Nikko Asset Management chief executive George Carter. Photo / Supplied
A proposed law that would ensure all organisations crack down on modern slavery in their global supply chains as well as worker exploitation in New Zealand goes too far and should be aligned with Australia's law, legal and business advocates say.
But charity World Vision wants it to go even further by adding human rights due diligence to what entities need to do which would align New Zealand with the European Union's legal framework.
Submissions close on Tuesday for the Government's proposed legislation. The proposals include requiring all organisations to take action if they become aware of modern slavery or worker exploitation.
Medium and large organisations - those with annual revenue of over $20 million and over $50m would be required to disclose the steps they are taking to stop it and large (revenue over $50m) organisations would be required to undertake due diligence throughout their supply chains.
New Zealand is late to the party on bringing in law on governing this; Australia, the UK and the EU already have laws in place.
But Petra Carey, senior associate at Russell McVeagh, said New Zealand's proposals go much further than other modern slavery regimes, particularly Australia's law.
"Our view is that there would be benefits to align our regime as much as possible with Australia's."
Australia's law only kicks in for those with revenues above A$100m and it only goes as far as requiring organisations to disclose the steps they are taking.
There is no requirement for due diligence to be undertaken.
"Whatever the requirements are they should align to Australia's because often you will have entities that need to report in Australia and New Zealand and it would be counter-productive and inefficient to have different reporting requirements."
Carey said aligning the regimes would also make it easier for consumers and other entities to compare the efforts of different organisations across the countries.
"That to me would achieve the objective in the MBIE consultation document which is to encourage consumers to have access to information about where their goods and services are coming from."
Carey said it was also concerned that applying the law across the board could have the opposite of the intended effect.
"If you have this broad obligation on all entities to take action if they become aware of modern slavery and worker exploitation in their supply chains and operations - does this have the opposite desired affect in that it encourages entities to not proactively identify those issues?
"I think what we will be saying is there needs to be thought given to a different framework to encourage and facilitate good practice as opposed to it being seen as a compliance burden. We do support regulatory response to this - it just has to be done in a way that is effective and balances the outcomes versus costs."
Business New Zealand advocacy director Catherine Beard said it was concerned about the legislation capturing small and medium-sized businesses.
"NZ SMEs are micro compared to a lot of other countries. I think there would be a concern that if it is cascaded too far down to the small companies - is that putting a transaction cost on them for things that are out of their control anyway?
"It seems a bit self-defeating to put obligations on companies that are really too small to be able to influence or get the knowledge for what is going on outside of our borders."
New Zealand has nearly half a million businesses with revenues under $20m, while there are around 2000 medium-sized and 1400 large, according to Beard.
She said those at the bigger end of town often had a report on a range of issues and had the systems and processes set up to do so but small businesses did not.
Beard said even big businesses had problems trying to control their overseas supply chains.
"Some of the challenges I have heard about is, even with really big multinational brands, is they will have a supplier in Asia, they will go and inspect it, it ticks all their boxes for corporate social responsibility and then fly back to [their] home country.
"And what they don't see is that business sub-contracts out to maybe 100 other firms which may not be that visible. I think big firms can probably get to the bottom of that but even for them it is not always easy."
Beard said it would prefer the legislation took an education and training approach for SMEs who were already facing pressure from consumers.
"Consumers expect businesses to act with integrity and work with other good businesses who don't do all these nefarious things. They are going to be getting pressure from their customers and big suppliers because suppliers will increasingly say to people in their supply chain we have got to tick this box off so you do as well. There will be commercial pressure and customer pressure as well but to make them legislatively responsible is maybe a step too far when other countries have decided not to do that."
But Rebekah Armstrong – World Vision's head of Advocacy and Justice, believes the legislation should apply to all entities in NZ.
"This is because we do have a modern slavery problem in NZ because of our small size of SMEs and our business make-up. Some of these Acts usually just apply to big business but [we] think it should apply across the board.
"But we do think it should apply proportionately - obviously the level of obligations for companies will need to depend on the kind of sector of activity they are in, the risk profile, that kind of thing. So if you are a small company but are working in New Zealand's horticulture industry which has been an industry which has had modern slavery cases that might give you elevated responsibilities."
Armstrong said it also wanted the law to include human rights due diligence.
"That goes beyond reporting what is happening in your supply chain - it means you have got to identify risks and cases of modern slavery and take action to address what you find. This particular human rights due diligence law is currently under proposal for the EU."
She said New Zealand should be looking at what was happening in the EU.
"It is going to become a prerequisite to trade in the future for companies to have to carry out this so we think they should be front-footing it right now."
Armstrong also wants to see penalties for non-compliance.
"The UK and Australian laws are quite soft law. We realise for any law to have impact it needs to have penalties - that is what we have found from looking at these other laws.
We want there to be some accountability mechanisms."
That could include fines or other restrictions such as stopping a company from taking part in public procurement processes or a name and shame system. And she wants to see some form of redress for victims.
"I think there should be remedy for victims of modern slavery to be able to complain or make a complaint against a company. At the moment in New Zealand there is not really any processes to require companies to allow victims of modern slavery to do that.
"I have recently sat on ANZ Australia panel - they have created a grievance mechanism because they were involved in the forceable displacement of people through a transaction that they carried out in Cambodia. So victims of that can bring legal action before court.
"I think it is really important that victims are prioritised in NZ law as well."
George Carter, chief executive of asset manager and KiwiSaver provider Nikko, also worried about combining the modern slavery law with worker exploitation.
"We are really keen to see our efforts raised to stamp out and deal with trafficking and slavery.
"My concern is that the proposed legislation has shoe-horned two separate issues together."
He said modern slavery was clear but worker exploitation was being defined as anything that was a non-minor breach of employment law in New Zealand.
"These are not in the same ballpark of issues that we are dealing with globally or domestically. Bolting the two together into one piece of legislation where your requirements of dealing with both are exactly the same is I think an egregious abuse of the genuine and legitimate concern we have around modern slavery."
He said making businesses ensure all their supply chains in New Zealand were complying with New Zealand employment legislation should be dealt with separately.
Thousands of submissions are expected on the proposed legislation which will then be examined by MBIE and the law will then be formulated.
Cabinet is expected to seek the final policy decisions by the end of this year with the bill enacted within this parliamentary term. That could see the law come into force from 2024.
NZ GDP falls 1% in September quarter; analysts expected 0.4% decline.