Former Gloriavale members filed a multi-million-dollar class action lawsuit against the trust behind Gloriavale last week, alleging practices amounting to slavery and child labour. Regardless of the outcome, this case highlights the potential legal and reputational risks associated with allegations of modern slavery practices.

Modern slavery is an ongoing, worldwide concern. With increasing regulation of modern slavery in some of New Zealand’s key export markets, there could be serious implications for New Zealand exporters if they do not ensure their supply chains are free from modern slavery practices. The 2023 Global Slavery Index estimated that in 2021 there were 8,000 people living in modern slavery in New Zealand, making supply chain integrity a real issue for New Zealand businesses.

The current landscape in New Zealand

At present, New Zealand lacks modern slavery supply chain legislation, although slavery and forced labour are illegal under existing laws. The previous Government initiated work on it but had not drafted legislation before the 2023 election. In May 2024, the current Government disbanded the Modern Slavery Leadership Advisory Group, set up to provide advice on modern slavery law. Workplace Relations and Safety Minister Brooke Van Velden has indicated that the current Government’s priorities are improving the Holidays Act and reforming health and safety laws, and it is unlikely to advance modern slavery supply chain legislation until those priorities have been progressed.

Global trends in modern slavery legislation

Despite New Zealand's current stance, many of our trading partners have implemented modern slavery supply chain legislation, including the United Kingdom, Australia, Canada, and the European Union. Some New Zealand businesses are already experiencing the trickle-down effect of these laws. Investors and financiers, subject to modern slavery supply chain legislation in their home country, are increasingly requiring assurances that New Zealand supply chains are free from modern slavery. This trend is particularly evident in sectors such as renewable energy sector. [Read our articles on modern slavery and renewable energy]

Ground-breaking modern slavery legislation

In April 2024, the European Parliament voted in favour of a groundbreaking law requiring large companies to conduct due diligence on their supply chain, from raw materials to the distribution of finished goods. More significantly, the European Parliament also approved a regulation enabling the European Union to prohibit the sale, import, and export of goods made using forced labour. The Regulation adopts the International Labour Organisation definition of forced labour (which includes forced child labour) as “all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily.”

Key aspects of this new regulation include:

• Member state authorities and the European Commission will have the power to investigate suspicious goods, supply chains, and manufacturers.
• Products deemed to have been made using forced labour will be banned from the European market, including online sales, and shipments will be intercepted at the border.
• The prohibition applies to each stage of a product’s supply chain, including its manufacture, harvest, and extraction, and any working or processing related to the products.
• Non-compliant companies may face fines and be required to withdraw their products from the European single market.
• Companies can only re-enter the market once they eliminate forced labour from their supply chains.

Implications for New Zealand Exporters

The European Commission will take a risk-based approach to identifying potential violations, taking into account the scale and severity of the suspected forced labour. While New Zealand is likely to rank lower on a risk-based approach, these laws have the potential to significantly impact New Zealand exporters:

1. Market access: The European Union is New Zealand’s fourth largest trading partner. Major exports include meat, fruit, dairy, fish and seafood. Once the law takes effect, buyers, including large supermarket chains and global manufacturers, will have to conduct due diligence on their supply chains.
2. Increased scrutiny: Regular media coverage of migrant exploitation in the agriculture and horticulture sectors could lead to heightened scrutiny of New Zealand products from these industries.
3. Proof of compliance: New Zealand exporters may have to demonstrate that their production processes are free from forced labour.
4. Risk of market exclusion: Failure to address modern slavery concerns could result in product bans in key markets, particularly the European Union, or buyers looking elsewhere.

Recommended actions for New Zealand exporters

Given these global developments, New Zealand exporters should be proactive in addressing potential modern slavery issues in their supply chains. As a starting point, New Zealand exporters should consider the following steps:

1. Carry out comprehensive supply chain risk assessments, identifying common risk areas.
2. Engage with your suppliers to ensure understanding and compliance with ethical labour practices, minimum employment standards and New Zealand employment law.
3. Implement robust due diligence processes.
4. Prepare to demonstrate supply chain transparency to customers, regulators, and other stakeholders.

Stay informed about legislative developments in key export markets.

Conclusion

Although New Zealand has not yet introduced modern slavery supply chain legislation, the global trend towards stricter regulation makes it prudent for exporters to act pre-emptively. Complacency in this area could put exports at risk. In addition, globally, consumers are increasingly influenced by ethical concerns when making purchasing decisions. New Zealand businesses without transparent supply chains risk becoming uncompetitive. Implementing modern slavery policies and initiating supply chain reviews can help protect market access, maintain competitiveness, and contribute to the global fight against modern slavery and forced labour.

For guidance on how global modern slavery supply chain regulation might affect your business, or assistance in preparing modern slavery policies or conducting supply chain reviews, contact one of our experts.

Special thanks to Catherine Bryant for her assistance in writing this article.