Louise McGrath: Welcome to DBrief, the podcast where we explain policy to industry and industry to policy makers. I'm Louise McGrath, head of industry development and policy at the Australian Industry Group. And today I'm joined by human rights lawyer Vanessa Zimmerman, CEO of Pillar Two. Welcome Vanessa.
Vanessa Zimmerman: Hi, Louise. Thanks for having me.
Louise McGrath: Modern slavery regulation is emerging as a significant issue for Australian businesses, either as a directly regulated body with a turnover of one hundred million dollars or more, or as a supplier to a regulated entity. And sometimes they're in both camps. Once your business extends beyond the border as an importer or exporter, it gets even more complicated as every country is moving on this issue at a different pace. So we thought it was time that we do a deep dive into the issue. Vanessa, let's start at the beginning. You worked with Harvard's John Ruggie, helping to draft the UN Guiding Principles. What's the context for those principles and what do they mean for business?
Vanessa Zimmerman: Thanks, Louise. I was incredibly lucky to work on the UN Guiding Principles on Business and Human Rights. They are surprisingly now fifteen years old, so I'm feeling very old. And they came at a really important moment in relation to the world of business and how the world of business actually relates to human beings and to human rights. When the UN Guiding Principles were drafted and then unanimously endorsed by the UN Human Rights Council, there were really evolving complexities in global supply chains.
Transnational corporations were being accused of allegations of human rights harms, and there really wasn't a clear framework to support businesses, governments and other stakeholders to really understand what the responsibilities of businesses were relating to human rights. So Professor John Ruggie, who was a Harvard professor of global governance, was appointed by the UN Secretary General to really take this area forward and to try and come up with a practical and pragmatic but also principled approach to these issues. And that's where the UN Guiding Principles came in.
What they are at their core are a set of principles that really set that framework that I mentioned before, that really explains to governments that they have a duty to protect human rights in relation to business activities, that businesses themselves have a responsibility to respect human rights, and that victims of business-related human rights harm need to have access to remedy where things go wrong. And we do know that things go wrong. Really, after the UN Guiding Principles came into being, the question moved from "do businesses have a responsibility in relation to human rights" to "they do have a responsibility, but how should they actually meet that responsibility and what do they need to do about it?"
At its core, the UN GPs, as we call them, are asking companies to make sure that they know and show that they are respecting human rights throughout their own business activities, as well as their business relationships. They need to understand what their adverse human rights impacts might be and what steps they're taking to effectively manage them, and again, to know what they might need to do if something goes wrong. And what we're seeing today is that the UN GPs are being used as the foundation for many of the laws that we're seeing emerging and that you referenced before. So for the Australian Modern Slavery Act, for the EU's Corporate Sustainability Due Diligence Directive, which we'll talk more about later, for forced labor bans in the EU, the US and other places — those core concepts of businesses actually understanding what their adverse human rights impacts might be and what they're doing about them are coming into those laws as well.
Louise McGrath: And so when you first start talking with a client, how do you frame modern slavery in that broader human rights discussion?
Vanessa Zimmerman: When we speak to clients, it's really important, first of all, just to talk through the fact that human rights are about people. So primarily, we're looking at what are the ways that businesses might negatively impact on people. And in certain situations, those impacts will reach the threshold of an internationally recognized human rights harm.
So when we're speaking to businesses, we want them to understand that when it comes to modern slavery in particular, they usually need to think about the impacts that there might be on their own workers, on workers in supply chains, and in some cases community members and others. It's very important that businesses understand that modern slavery and freedom from slavery is one internationally recognized human right, but it comes within a whole landscape of other internationally recognized human rights that are also really important. And what we usually see is that it's very rare that modern slavery occurs in isolation.
So often there will be other human rights harms that are happening at the same time. For example, if a worker that is in a situation of modern slavery is in really bad living conditions, doesn't have enough food or water, doesn't have access to health services, there will be other human rights that are also impacted that need to be managed. We also see that modern slavery itself often happens after many other human rights harms that might occur.
