Enacted in 2019, Australia’s Modern Slavery Legislation states that every business with $100million turnover needs to have a Modern Slavery Statement and assess all their suppliers. Although this legislation is intended for the top end of town, in this article we take a look beyond the legislation to highlight what it means for SMEs.
Whilst SMEs aren’t required, by law, to deliver a Modern Slavery Statement, companies are being asked to be transparent about the current risk of Modern Slavery, within their supply chains and business operations. They are also being expected to commit to taking appropriate steps to address any risk identified. The challenge is, that whilst SMEs might be certain that their first-tier supply chains and business operations are free from Modern Slavery, it can be difficult to identify this risk further down the chain.
A question I like to ask SMEs is “What do you buy that could be a Modern Slavery Risk?”. If there is any doubt over any product or service, then it’s important for that SME to do a review of their operations and supply chains to identify potential issues and create a plan of action to address them.
It’s also important for SMEs to understand what their customers may require in their supplier “code of conduct” so that they can provide them with up-to-date and correct information. It’s even a good idea for SMEs to have a Modern Slavery Statement (“lite” version) to show their customers that they align to their requirements.
Over the past year, Active Directions have worked with a number of large corporates to develop Modern Slavery Risk Assessment Models, deliver ethical supplier audits and surveys, as well as develop supporting Modern Slavery Statements. We’ve found that SMEs who are proactive in showing that they already have the checks in place are highly attractive to big corporates and are also using this compliance as a differentiator in the market.
What’s more, SMEs who are already identifying effective and cost-effective ways of incorporating supply chain sustainability, incl. end-to-end supply chain traceability, are future-proofing their operational and financial business model. We are seeing a big shift towards a future where large corporates will only choose to do business with SMEs that can prove they are compliant, ethical and sustainable.
We are also seeing the positive benefits of this trickle-down model as businesses look after their suppliers and suppliers look after their people, leading to the creation of good working environments, higher productivity and bolstering organisational reputation.
Below is a snapshot of how Active Directions rolls out a Modern Slavery Risk Assessment. A key differentiator is that we use a pragmatic approach for organisations to have effective processes in place for when there is an instance of Modern Slavery identified. This includes establishing networks with relevant NGOs and other providers who are able to manage those cases effectively and independently.
Over the past few years, we have seen an increase in focus on Environmental, Social and Governance (ESG) issues which has only been accelerated due to the global pandemic. Driven by B2B and a strong consumer focus on sustainable and ethical products and practices, SMEs will need to pay attention to these concerns and create a strong ESG position. Not doing so will not only hamper their ability to grow, attract talent and thrive, but will have a direct impact on their financial profitability.
About the Author
As a Principal Consultant with Active Directions, Micha Veen takes the lead on delivering robust Modern Slavery Risk Assessments and assisting organisations to develop sustainable management processes and useful templates to mitigate risk and build transparency in their supply chain.
Micha is also the Founder of Unique Excellence helping organisations develop feasible operational and supply chain innovations.