Getting ready for proposed Modern Slavery legislation

Changes signal NZ’s growing emphasis on environmental, social, and corporate governance (ESG) considerations for businesses 

Two upcoming legislative changes – the Privacy Amendment Bill 2023 and the proposed modern slavery legislation – highlight an increased focus on corporate responsibility and environmental, social and corporate governance (ESG) issues in New Zealand.

In the first of a two-part series, we look at the proposed legislation aiming to eliminate modern slavery from New Zealand commerce and examine the possible implications of such changes on New Zealand businesses. We also highlight key steps for New Zealand businesses should take to ensure they are compliant when the changes take effect.

Overview of proposed Modern Slavery legislation   

‘Modern slavery’ refers to severe forms of exploitation of individuals for personal or commercial gain. It encompasses a variety of practices which include forced and child labour, human trafficking and the provision of poor or inhumane working conditions. 

An increasing number of businesses benefit from modern slavery practices along their supply chains and the competitive advantages associated with the cheaper labour and materials they enjoy as a result. 

The proposed changes can be summarised as follows:

• Disclosure Focus: The focus of the legislation is on creating new disclosure requirements for businesses. The government hopes to bring greater transparency to organisations’ supply chains and business practices.

• Revenue Threshold: The proposed changes affect entities reporting over $20 million in annual revenue, requiring mandatory annual reports identifying, and listing steps taken to address, modern slavery risks in their structure, operations, and supply chains.

• Drafting Timeline: Announced in July 2023, the National Party has reiterated its support, with the legislation on track to receive royal assent in 2025. The first disclosure statements are due in 2026. 

Key implications for businesses

While the government has not yet announced the specific details of the legislative framework, it is expected that the Australian approach will be followed. Expected changes include: 

• Public Register: A publicly accessible digital register for transparency will be established for publication of disclosure statements, following developments in other jurisdictions such as Australia, as well as the EU and UK. Businesses should ensure they have the capability to produce such disclosure statements and consult with their advisors to assist with this process.

• Board-Level Accountability: Disclosure statements must be signed off by a company’s highest governing body and lodged on a public register. Efficient information channels and communication will therefore be key.

• Financial Penalties and Regulatory Body: Non-compliance will attract financial penalties, and a regulator will be established to enforce the law. Businesses should be ready to consult with their legal advisors to see what their obligations are.

• Contractual Chain Reaction: Even if your business does not directly meet the NZ$20 million revenue threshold for modern slavery reporting requirements, it is possible that these obligations could be indirectly passed down to you through contractual requirements set by larger businesses in the supply chain that do meet the threshold. This means:  

• Larger companies higher up in the supply chain may revise their contracts to include clauses that require compliance with modern slavery laws. These clauses often cascade down the supply chain, as each tier of suppliers and subcontractors is required to adhere to these standards.

• Failing to comply with these contractual obligations could expose your business to legal risks and reputational damage, especially if your clients are large corporations with significant public exposure.

• Complying with these obligations might require changes in your operational practices, including supplier selection, contract negotiations, and ongoing compliance checks.

Recommendations for businesses – large and small 

It’s important for businesses to proactively manage this risk by understanding their position in the supply chain, staying informed about their contractual obligations, and implementing robust compliance processes. 

Businesses should begin assessing their supply chains for modern slavery risks and implementing supplier codes of conduct.

For advice and guidance to better understand your potential obligations under the proposed Modern Slavery legislation, please contact Tom Pilley on 09 306 0609 or [email protected], or Anthony Kuran on 09 306 0611 or [email protected].