WESFARMERS SUSTAINABILITY REPORT 2018

2018 Modern Slavery Statement for Wesfarmers

Wesfarmers Limited (Wesfarmers/the Group) opposes slavery in all its forms. This statement, which is intended to meet the requirements of s54 of the United Kingdom’s Modern Slavery Act 2015, s12 of the proposed Australian Modern Slavery Bill1 and s24 of the Modern Slavery Act 2018 (NSW)2, describes the steps taken by Wesfarmers and all its wholly owned subsidiary businesses and divisions during the financial year ending 30 June 2018 to seek to minimise the risk of modern slaveryoccurring in our businesses or their supply chains.

At Wesfarmers we acknowledge our role and responsibility in seeking to safeguard human rights through ethical and sustainable business practices. We also recognise that human rights is an area of growing importance to our employees, shareholders, customers, and the communities where we operate. There is therefore both a business and a moral case for seeking to ensure that human rights are respected across the Group’s operations and supply chains.

We recognise we are on a journey to improve our modern slavery risk identification and mitigation and we are committed to continuous improvement.

We support the following globally recognised declarations, principles and goals:

  • Universal Declaration on Human Rights
  • United Nations Guiding Principles on Business and Human Rights
  • United Nations Global Compact
  • International Labour Organisation Declaration of Fundamental Principles and Rights at Work
  • United Nations Women’s Empowerment Principles
  • United Nations Sustainable Development Goals

A consultation process with our wholly owned subsidiary businesses was undertaken to draft this statement. Our businesses prepare an annual ethical sourcing report including details of factories audited, ethical sourcing training undertaken and any significant changes to their ethical sourcing programs. Information from those reports as well as examples of initiatives undertaken during the year, then feed into this statement. This statement was then reviewed by the senior management of each business as well as the Wesfarmers Board during our 2018 Sustainability Report approval process. Modern Slavery disclosures formed part of Ernst & Young’s Assurance of our 2018 Sustainability Report, as detailed here.


Wesfarmers’ businesses have adopted a risk-based approach to modern slavery due diligence and have primarily focused on the human rights of direct employees and the human rights of those in the tier one factories (factories producing the final product for resale) of our supply chains who are supplying own brand products for resale. When we began our ethical sourcing journey five years ago, we recognised this was the area where we could make the most significant contribution. Goods not for resale and services supply chains have been identified as potentially carrying modern slavery risks and although some of our businesses are already working on human rights in our goods not for resale and services supply chains as well as tier two and three factories, there is further work to be undertaken. Unless otherwise specified, this statement refers to goods for resale and our direct operations.


Our structure, operations and supply chain

This statement extends to all Wesfarmers’ wholly owned businesses described on our website here.

From its origins in 1914, as a Western Australian farmers' cooperative, Wesfarmers has grown into one of Australia's largest listed companies. With headquarters in Western Australia, our diverse business operations cover: supermarkets, liquor, hotels and convenience stores; home improvement; office supplies; department stores; and an industrials division with businesses in chemicals, energy and fertilisers and industrial and safety products.

Wesfarmers employs more than 217,000 people in Australia, New Zealand, the United Kingdom, Portugal, and several countries in Asia including Bangladesh and China. In the financial year ending 30 June 2018, Wesfarmers paid its more than 18,000 suppliers AU$47 billion. Wesfarmers’ businesses work within large, diverse supply chains of partners and stakeholders. Each entity in this chain has its own independent duty to respect human rights in all areas of its operations.

Our businesses directly source products for resale and not for resale from a range of locations with the largest volume sourced from Australia, China, Bangladesh, New Zealand, India, Thailand and Vietnam. With the exception of Australia and New Zealand, global risk and strategic consulting firm Verisk Maplecroft classify these countries as ‘high’ or ‘extreme risk’ for human rights risks.4 

While our operations and supply chains are complex, our aim is to ensure that human rights are understood, respected and upheld. We expect our partners and stakeholders to adhere to ethical business conduct consistent with our own, and are committed to working with them to fulfil this common goal.

The policies and frameworks that support the Group’s day to day operations are designed to make sure all relevant universally recognised human rights are safeguarded. Consistent with the principles detailed in our Code of Conduct and Ethical Sourcing Policy, Wesfarmers is committed to making positive economic, social and environmental contributions to society, consistent with the principles of honesty, integrity, fairness and respect. We prohibit discrimination and forced, trafficked and child labour and are committed to safe and healthy working conditions, including the right to freedom of association and collective bargaining. We have a Group-wide Ethical Sourcing Policy, which sets the minimum standards expected of our divisions who sell goods for resale. Coles, Bunnings, Kmart, Target, Officeworks and Wesfarmers Industrial and Safety have their own ethical sourcing policies appropriate to their businesses. During the year Wesfarmers Chemicals, Energy and Fertilisers (WesCEF) commenced a review of its supply arrangements to facilitate development of an ethical sourcing policy.