So it doesn't usually just happen straight away. Sometimes there can be other human rights harms, particularly labor rights abuses, that occur first. So it's very important for companies to understand that when they're looking at modern slavery, it is in relation to that broader landscape, and it's important to understand the connections between different rights issues.
In Australia, we do know that there are many companies that start with modern slavery risk management as the first step in their human rights program because of our Modern Slavery Act, and that Modern Slavery Act has done us a very good job, I think, of underscoring that modern slavery is a very severe human rights issue that needs to be looked at.
What we now need to see, though, are these companies looking at the other human rights risks that they might face to make sure that they're capable of managing those risks — both in terms of making sure that they can actually manage risks to human beings, but also to enable them to manage the business risks that come out of having other human rights risks that they might be involved in.
Louise McGrath: You mentioned things like not having access to food and all sorts of other labour rights issues. So what's the picture most people have in their head when they hear modern slavery? And why is it wrong? I mean, is it people in chains or is it much more subtle?
Vanessa Zimmerman: Sometimes there are people in chains who are physically restrained in certain different ways, who might be locked up overnight, who might be under constant threat of physical violence. So that does happen, but it's not really what most forms of modern slavery take.
And when we think about modern slavery, we're talking about a situation where a person does not have the freedom to refuse a job or to leave a job because of some kind of threat or coercion or abuse of power. And this can happen in situations where people might seem to be coming and going fairly freely from a job, but because they're under the threat of, let's say, being denounced to immigration authorities, or perhaps their passports being withheld, or they might be paying off a debt and have been threatened in relation to what might happen if they don't pay it off — they're still in that situation where they can't freely leave that job.
And I think that is what, for some people, is quite hard to imagine. I think also there can be misconceptions around where modern slavery actually happens, and some people might think it only happens really far away. But we know that it can happen in Australia in all sorts of sectors, and that increasingly we're finding more and more instances of that situation in Australia.
Louise McGrath: Four Corners had quite a detailed report a few weeks ago on the chocolate supply chain, but it's not the only supply chain with challenges. What does it tend to look like in an average Australian supply chain in 2026?
Vanessa Zimmerman: So in an average Australian supply chain, I think a company does need to understand that there is probably some form of labor exploitation and potentially modern slavery occurring somewhere in the supply chain. Even smaller companies, midsize manufacturers and other companies are likely to procure raw materials in some form, have services that are being provided to them, are purchasing other goods as well, and most of those products and services will have some risk of modern slavery occurring there.
For some companies, they do need to really look at what is happening in terms of what they're sourcing overseas. For other companies, it will be, as I said before, what's actually happening right here at home — in terms of where products are coming from and even some of the raw materials that are being used, as well as services. It really is important for companies to think about who they're getting services from and what those services entail and what complexities might be occurring behind the scenes.
Because what we can see sometimes, particularly in the provision of services, is that there can be really complex structures, including labour hire arrangements and subcontracting, the use of migrant workers — all sorts of red flags that might be there. And a report actually just came out last week from the office of the Australian Anti-Slavery Commissioner, Walk Free and the Migrant Justice Institute, basically highlighting the red flags that might be present in Australia in all sorts of services and other types of arrangements. So it is quite complex.
The CEO, I think, of Tesco, was quite famous a couple of years ago for saying that there is no company that doesn't have modern slavery somewhere in their supply chain, and I think now the question has really moved for a lot of CEOs and board members and others to: we know we have risks, but do we actually know where those risks are and what we're doing about them?
Louise McGrath: So it's almost like cybersecurity now — it's not if it's going to happen, it's when and where and how to find it.
(00:10:33) Vanessa Zimmerman: Yes.
Louise McGrath: And as I mentioned at the outset, the current Australian Modern Slavery Act really only applies to those with a turnover of one hundred million plus. But do you think this is just a problem for large companies, or should midsize manufacturers also be worried?
