discuss modern slavery with Luxon, who when in opposition said he would “march in the streets” for better anti-slavery laws, was declined.

It wasn’t the only letter the prime minister got.

He got one from Alan Jope, former chief executive of multi-national company Unilever, which Luxon used to work for. Jope is now commissioner for the London-based Global Commission on Modern Slavery and Human Trafficking.

“During my time at Unilever we successfully increased transparency and ethical practices across our supply chains, My experience has reinforced my view that robust global due diligence standards are not only morally right, but also good for business,” Jope said in his email to Luxon

It appears the pair met in July on Microsoft Teams, but whatever the content of the chat between Luxon and Jope, New Zealand’s pause remains in place.

Modern slavery specialists, like PWC’s Chris Baldock, think the pause is temporary.

“I expect we will get there at some point,” says Baldock.

That’s partly because New Zealand has pledged to address modern slavery under its EU and UK free trade agreements, and an indefinite pause is not a tenable policy option for an open, trading nation dependent on those markets.

Camilla Belich, Labour’s voice on workplace relations, said the Government needed to remember it had an obligation to follow through on its treaty promises.

“New Zealand should be playing its part in ending exploitation in supply chains,” Belich said.

The failure to pass modern slavery reporting laws is not stemming increased transparency from our largest companies.

That’s because so many are owned by overseas companies, which have to abide by modern slavery reporting laws in Australia, the UK and EU.

The big four banks’ (ANZ, ASB, Westpac and BNZ) parent companies have modern slavery statements that include their subsidiaries. So do our largest two insurers (IAG and Suncorp). So does Wesfarmers, owner of Kmart and Bunnings. So does Fonterra, which does business in Australia. So does Harvey Norman. So does PWC. So does Woolworths.

And so do many of the companies whose brands fill Woolworths’ shelves like Mondelez (Cadburys), Unilever (Dove, Rexona, Ben and Jerry’s, Vaseline, TRESemmé and Lynx), and Nestlé (Nescafe, Milo, Maggi and Kitkat).

ANZ in New Zealand now has Rebecca Kingi as an in-house expert on modern slavery.

The implication of that hire is that businesses that want to get finance from the bank, or make payments through its systems, face scrutiny over their modern slavery efforts, and in some cases, may even face getting debanked.

In its latest (Australian) modern slavery statement from 2023, ANZ said it had invested in systems to “improve our policy, screening and customer engagement on non-financial risks including modern slavery”.

Kingi said even without domestic modern slavery laws in New Zealand, there were forces driving large New Zealand companies to improve, including the demands of trading partners.

Fonterra reported on its modern slavery risk in its business when it announced its annual profit late last month.

Fonterra supplies Nestlé, which requires Fonterra to abide by its “responsible sourcing” requirements, and that includes having systems in place to give the Swiss multi-national confidence there are no nasty surprises buried in its supply chain.

New Zealand is not considered high risk for modern slavery, but it is here in the form of migrant labour exploitation.

Despite having manufacturing sites, and suppliers in countries where modern slavery risks are considered higher (including Indonesia, Malaysia, Sri Lanka, and Saudi Arabia), the only instance of modern slavery Fonterra reported on was in New Zealand where a farmer was found to be exploiting migrant workers.

It’s not a one-way street. New Zealand companies are demanding modern slavery action from suppliers. Woolworths requires it from its suppliers, Nestlé included.

While it’s shocking to see exploitation revealed, it would be shocking to see no instances identified by companies as large as Fonterra, experts say.

Kate Turner from Australian fund manager First Sentier, speaking at the Auckland conference, said: “The first question that we tend to ask companies is, have you identified any incidents of modern slavery or labour exploitation in your operations or your supply chains in the last 12 months?”

“We know with 50 million victims, it's in the supply chain of every company. So, if they haven't found it, why not?”

“We track how many incidents our investing companies have found each year and they're getting higher and higher, which is good that more companies are finding issues.”

The implication is they are finding because they are now being forced to look, and as most are listed companies, the information they publish has to be accurate, or they face the possibility of financial regulators prosecuting them for the modern slavery equivalent of greenwashing.

But that also raises the question about how much modern slavery has yet to be found by companies still learning about their own supply chains.

Companies like Woolworths and Kmart have thousands of suppliers, their modern slavery statements show. And those suppliers have suppliers of their own.

In its last modern slavery statement from 2023, Wesfarmers revealed that Kmart had identified a further 1031 tier 2 and tier 3 processing facilities, including spinning mills, fabric mills, laundries, dyeing and printing facilities that it was not previously aware were even in its supply chain.

Shaw wants company executives to bring their “hearts” to stamping out modern slavery, but in his experience, they are more focused on reducing their corporate risk.

“Most businesses come to something like modern slavery, or the climate crisis, or any of the big sustainability crises, and they bring that very infective, immature lens to something they want to try to get a handle on to mitigate the risk to them,” he says.

“The United Nations doesn’t have a handle on modern slavery, so your business, by painting a rosy picture, is really just polishing the turd, and you are not convincing anyone,” he says.

Catherine Langabeer, head of sustainability at Woolworths in New Zealand, says modern slavery is not an inevitable outcome of the modern, global way of doing business.

“For a number of actors we have worked with that have not initially been compliant with our responsible sourcing programme, they have come on the journey, and have continued to provide goods and services to us, while making good on breaches that may have occurred in their supply chain,” she said.

She says: “We are not immune to this in New Zealand, whether it’s through the products that we are purchasing, that come in through these long supply chains, or whether it is instances of modern slavery appearing within our borders.”

Woolworths takes a risk-based approach, seeking to identify the areas of its supply chain that pose the highest risk, both on specifically-risky commodities, and countries, she says.

High risk commodities include some staples of Kiwi kitchens, including rice and tomatoes.

“We have been doing some work at a group level on tomato paste,” Langabeer says.

Woolworths customers did expect to walk into its stores, and not have to worry that products on the shelves were made using slave labour.

“You want to be able to walk into a retail outlet, and say what I purchase off the shelf won’t have had those negative, harmful impacts,” she says.

“What’s the world in which you can say you have some appetite, some tolerance for that?”

But will we get there?

“That’s a bit like asking me will we get there on 1.5 degrees climate,” Langabeer says.

But, she says: “There has to be the aspiration.”