A key focus of the Group is ensuring that each of our divisions has a strong management capability that is accountable for strategy development and execution, as well as day-to-day operational performance. Each division is overseen by a divisional board of directors or steering committee that includes the Wesfarmers Managing Director and Chief Financial Officer, and is guided by a Group-wide operating cycle and governance framework.

Our governance of modern slavery risks is set out below.

Potential modern slavery risks

We recognise that we must take steps to identify and address any actual or potential adverse impacts with which we may be involved whether directly or indirectly through our own activities or our business relationships. This table outlines the potential modern slavery risks for our business.

Table 1: Potential modern slavery risks for our business

Potential modern slavery riskHow we identified the modern slavery risk

Non-compliance with our labour standards in the supply chain including health and safety, working hours, wages, forced labour and child labour, and freedom of association.

Our businesses have different modern slavery risks depending on various factors, including the level of human rights protection and enforcement in the countries where they operate or source from. With a high number of suppliers in countries where the level of maturity in the protection of human rights in regard to labour conditions is low, there is risk of harm to people.

Previously we considered non-compliance with our labour standards to be high-risk in all regions except for Western Europe, Australia and New Zealand,4 however, our due diligence process has revealed unfair working conditions such as the underpayment of sub-contracted workers and poor health and safety standards are potential risks in any region including Australia.

Our due diligence process has revealed that there is an increased risk of unfair working conditions for people who are employed by third party labour hire companies. These third party labour hire companies are often contracted to provide agricultural harvest, call centre and cleaning services.

Non-compliance with broader human rights which can be connected to or indicative of modern slavery risk, including employee rights to equality, fair pay, safety and privacy.

We have identified that some level of discrimination based on gender, age, race, disability, sexual orientation, cultural background, religion, family responsibilities or other areas of potential difference is a potential risk in any business.

Australia has a gender pay gap of 15.3 per cent5. Since 2010, a Group review of gender pay equity has been conducted annually, with results reviewed by the Board and divisional Managing Directors. Over this period the company has moved to close any pay equity gaps. Any apparent gaps are analysed to ensure such gaps can be explained with reference to market forces which may include, for example, different rates of pay in different industries, location and the relative supply and demand for different qualifications, individual performance and experience.

We recognise the right of those we employ to negotiate their wages either individually or collectively, with or without the involvement of third parties. We also believe in maximising the flexibility of workplace arrangements available to our employees.

Employee safety is our highest priority and while we are seeing the benefits of a relentless focus on making our workplaces safer, we acknowledge that if team members are injured at work, our safety performance still requires improvement.

During the year, privacy has been raised as a material issue. We have systems and procedures in place to protect privacy but acknowledge that privacy protection requires ongoing significant resources.

Actions taken to address modern slavery risks

We regularly undertake the following actions to mitigate the potential modern slavery risks in Table 1.

Table 2: Actions to mitigate potential modern slavery risks

Potential modern slavery riskAction

Non-compliance with our labour standards in the supply chain including health and safety, working hours, wages, forced labour and child labour, and freedom of association.

Action: Establishing which suppliers to work with

Most of our businesses take a risk-based approach when making the decision to conduct detailed due diligence on a supplier of goods for resale, based on the goods or services, country of origin and vendor. Before we contract with a new supplier we assess its risk against our criteria and require high-risk suppliers to complete a risk assessment questionnaire and/or be audited. We investigate the supplier to understand risks of human rights breaches. We also consider whether there may be any sanctions that may be in place against that supplier or the country in which it is located.

Coles, Bunnings, Officeworks and Wesfarmers Industrial and Safety are at various stages of utilising the Supplier Ethical Data Exchange (Sedex) to streamline ethical risk assessment and monitoring, and provide efficiencies to their suppliers. Sedex facilitates risk assessments and information and social compliance audit sharing across its platform. This maintains visibility and drives consistency across supply chains. Coles requires suppliers of fresh produce, meat and Coles brand products to register on Sedex and complete the self-assessment for each site before the supplier is approved to supply Coles.