Vanessa Zimmerman: Really an issue for all companies. We do see quite a few misconceptions that this only impacts large companies, and also that only large companies would have the tools and resources available to actually look into these issues and do something about it.
But the reality is that while we know that large companies might have greater exposure because of the scale and reach of their operations and supply chains, mid-sized manufacturers or smaller and medium sized entities also have risks, and they're also expected to do something about them. If you think about a mid-sized manufacturer, they probably are procuring raw materials that might have quite complex supply chains upstream, including being procured from higher risk jurisdictions overseas.
They might also be using, within Australia, labour hire providers or some other form of outsourcing arrangement — contractors on sites where, again, there might be migrant workers or other complex arrangements going on. And then, as I said before, some of those service providers, such as relating to security or catering or cleaning, would also likely mean that there are risks there. The UN Guiding Principles that we were talking about before — which, as I mentioned, are the foundation of the Australian Modern Slavery Act and several other pieces of regulation around the world — recognise that every company, regardless of its size or operating context or structure, does have a responsibility to respect human rights.
But they also acknowledge that the way in which that responsibility is met, or the scale and complexity of how businesses may meet that responsibility, will vary according to the size and structure of that company.
So it means that a mid-sized manufacturer is not expected to have every single resource or procedure in place that a larger company might have, but it is expected to take a risk-based approach and make sure that it's taking a proportionate approach to managing its modern slavery risks.
I think what we're also seeing now is that even if some of the more smaller and medium sized enterprises are not covered by the Modern Slavery Act — meaning at the moment they would not have to report on their modern slavery risks and what they're doing about them — they will be asked by their customers to provide that information. They'll be part of larger companies' value chains and will be asked about that. And we do know that companies are getting a lot more sophisticated questions from their customers about these issues, and it does not suffice anymore to simply say we're aware there might be risks when we're looking into them.
They will be asked for a lot more information, including through supplier assessment questionnaires and others, which can be very difficult if a mid-size manufacturer is suddenly facing fifty questionnaires a week. But it is something that is still evolving and coming, and it is a pressure for these types of companies.
Louise McGrath: Yeah, I agree, it's the pressure of complying with their customer that's the biggest challenge. And we've been doing a lot of work with ACCC and the Small Business Ombudsman and Chris Evans, the Anti-Slavery Commissioner, because everyone recognises that this is a potential issue and is trying to find ways where everyone in the supply chain can feel assured that the burden isn't being inappropriately applied.
Vanessa Zimmerman: Exactly. And just quickly on that one as well, I think what the Anti-Slavery Commissioner and others have been doing, which I think is really important, including through your organisation, is to just have a conversation with these smaller and medium sized enterprises to ask what is bothering them about this, what is difficult to actually provide in terms of information, what's not difficult, and to have that dialogue and engagement so that we know what guidance and support might be needed there. Because I think there are many more of these medium sized enterprises that are increasingly aware of these types of issues — that awareness has grown — but we need to have that dialogue between different groups.
Louise McGrath: Yeah. And I think some of the feedback from some of our Members is that some of those large companies are actually stepping back and saying, "what do we really need in our audits," and are starting to reduce some of that burden. So I think it's something I'm really quite motivated and enthused by — the progress that we're getting on this and everyone's enthusiasm for reform.
Vanessa Zimmerman: I agree.
Louise McGrath: Our boards generally worry about reputation risk, and we'll talk a bit about potential criminal risk later on. But at the moment it's primarily reputational risk, being at the top of the supply chain very focused on their tier one supplier. But where do you think the risk could actually be hiding that they would never think to look?
Vanessa Zimmerman: The risk can absolutely be hiding down in tiers that are way beyond tier one. One of the misconceptions sometimes is that if you have a really large tier one Australian supplier, all of the risks will be managed because that tier one supplier is Australian. But what we know is that if that tier one supplier then has many tiers of suppliers underneath them, there could be risks there. And even with Australian suppliers that are operating wholly in Australia, we also know, as we've talked about, that there could be risks there.
