How NZ’s Modern Slavery Law stacks up and the need for due diligence

By Rebekah Armstrong, Head of Advocacy and Justice

The Government recently announced it will begin drafting modern slavery legislation. World Vision’s Head of Advocacy and Justice, Rebekah Armstrong, provides an overview of the law, looks at how it compares with similar laws internationally, and explains why the law needs due diligence.

Note – this article is adapted from an article published in the National Business Review on 12 August 2023.
 

Overview

On 28 July, the Government announced that it will begin drafting legislation to address modern slavery in supply chains. First, it will introduce a disclosure law. It has committed to incorporate due diligence and ‘take action’ duties in the future, but it hasn't provided a timeline for this. All going to plan, the disclosure law will likely receive royal assent in 2025, with the first statements due in 2026.

Businesses and other organisations with an annual revenue of over $20 million will be required to submit a disclosure statement detailing their structure, operations, and supply chains to identify modern slavery risks internationally and worker exploitation risks domestically. These statements must be signed off by the highest governing body in an organisation, such as a board of directors, and will be published in a public digital register. This allows for greater transparency as all New Zealanders will be able to go online and read statements from their favourite brands.

There will be financial penalties for not complying with the law or providing false information, and there will be a regulator who will have the ability to publish the name of non-compliant organisations. Organisations will have to report on all tiers of their supply chain, not just direct suppliers.

An organisation must report on:

1. Its structure, operations, and supply chains;
2. The risks in its operations and supply chains, and any entities it owns or controls, relating to:
   - modern slavery in international operations and supply chains; and
   - worker exploitation and modern slavery in domestic operations and supply chains;
3. The actions taken to prevent, mitigate and remediate those risks;
4. How it assesses the effectiveness of such actions;
5. The process of consultation with any entities that it owns or control;
6. and any other matter considered relevant.

This reporting criteria is similar to the Australian, Canadian and UK’s Modern Slavery Acts, except that Canada’s Act specifies forced labour and child labour instead of “modern slavery” and outlines that disclosure must also cover an organisation's policies and due diligence processes.

Let’s look at other ways NZ’s law compares with other commonwealth laws.

Organisations captured by the legislation

NZ’s modern slavery legislation will apply to all organisations with an annual revenue of more than $20 million, encompassing about 4000 NZ organisations in both the public and private sector, including charities and churches.

While the $20 million threshold is notably lower than other countries, this is to ensure that the law is impactful within NZ’s unique business landscape where 97% of businesses are SMEs. A review of Australia's Act suggests a potential reduction to $50 million, which would encompass an additional 2,393 companies.

Given that our recent Risky Business research revealed that small New Zealand businesses were just as likely as medium-large businesses to source product at high risk of being made using modern slavery, World Vision is advocating for extending the law to organisations under $20 million who are involved with high-risk products or sectors.

Penalties

Reviews of modern slavery laws in other countries show us that there needs to be penalties and enforcement mechanisms to motivate companies to comply with the law. A recent review of the Australia's Modern Slavery Act recommended the introduction of financial penalties or sanctions for failure to comply with the law. The UK Government has also committed to reform the UK Modern Slavery Act, including introducing a penalty regime. Canada’s law provides penalties or “punishment” for non-compliance or providing false or misleading information. It also extends punishment to directors or the person responsible for sign-off in the organisation.

Public register
The Government will establish a publicly accessible digital register to host disclosure statements. This will be searchable and allow for scrutiny and monitoring of statements from investors, researchers, NGOs, and the general public. It will facilitate transparency and continuous improvement. This digital register will be an improvement on Australia’s register which has been criticised for accessibility and useability issues, with recommendations for improvements to facilitate greater searchability and accessibility. Canada and the UK also have public registers in place.

Accountability
An organisation’s highest governing body must sign off on the disclosure statement. This will help to raise awareness about modern slavery issues within an organisation and ensure a clear group of individuals is held responsible for reporting requirements.


So that’s the rundown on the proposed law. It’s a great first step, but it’s still missing a crucial element for meaningfully addressing modern slavery in supply chains.

 

Why the law needs due diligence

New Zealand’s disclosure law builds on the lessons of other Commonwealth Modern Slavery Acts by narrowing the threshold of revenue for reporting, providing penalties for non-compliance, and improving the publicly accessible register. However, New Zealand’s proposed modern slavery law does not include due diligence and “take action” requirements, which would require New Zealand businesses to identify, prevent, mitigate and account for modern slavery in supply chains. The proposed law provides an obligation to report on aspects of due diligence, but not actually meaningfully carry out due diligence. This means that an adequate response to comply with the law would be "we have taken no action to prevent, mitigate or remediate any modern slavery risk over the reporting period."

Due diligence is a much more comprehensive way to address modern slavery risks in supply chains. It’s not just about identifying problems, but also about setting up a whole system that identifies those risks, figures out how to tackle them, monitors how it’s working, and has plans ready to go if modern slavery is uncovered, including the best ways to provide remedy to victims. Then it requires publicly reporting on all of the above.

Reviews and critiques of the Australian, UK and Canadian proposed law have culminated in strong recommendations for the laws to be strengthened to include due diligence. Germany, France, Norway, Switzerland, and the European Union have laws (or are soon to introduce law) focused on due diligence.

And it’s clear New Zealanders want this type of law too. Last year’s consultation feedback for modern slavery legislation showed:

• 90% of submitters support the requirement for all entities to undertake due diligence to prevent, mitigate and remedy modern slavery and worker exploitation by New Zealand entities where they are the parent or holding company or have significant contractual control over the New Zealand entity.
• 87% of submitters support the requirement for medium and large entities to report annually on the due diligence they are undertaking to address modern slavery in their supply chains.
• 94% of submitters support the requirement for large entities to meet due diligence obligations to prevent and mitigate modern slavery in their supply chains.

World Vision believes it is important that the Government considers key learnings from modern slavery laws in other countries. In many countries similar to New Zealand due diligence legislation is becoming the norm. We’ve been lagging behind, and it’s important that we keep up this time – for our country’s reputation, for New Zealander’s wanting to do the right thing, and for the people round the world making the goods we buy.