Kmart and Target have a three-year ethical sourcing (ES) program roadmap. The road map identifies six strategic areas and associated tasks to be actioned over the next three years. This is transitioning Kmart and Target's program from an audit and compliance approach to a model with more focus on factory capacity building, supplier compliance ownership and industry partnerships.

Action: Communicating our Ethical Sourcing Policy to suppliers who supply goods for resale

We have a Group-wide Ethical Sourcing Policy, which sets the minimum standards expected of our divisions who sell goods for resale. Coles, Bunnings, Kmart, Target, Officeworks and Wesfarmers Industrial and Safety have their own Ethical Sourcing Policy appropriate to their business. During the year WesCEF commenced a review of its supply arrangements to facilitate development of an ethical sourcing policy. All suppliers engaged by our divisions to supply goods for resale must take all reasonable steps to comply with our minimum standards. Some of our businesses also apply their policies to suppliers providing goods not for resale while others are working towards this. Bunnings, for example has enhanced its Code of Conduct by expanding from product suppliers to also include service providers. 

We will only work with suppliers to supply goods for resale who operate in line with the divisions’ Ethical Sourcing Policies. Under the relevant Policy, all suppliers producing goods for resale must agree to comply with the following minimum standards in their agreements with our businesses:

  • No forced or bonded labour
  • No child labour
  • Transparent record-keeping of wages and benefits
  • Working hours must comply with applicable local laws
  • No discrimination
  • No harassment or abuse
  • Freedom of association
  • Working conditions: suppliers shall provide a safe and hygienic working environment that is without risk to health, taking into consideration knowledge of the relevant industry and any specific hazards
  • No bribery
  • Approved sub-contracting: there shall be no sub-contracting unless previously approved by Wesfarmers and/or divisions/business units6
  • Environmental compliance

While not all of these minimum standards are directly relevant to modern slavery, they are important to Wesfarmers' holistic Ethical Sourcing Policy.

Action: Mapping our supply chain

To manage business and sustainability issues with such a complex supply chain we map our tier-one suppliers. Where possible, we are mapping tier-two and three suppliers (suppliers producing components which go into a final product) for high-risk products. For example:

  • Coles is engaging with its suppliers and mapping its supply chain beyond direct suppliers including sites that significantly contribute to the final form of the product.  Examples of processes considered to significantly contribute to the final form of the product include (but are not limited to):

    -        Embellishing, pressing, fabric finishing;

    -        Partial garment cut and trim;

    -        Peeling, trimming, husking, de-hulling, filleting;

    -        Harvesting of fresh fruit, vegetables or seafood;

    -        Grow produce for retail sale;

    -        Pack produce for retail sale;

    -        Operate as an aggregator, distributor, broker or agent supplying produce for retail sale; and

    -        A direct supplier, a subcontract supplier or a co-packer. 

  • Bunnings is mapping and engaging with suppliers for raw materials such as timber, and during the year commenced this process with stone.
  • Kmart and Target are mapping and engaging with cotton fabric suppliers.
  • Target, Kmart and Coles are continuing to publish the details of the factories that directly produce some of their own brand products.

Action: Building long-term relationships

We aim to build long-term direct relationships with suppliers to work with them to safeguard human rights. This may have a number of additional benefits. For example, a long-term relationship may provide increased certainty for their businesses, may lead to increased efficiencies and productivity, and may result in the delivery of enhanced services and products.

For example:

  • In 2016 Coles signed a 10 year deal with Sundrop Farms to provide sustainable truss tomatoes exclusively to Coles customers 365 days of the year for the next 10 years.
  • Coles formed the Coles Agronomy Group with approximately 20 growers volunteering their time to work together with Coles to address industry challenges around labour practices in the fresh produce industry, varietal development, sustainable farm practices and water use.
  • Bunnings merchandising team and buying agents are responsible for building long-term relationships with suppliers with a common vision towards a responsible and sustainably sourced supply chain. 
  • Kmart and Target have joined the ILO/IFC Better Work Program as a buyer partner. The Better Work program aims to make sustainable improvements in working conditions within the garment industry and make the sector more competitive overall. Kmart and Target’s ethical sourcing team will work in partnership with the Better Work program on long-term improvement plans for factories.
  • Industrial and Safety is committed to building long-lasting supplier relationships that harbour a continuous improvement methodology. This is sustained by an established off-shore office in China (47% of WIS own-brand spend is China-centric), and partnered sourcing offices in Bangladesh and India further supporting the Industrial and Safety sourcing model by facilitating supplier interaction in local language wherever possible.