This is an area too where I think there can be at least a perception of divergence between looking at risk to people and risk to the business. The UN Guiding Principles talk about the need for companies to look at both risks to people — how the company might adversely impact people — but also risk to business. And as we will speak about throughout the podcast, businesses today are facing quite a few operational, reputational, legal and financing risks relating to not getting it right when it comes to respecting human rights.
But this is an interesting area where sometimes, for example, if you've got suppliers where there are very big spend levels, there's a lot of leverage. There might be an assumption by the board that that is where the focus needs to be, because those are the suppliers with whom the company does the most business — therefore they must be the most important for managing all of these risks as well. But what we know is that there are companies that have found themselves in quite a bit of reputational and other difficulty for not looking at suppliers where there are lower spend levels, where there still might be quite high risks relating to modern slavery because of the jurisdiction or because of the sector that they're in.
So it is important for boards to really think about what is the landscape of risk that might be impacting the company — what types of things the company is actually procuring, what types of goods, what types of services, where the highest risks might be — not just based on level of spend. Those factors can be relevant in some cases, because sometimes the more that you spend with a supplier, the more leverage you might have and the more ability you might have to affect change. But it doesn't take away the risks in other parts of the supply chain.
As I was saying before, I think the other two gaps are that sometimes boards, even today — boards of very large companies who have been reporting for many years under the Australian Modern Slavery Act — we will still hear comments that there couldn't possibly be modern slavery here in Australia. So that's still an issue. And related to that, the services point: a lot of companies are still focusing on goods, but they're not looking at the services that are coming through as well. And this sometimes can be exacerbated by certain regimes around the world also focusing just on goods in relation to modern slavery reporting or broader risk management. So it can amplify that assumption by companies that they don't have to look at the services as well.
Louise McGrath: Great. Well, we'll have a break here, and after the break we'll get into more details around stories of modern slavery.
Louise McGrath: And welcome back to DBrief, where I'm speaking with Vanessa Zimmerman, human rights lawyer from Pillar Two, around modern slavery. Vanessa, you work with firms from all kinds of industry covering dozens of countries. What's the story that still sits with you?
Vanessa Zimmerman: So many stories across many, many years, but I'll just do two really quickly, if you forgive me. One of them was this — this was actually before Covid. Many of you may remember that over Covid, the plight of seafarers on ships all around the world was brought to the attention of many global news outlets, because there was a significant risk of seafarers facing instances of modern slavery because of the time they were spending on ships and their ability to actually freely leave what they were doing — also relating to allegations of retention of passports, and living and working conditions on the ships. But even before Covid, this was already a significant issue.
I remember going to speak to a ship management company that was managing, for our client, the use of ships to transfer goods all around the world. And it was really fascinating to sit in front of the people in this management company and have a really difficult conversation about what my client was worried about, how that might be manifesting and what could actually be done.
When you're actually sitting in front of someone and you have to ask them if there might be a risk of modern slavery going on in their business — particularly where you might be speaking to people who are ex-ship captains and know a lot more about shipping and sailors and seafarers than I do — it can be really tricky to approach that in a way where you're actually going to get your message across in a way that will be listened to and be sustainable, and be something that can actually achieve change in the long term.
I remember having conversations around the fact that, for example, certain crew members were from one country, the officers were from another country, with comments that this was just the way things were done in terms of retention of passports — that tensions between the crew and the officers that may increase risks of modern slavery or other human rights harms were just because there were two different nationalities working together, and that was just a normal risk that was being faced. And really also trying, for my part, to better understand what life is actually like on a ship like this, and how those risks could actually be managed in practice. So it was a nice reality check, I think, for me — that these are very complex conversations. You really have to know what you're talking about, you have to understand the sector and what risks might be coming up, and you have to be very practical in your recommendations.
If you suggest that they get a fifty page manual that is never going to be used by anyone and is going to sit very nicely in somebody's office on the ship, it's not going to get anyone anywhere. So that was just one example that really stayed with me. And then over Covid, as I saw the other situations emerging around seafarers, it really struck me as to how those issues might be being dealt with.
