Climate risk - key resources for boards
Boards have a critical role in responding to climate-related issues to ensure the long-term sustainability of their organisations.
The phrase “Ignorance is bliss” is attributed to the English poet Thomas Gray in Ode on a Distant Prospect of Eton College, but the sentiment had already been expressed much earlier by Latin writer Publilous Syrus.
Syrus had been taken to Italy as a slave. “In nil sapiendo vita iucundissima est,” he wrote (In knowing nothing, life is most delightful.)
Recent coverage of the exploitation of workers from Gloriavale in the production of honey is another example where company directors find themselves claiming ignorance and innocence when a part of their supply chain is found wanting in the treatment of workers.
In New Zealand, labour standard breaches and issues related to voluntarism or excessive working hours have been most often cited related to the treatment of migrant workers.
However, the Gloriavale investigations by the Ministry of Business Innovation and Employment’s Labour Inspectorate highlights there are other forms of indentured labour and servitude for those who face no means of escape.
This is not the first time that the Inspectorate has looked into matters at Gloriavale. It is also not clear what the Labour Inspectorate will do in the current case, which involves paying less than the minimum wage.
The directors concerned this time are not members of the Gloriavale community. They sold the honey business to the religious sect but retained directorships. One of the directors has said to the media that he does not know if the workers are paid minimum wage and was quoted in a Stuff article as saying: “I do care, but it’s not my responsibility.”
A number of leading New Zealand companies are currently taking on what could be seen as a false sense of security around the question of modern slavery and its presence in our supply chains.
They are seeking to persuade the business community and the Government that New Zealand needs to join the many other countries that have passed legislation to require organisations, both public and private, to satisfy themselves that their operations and supply chains do not include any form of modern slavery – and to take action if they do find it.
In March this year 85 businesses wrote an open letter to the Government advocating for a Modern Slavery Act for New Zealand. It said: “In a globalised world where we have complex and diverse supply chains, combined with a lack of transparency and weak enforcement protections, modern slavery has been able to thrive.”
The letter continued that the economic and social consequences of COVID-19 had increased the risk of modern slavery for vulnerable workers around the world, and that New Zealand needed to tackle the problem head-on as part of our own COVID recovery.
Legal definitions of modern slavery vary across countries but, broadly, the term describes situations where coercion, threats, or deception are used to exploit workers and undermine or deprive them of their usual freedoms.
It’s at the pointy end of exploitative practice but it doesn’t always have to involve trafficking. It’s often hidden in supply chains.
Modern slavery legislation has its origins in UN conventions and our current Government picked it up in its 2020 campaign manifesto. Those countries that we usually compare ourselves against – the UK and Australia – have had similar law in place for several years.
Overseas legislation has all had the same basic approach: employers should know their supply chains, document them, ask their suppliers how they treat their workers, publish the results – and repeat.
This transparency that New Zealand businesses are advocating for brings sunlight and scrutiny, but the question for the Government is likely to be: Is transparency enough?
Cases such as those in Gloriavale are unlikely to easily fit against the tests contemplated in modern slavery legislation as seen overseas.
The allegations of labour standard breaches are all within current legislation, where the responsibility for legal compliance sits with the employer. So, while the directors of the honey company in question may claim a legal defence, the current issue is whether they can claim a moral one.
I have worked alongside some of New Zealand’s leading businesses who are trying to get their head around these issues and understand how to define the moral compass for their customers, suppliers, employees, and shareholders.
Ignorance is unlikely to be a sustainable strategy if modern slavery legislation is introduced.
Last year the Government also signalled its intention to introduce a duty on third parties with significant control or influence over an employer to take reasonable steps to prevent a breach of employment standards. This could apply much lower tests for directors than modern slavery legislation typically does.
If the two forms of legislation come together, then the approach of keeping heads in the sand will not be a sound business strategy.
So, what stops businesses acting on such clearly reprehensible treatment of people? Commentators in the United Kingdom have been critical of a response that relies on consumer advocacy. Waiting for consumers to draw a societal moral line has not served the planet well in a climate response.
A consumer-led response only serves to temporarily relieve boards from challenging their executive teams about brand, reputation and finance risk. Ignore it at your peril. Even without law change, ethical investment is starting to have an impact – domestically the Aotearoa Circle is leading this charge.
At MartinJenkins our recent work with New Zealand companies on modern slavery and exploitation has highlighted for us the fact that traditional assurance methods are not enough.
We have found it helps to consider four different layers of risk when you’re looking at your supply chains:
This model emphasises that to manage these risks, you need a good understanding of the workers in your supply chain, their specific contractual arrangements, and the specific kinds of exploitation risks they may face.
Modern slavery is difficult to detect even if supply chains are transparent. It’s insidious, and it’s happening right here.
The opportunity for businesses in New Zealand is to do more than simply meet current legal requirements and ensure that your bliss is not ignorant.
Sarah Baddeley is an executive director of MartinJenkins. She often works with New Zealand companies helping them detect and prevent exploitation of migrant workers. Baddeley co-led the Independent Review of Chorus’ Next Generation Connection Contracting Model, which addressed the issue of worker welfare.