Action: Collaborating with other businesses, government and non-government organisations

Collaboration with industry-wide initiatives, government and non-government organisations is an important part of managing modern slavery risks.

  • Coles works with Australian suppliers to support their understanding of the Federal1 and New South Wales2 modern slavery bills, and the proposed Queensland, South Australian and Victorian state governments labour hire licensing legislation.
  • Bunnings is a key signatory to the European DIY Retailer Association (EDRA), linking DIY retailers together to share ideas on best practice in ethical and sustainable sourcing. The initiative allows retailers to come together to promote better labour and environmental conditions in the global home improvement supply chain.
  • Kmart and Target have continued their participation in the Action, Collaboration, Transformation (ACT) living wage collaboration.
  • Kmart, Target and WIS along with other brands and global unions, have signed an extension of the Accord on Fire and Building Safety in Bangladesh to 2021.
  • Industrial and Safety, Coles, Officeworks and Bunnings gain access to a number of Australian and world leading business as part of their Sedex membership. By attending member events, the businesses are able to connect, and share insights into ethical sourcing with other brands, retailers and suppliers alike.
  • Industrial and Safety, Bunnings and Officeworks have signed a letter of support to the Association of Professional Social Compliance Auditors (APSCA). APSCA’s mission is to govern and improve the standards and techniques used within the social auditing space. Governing this area enables auditors to reliably identify and remediate risks. 
  • Workwear Group is a member of Ethical Clothing Australia (ECA®) an accreditation body that works collaboratively with local textile, clothing and footwear (TCF) companies manufacturing in Australia. The ECA voluntary accreditation program offers practical and affordable assistance to these businesses, and ensures that their Australian supply chains are fully transparent and legally compliant.

Action: Auditing our suppliers

To mitigate the risk of unethical practices occurring in our supply chains, the relevant Wesfarmers businesses (Coles, Bunnings, Target, Kmart, Officeworks; and Industrial and Safety) apply a human rights and ethical sourcing audit program to certain suppliers.

Where non-compliance with our Ethical Sourcing Policy identified, the supplier is required to fix the issue within an appropriate period of time depending on the nature and severity of the non-compliance. Suppliers are ‘conditionally approved’ if non-critical non-compliances have been identified and notice has been given that they must be remedied. If a supplier then addresses non-compliance, it is deemed to be an ‘approved’ supplier site. In this way, our audit process is contributing to remediating supplier non-compliance and improving conditions for workers by working with supplier site owners to address any issues. If a supplier site is not willing or able to address a critical breach, our business will stop buying from that supplier site.

Action: Training and capacity building

We keep our buying and sourcing teams up-to-date on our ethical sourcing and human rights commitments and how their actions may impact workers’ rights. The findings from our audit program and stakeholder engagements are fed into this training to ensure that our teams improve their understanding of ethical sourcing and human rights. We train relevant employees on how to incorporate respect for human rights into all business decisions, making employees aware of the impact their actions can have on human rights. For example, we train relevant team members about the implications of making short notice purchasing decisions on potential human rights risks.

We deliver training on ethical sourcing requirements to relevant team members, third party auditors, suppliers and factories so that they understand ethical sourcing risks and the standards expected by our divisions.

Cross-functional teams in our businesses regularly collaborate, as in regular ethical sourcing forums, to share lessons learned and continue to improve their knowledge. Training and capacity building is an area that requires ongoing focus. 

Action: Reporting and monitoring of grievance mechanisms

We have established specific grievance mechanisms for workers in our supply chain.

  • Coles has set up the Coles Wages and Conditions Hotline for workers in Coles supply chains, including farms, factories and service providers. In Australia, employees who work for a Coles supplier can call 1300 532 515 between 8am and 8pm, seven days a week to understand more about their conditions of employment or to report unfair labour practices. For workers where English is not a first language, there is an email, wageline@coles.com.au. Workers can provide their telephone number, preferred language and a brief description of their concerns.
  • Bunnings buying agents are responsible for building relationships with suppliers and providing grievance channels. This is introduced within their Trading Terms, which includes specific expectations on Modern Slavery.

Non-compliance with broader human rights which can be connected to or indicative of modern slavery risk, including employee rights to equality, fair pay, safety and privacy.

Action: Developing employee policies and standards

We have policies which embed the importance of “respect for the rights of all”, including our employees. Wesfarmers strives to create a work environment which is inclusive of all people regardless of gender, age, race, disability, sexual orientation, cultural background, religion, family responsibilities or other areas of potential difference. Each division/business unit must establish and communicate policies, procedures and programs that are in line with our Equal Opportunity Policy.