The other one, just very quickly, related to an overseas client that called us, I think a couple of years ago now, with what would be a textbook case of a modern slavery incident at a warehouse in a state in Australia. I had to have a very good poker face while they were explaining all of the different red flags — passport retention, family members that appeared to be living in the warehouse with workers, recruitment fees, all sorts of issues that to me were so obvious as an issue of modern slavery. But to our overseas client, first of all, they had started with an assumption that this really couldn't happen in Australia, so the risks must not be too great. And second of all, those red flags that were so obvious to me were not obvious to people who even then were working in human rights related roles, but did not understand that the red flags existed.
So it really was a reminder that we need to keep up our awareness raising. These situations are constantly changing. Unfortunately, people keep finding new ways to make sure that people are exploited, and so making sure that awareness continues to be there — and that these companies have the resources of who to call and what to do about something, including when to call the Australian Federal Police when these types of allegations occur — and not to sit on things, and not even to try to conduct internal investigations in situations where something is that dire and actually needs to be reported to the authorities.
Louise McGrath: Now, with AI driving a lot of conversation — everyone seems to have an opinion on AI now, even the Pope — it's being used both to detect modern slavery risk and potentially to help hide it. Where do you think the technology would do the most good, and where should we be worried?
Vanessa Zimmerman: I am an AI dinosaur and I need to use it far more often, as my children and team will tell me. But I do think that it can achieve a lot of good in this space, with some caveats. One of the issues that's always been a problem in the modern slavery space has been visibility — really complex supply chains, opaque contracting arrangements, not knowing enough about risks in particular countries because there might not be free press or civil society there.
So if AI can help us get some of that information and make sense of it — I've recently been doing quite a bit of work in Japan. One of the companies we were working with has, I think, over one hundred thousand suppliers. So if you have that many suppliers, something needs to help you make sense of that and to be more proactive and able to actually identify risk before it happens, and we probably need AI for that. We also know that AI can be used for traceability — to know where certain items are coming from. But what AI can't do yet — and I don't think it really can do in the future — is have that human connection and actually speak to impacted workers and really try to figure out what the problem is. In situations of actual modern slavery, to figure out what remediation might need to occur, it can't stand in the place of meaningful stakeholder engagement and worker engagement.
There are ways that it can be used to support that as well — we see worker voice apps and things like that — but it shouldn't take the place of analyzing that data, and in most cases, actually speaking human to human and trying to figure out what's going on. I think the other problem can be that it can be used for surveillance purposes for workers. Sometimes it can be used for fairly benign purposes on the surface to see what's going on in a workplace, but if that is then used for discrimination or for retaliatory purposes, there are problems.
And the last problem that we've started to see recently is where, let's say, a supplier gets sent a supplier assessment questionnaire and they get asked if they have their own supplier code of conduct, or a grievance mechanism, or a human rights policy. Very quickly those documents are sent back to the customer looking very beautiful, with perhaps a slight resemblance to some other companies in their sector or somewhere else. And the customer cannot really use those documents because it's probably fairly clear that they've been drafted using AI, and it doesn't really help anybody in terms of trying to figure out where the gaps are, for capacity building purposes. So we do need to watch that as one of the aspects where it could be more of a negative.
Louise McGrath: Yeah, it really is just the box ticking and not trying to identify change.
Vanessa Zimmerman: Exactly.
Louise McGrath: Now, the EU's forced labor ban will be landing in 2027, and Australia's own reforms are on the table. Are we heading towards one global standard for business, which is always my hope, or a messier patchwork that companies will have to navigate country by country?
Vanessa Zimmerman: I think we're going to have a bit of a spaghetti soup, or a patchwork, but what I'm hoping is that at least there is alignment on the underlying foundations of all of the patches in our giant quilt — I'm mixing metaphors and doing all sorts of things, but I think that's what we might see. For those that don't know, the EU forced labour regulation will start to be operational next year, and basically it means that the EU authorities can ban items either leaving the EU or coming into the EU where they were made with forced labour.
