Food for thought: The Modern Slavery Act’s impact in fresh food retail, wholesale and agriculture

The Australian food retail, wholesale and agriculture industries are no strangers to reports of poor treatment of migrant workers on Australian farms, often involving labor hire companies¹.

Due to the nature of the work involved in the production, processing, packaging and transport of food and produce, these supply chains have a high risk of modern slavery².

While the major supermarkets already have anti-slavery programs in place, other businesses operating in the food and agriculture industries, including producers, distributors, packers, exporters and caterers, may not be fully prepared for the introduction of a new corporate reporting requirement.

• Engagement of labor hire contractors who recruit backpackers and seasonal workers for fruit and vegetable picking on farms, without express obligations concerning ethical recruitment and retention of laborers³.
• Poor conditions, passport retention and bonded labor in food processing⁴.
• Procurement of high risk foods across maritime borders, particularly from emerging economies, such as crustacea, corn, palm oil, poultry, rice, sesame, wheat, sugarcane, cattle, beans, coffee and cocoa beans, seafood, nuts and tea, including forced labor risks involved in shipping, and transport of these products⁵.

On 16 August 2017, the Australian Minister for Justice Michael Keenan announced that the Federal Government proposes to introduce legislation to require large businesses to report annually on their actions to address modern slavery. This announcement reinforces Australia’s commitment to having one of the strongest responses to modern slavery in the world. We have been actively participating in the Attorney-General’s Department national consultation process to refine the Government’s proposed Modern Slavery in Supply Chains Reporting model.

It is currently proposed that businesses with revenue of AU$100m+ will be required to report annually on their efforts to identify and stop modern slavery in their operations and supply chains. There is no doubt that many businesses in the food retail, wholesale and agriculture industries will face intense public scrutiny, especially given the high risk of modern slavery in the sector.

In this update, we look at modern slavery risks in the food and agriculture sectors, the likely implications of a new reporting requirement for Australian businesses that operate in that sector and what they can do to prepare.

At its broadest, the term 'modern slavery' incorporates any situations of exploitation where a person cannot refuse or leave work because of threats, violence, coercion, abuse of power or deception. It includes slavery, servitude, forced labor, debt bondage, and deceptive recruiting for labor or services.

The Australian Government proposes that for the purpose of the reporting requirement, modern slavery will be defined to incorporate conduct that would constitute a relevant offence under existing human trafficking, slavery and slavery-like offence provisions set out in divisions 270 and 271 of the Commonwealth Criminal Code. However, the exact scope of “Modern Slavery” is the subject of consultation and it remains unclear whether the definition of Modern Slavery will go beyond the Criminal Code offences.

• enslavement on Thai fishing vessels to assist in producing seafood sold across the world, including to Australia⁶
• immigrant laborers on farms being routinely abused⁷
• employers withholding wages or forcing staff to work at rates lower than those previously agreed
• labor agents confiscating the passports of migrant workers, often with little grasp of English, forcing them to work and live in squalid conditions
• recruitment fees payable by employees from future wages⁸.

Given the bipartisan support for a Modern Slavery Act, Australia is likely to have a reporting requirement relating to modern slavery that could be in place as early as 2018. The likelihood is that the new Australian regime will be similar in many respects to the UK regime.

The current proposal would require businesses to address the following matters in their statements:

• the entity’s structure, its operations and its supply chains
• the modern slavery risks present in the entity’s operations and supply chains
• the entity’s policies and processes to address modern slavery in its operations and supply chains and their effectiveness (such as codes of conduct, supplier contract terms and training for staff)
• the entity’s due diligence processes relating to modern slavery in its operations and supply chains and their effectiveness.

The Joint Standing Committee on Foreign Affairs, Defense and Trade, which is responsible for the ongoing Inquiry into establishing a Modern Slavery Act in Australia, has given its in principle support for the Australian Government to publish a list of businesses obliged to report and a list of businesses that fail to report. A publicly accessible central repository for published statements is also proposed.

Australian businesses ought to expect that there will be significant public criticism of those businesses that do not comply with their reporting obligations and that statements, once published, will be subject to intense public scrutiny, as has been the case in the UK.

The existence of a central repository of statements will facilitate the monitoring and review of statements. It is also likely to assist businesses, consumers and other stakeholders to understand the steps being taken by businesses to eradicate modern slavery in their operations and supply chains and take more effective steps to address the underlying issues.

As highlighted above, the food and agriculture industries are no strangers to the risk of modern slavery. While the Federal Government and regulators have taken action in investigating allegations of abuse of vulnerable migrant workers on farms, industry participants have taken some steps towards addressing these risks, with varying results, including:

• adoption of the UN Guiding Principles on Business and Human Rights Reporting Framework and membership to the UN Global Compact
• establishing a national labor hire certification scheme with training programs for employers in horticulture and pack houses, for example the Fair Farms Initiative
• sourcing products that come with ethical certification such as UTZ certification, and Fair Trade
• participation and membership of data-sharing organizations to audit suppliers such as the Suppliers Ethical Data Exchange.

In the meantime, civil society groups and other organizations have created their own public databases to rate businesses’ compliance with human rights and sustainability standards, including:

• Oxfam’s Behind the Brands Campaign
• Know the Chain’s benchmark on food and beverage companies
• Corporate Human Rights Benchmark which assesses 98 of the largest publicly traded companies in the world on 100 human rights indicators
• Apps like “Shop Ethical!” which provide information on the environmental and social record of companies behind common Australian supermarket brands
• Dow Jones Sustainability Index – a globally recognized independent benchmark that measures the performance of the world’s largest 2500 companies.

Unfavorable listings in such databases and indices can have negative reputational effects.

In light of the high risk of modern slavery occurring in food and agriculture businesses and supply chains, many companies are already in the process of reviewing their operations and supply chains and implementing measures to identify and address incidents of modern slavery.

Those businesses that haven’t already done so should consider taking the following steps:

• mapping the organization’s structure, businesses and supply chains
• formulating policies in relation to modern slavery – this will involve collating current policies, identifying gaps, adapting existing policies and formulating new policies, as needed
• carrying out a risk assessment – identifying those parts of the business operations and supply chains where there is a risk of modern slavery taking place
• assessing and managing identified risks – this may include carrying out further due diligence in the entity’s operations and supply chains and reviewing and adapting contract terms and codes of conduct with suppliers
• considering and establishing processes and KPIs to monitor the effectiveness of the steps taken to ensure that modern slavery is not taking place in the business or supply chains
• carrying out remedial steps where modern slavery is identified
• developing training for staff on modern slavery risks and impacts.

Businesses operating in the food and agriculture industries need to be particularly alive to the risk of slavery occurring deep in their supply chains, which are often long and complex.

Well publicized incidents mean that businesses operating in these sectors are likely to be treated as being “on notice” of these risks and the government, media and public will closely monitor the steps they are taking to operate sustainably and ethically.

By undertaking these steps, businesses will be well placed to respond effectively to new regulations and show that they are committed to eradicating modern slavery, in Australia and overseas, and taking concrete steps to achieve that outcome.

Norton Rose Fulbright has experience in Australia and globally assisting clients with modern slavery risk management and reporting, as well as broader business and human rights advice. We made a submission to the Inquiry (No. 72) and participated in the public hearing held in Sydney on 23 June 2017.

We also have been actively participating in the Attorney-General’s Department national consultation process to refine the Government’s proposed Modern Slavery in Supply Chains Reporting model.