Organisations with NZ$20 million revenue will be subject to reporting requirements
The Government has announced that it is intending to introduce legislation that establishes a public register to enable transparency over organisations and businesses' supply chains. Organisations with more than NZ $20m in revenue will be required to report on the actions they are taking to address the risk of exploitation in their operations and supply chains.
This alert outlines:
How the Government's announcement compares to the proposals included in the Ministry of Business, Innovation and Employment's (MBIE) 2022 Consultation on modern slavery and worker exploitation;
What organisations subject to modern slavery reporting requirements can expect, with reference to the existing Australian reporting regime; and
Preparatory steps that organisations can be taking now to prepare for the new regime (whether they will have a legal requirement to comply or not).
Government's plan versus MBIE's 2022 proposal
The proposed legislation is less onerous than the approach in MBIE's 2022 Consultation on modern slavery and worker exploitation (see our previous alert on this consultation here). MBIE's initial proposals for all organisations to take action if they become aware of modern slavery or worker exploitation, and for large (NZ $50m+ annual revenue) organisations and those with control over New Zealand employers to undertake due diligence are not within the Government's announced plan for modern slavery legislation. However, the Government indicated that these requirements remain a priority for this Government and will be progressed in future.
The Minister for Workplace Relations and Safety has nevertheless noted that New Zealand's proposal will be among the "world's strongest reporting systems for tackling modern slavery". Although the Government's proposal is similar to the Australian modern slavery regime, in that both regimes are disclosure-based, the proposed New Zealand regime will apply to much smaller organisations than the businesses that are subject to the Australian regime, which has an AU $100m revenue threshold. The Government has indicated that the threshold of NZ $20m strikes the appropriate balance of encouraging those that are most able to influence their extensive supply chains and not overburdening small businesses.
What can NZ organisations expect?
While the Government has not released specific details as to what reporting requirements will be included in the new legislation, it is expected that New Zealand will take note of the Australian approach, which includes requirements to:
- identify the reporting entity;
- describe the structure, operations and supply chains of the reporting entity;
- describe the risks of modern slavery practices in the operations and supply chains, and any entities the reporting entity owns or controls;
- describe actions taken by the reporting entity (or entities it owns) to assess and address those risks;
- describe how the reporting entity assesses the effectiveness of those actions; and
- provide any other information the reporting entity, or entity giving the statement, considers relevant.
It is also unclear at this stage what types of organisations will be subject to the revenue threshold test. In MBIE's 2022 consultation, the proposal was that reporting obligations and proactive legal obligations to report instances of modern slavery in an organisation's supply chain would extend to various types of organisations, not just businesses.
Furthermore, the announcement did not reveal whether reporting requirements would extend to worker exploitation, which was included in the scope of MBIE's 2022 proposals for reform and was characterised in those proposals as non-minor breaches of employment standards in New Zealand (as opposed to modern slavery practices, which would extend to conduct overseas).
Getting ready for the new regime
To the extent organisations have not already incorporated modern slavery prevention mechanisms into their business practices and governance structures, there are several preparatory steps that can be taken now to get ready for the new regime, which has bi-partisan support, including:
Mapping your supply chain to identify those suppliers that are at greater risk of relying on modern slavery practices to bring a product or service to market, e.g. through regular supplier surveys.
Introduce contractual requirements on suppliers to comply with relevant modern slavery laws.
Provide opportunities for trainings of staff and of suppliers on modern slavery risk and mitigation.
Set up a whistle-blower process or hot line to ensure staff, customers, other suppliers and stakeholders can tip-off modern slavery practices.
Establish where in your governance structure modern slavery risk is best monitored and assessed – given the reputational and, soon, legal risk attached to modern slavery practices, it is prudent to ensure this is given significant prominence on the ESG agenda.
Consider publishing a modern slavery statement on a voluntary basis, which demonstrates what steps your organisation has taken or is taking to eradicate modern slavery in your organisation and its supply chain.
Organisations that would fall under the relevant thresholds may still wish to adopt these measures, given the increasing importance New Zealanders are placing on understanding where their products and services come from, with a recent survey commissioned by World Vision (here) suggesting that New Zealanders strongly support the introduction of modern slavery laws.
The Government has indicated that drafting the legislation is expected to take around six months. In the meantime, please get in touch with your usual Russell McVeagh contact or one of the experts below if you would like to discuss the implications of this announcement further.