In Australia, the Australian Government has proposed a new failure to prevent modern slavery offence, with a defence around taking reasonable steps to show that you have tried to prevent modern slavery. And then, as you were saying, all around the world we have all different types of regimes, so we probably won't end up with one that looks the same in every jurisdiction.
There is no doubt that it is difficult for companies to make sense of that. Some of the big multinational companies that we work with are subject to five to six or eight regimes, and they have to figure out what all of that means. But what is lying under all of these, which is a good thing, is that foundational aspect from the UN Guiding Principles — which is that businesses need to understand what their human rights, including their modern slavery risks, look like, and they need to have meaningful programs and policies and procedures in place to actually prevent their involvement in, and address their involvement in, those harms if they happen.
So as long as companies are applying that approach and doing it in a meaningful way, they should be setting themselves up quite well to be able to meet all of the different requirements, even though it will still give internal counsel and others a lot of headaches in terms of figuring out what they actually have to do. And so I think the companies that don't just treat this as a hated compliance exercise across every single country will do better if they are actually applying those key concepts from the UN Guiding Principles and other key international standards to be able to meaningfully prevent and address their human rights risks.
Louise McGrath: Yeah, so it's really taking the principles rather than just reacting to every single timeline and regulation.
Vanessa Zimmerman: Exactly.
Louise McGrath: And if every CEO woke up tomorrow understanding just one thing about human rights, what would you choose them to know?
Vanessa Zimmerman: So many things — can I have two? I'm going to take two really quickly. The first is that respecting human rights is not a nice-to-have, and it's not a constraint on business, even though obviously steps need to be put into place to make sure that you're managing human rights risks. It's about business resilience. I was actually with someone from a larger European company last year, and I said, "with the ESG backlash and other issues going on, what is the business case that you make to your board around these issues?"
And he said to me, "business resilience," because we cannot continue to operate in all of the markets where we want to be, with all of the business partners, without making sure that these issues are dealt with. Professor Ruggie, while he was drafting the UN Guiding Principles, once went on a visit to a large mine site in South America and spoke to a community that had blockaded the road, and said, "why did you do this?" And they said, "well, the company didn't listen to our smaller complaints and our questions, so we decided that we had to create a really big issue for them so that they couldn't keep operating."
So these issues — whether it's extractive companies, retailers, or transport and infrastructure, whatever the sector — they do need to look at these issues in order to be able to keep operating, especially as we see such a volatile situation around the world in terms of geopolitics and complex supply chains.
The second thing I would love CEOs to really remember is that there is a lot of residual risk relating to human rights risk. We cannot make everything go away, and there's no perfection where you can say, "okay, we've signed off on all of this, we will never have to look at our human rights risks again, and it's all done." It's never all done, because these risks are constantly changing, and there will be changes that impact the company in terms of what it needs to be looking at.
And there will be very tough calls that a company needs to make sometimes, where it might have a really crucial supplier in a country that it just can't leave, and it will need to deal with that residual risk that we just can't take away. But that is the case with many other risks that businesses face as well, and it doesn't mean that we just don't look at it — it means that you still have a very real discussion about it.
Louise McGrath: Great. Well, thank you very much, Vanessa. Hopefully people have got a broader understanding of what this means for their business. It's not just another compliance thing, but as you say, a way to really understand your supply chain and boost your resilience. And it's clear that this isn't an issue that's going anywhere soon, and the best strategy for companies is not to avoid it, but to get on top of it as soon as they can.
If you are a Member of the Australian Industry Group and would like to join our Member reference group for modern slavery, to be kept informed of changes and to also learn from your peers, please email industry.policy@aigroup.com.au. And if you found this podcast via a link on our website, please do subscribe on our YouTube podcast platform and leave a review. This helps more people find us, and we'll speak in a couple of weeks.