Some of our businesses have gone beyond the minimum expectations set out by Wesfarmers' Equal Opportunity and Diversity policies, to develop policies specific to their workplace.

  • Coles, for example, has Gender Affirmation and Transition Guidelines in place to promote a supportive working environment for its transgender and gender diverse team members. 
  • Bunnings has an established Respectful Workplace Policy, as its culture is founded on values that go hand in hand with diversity: respect and innovation. Bunnings recognises that a diversity of cultures, backgrounds, experiences and education provides for a diversity of thought.

We have worked to grow the number of women at senior levels throughout the organisation and to close the gender pay gap by conducting a review of gender pay equity annually, with results reviewed by the Board and divisional Managing Directors. Any apparent gaps are analysed to ensure such gaps can be explained with reference to market forces which may include, for example, different rates of pay in different industries, location and the relative supply and demand for different qualifications, individual performance and experience.

We recognise the right of those we employ to negotiate their wages either individually or collectively, with or without the involvement of third parties. We also believe in maximising the flexibility of workplace arrangements available to our employees.

Employee safety is our highest priority and we continue to make improvements to safety in all our operations.

Assessing the effectiveness of actions

We measure Wesfarmers businesses’ performance in respect of ethical and sustainable practices through a number of mechanisms including:

Table 3: Evaluating our performance

Mechanism for assessing effectiveness of actionDetails

Ethical sourcing audit programs: We measure the coverage including the total number of factories in the audit program; the number and nature of critical breaches; and the speed of remediation and improvement.

 

Total factories in audit program
This year, our audit program covered 4,003 supplier sites used to manufacture own brand products for resale, across our international and local supply chain. Audits are undertaken by third party audit firms or by our team. Factories in the audit program are required to have a current audit certificate, which means they have been audited by us or another party whose audits we accept.

Depending on the division’s policy for auditing high-risk suppliers, these audits are typically completed before an order is placed with a supplier and if no findings are made, it will be repeated each year. If critical breaches are found, an audit will be repeated within six months depending on the situation to confirm that any findings have been addressed.

Total number and nature of critical breaches and remediation
During the year, we identified 114 critical breaches across 82 factories in our audit program. The major critical breaches identified included excessive overtime (37 per cent), transparency (16 per cent), safety (12 per cent), unpaid wages (11 per cent) and unauthorised subcontracting (10 per cent). As set out in Table 2, where a non-compliance is identified, the factory is required to fix the issue, within an appropriate period of time, depending on the materiality of the non-compliance. 

We were able to remedy 43 of these issues immediately, 50 had action plans that were on track at the end of the reporting period, one was exited immediately and no further supply orders were placed at the remaining 20.

Training and capacity building: We measure the number of training hours on human rights delivered and the number of people reached.

We deliver training on ethical sourcing requirements to relevant team members, third party auditors, suppliers and factories so that they understand ethical sourcing risks and the standards expected by our divisions. During the financial year ending 30 June 2018, our divisions delivered more than 3,500 hours of training.

Cross-functional teams in our businesses regularly collaborate, as in our regular ethical sourcing forums, to discuss what types of goods which we procure may present higher risks for modern slavery.

Effectiveness of complaints or grievance mechanisms: We measure the number of people who use our grievance mechanisms and the nature of their grievances.

We place importance on the provision of effective company-based complaints or grievance mechanisms to escalate issues wherever human rights impacts occur in our operations. We continue to build the awareness and knowledge of our employees on human rights, encouraging them to voice their concerns without fear of retribution and with full confidentiality if required. Each division has external whistle blower grievance channels and the number and nature of the calls are reported regularly to the Wesfarmers Audit and Risk Committee. We also promote the provision and implementation of effective grievance mechanisms by our suppliers.

Our company-based complaints or grievance mechanisms are accessible by our employees, the external community and stakeholders. Information on the mechanisms may be accessed here

Stakeholder engagement: We regularly engage with our stakeholders to understand their expectations about our performance.

Our stakeholders regularly provide feedback about our performance.

Non-government organisations

Our divisions work collaboratively with non-government organisations (NGOs) on a range of projects. This year NGOs engaged with us on ethical sourcing and human rights generally as well as formally through collaborations. Our stakeholders regularly provide feedback about our performance and help to drive our program to improve our modern slavery risk and identification and mitigation. 

Suppliers

Our businesses are committed to building strong and collaborative relationships with suppliers. By supporting our suppliers and producers, and helping them to grow their businesses and become more efficient, we are further enabling the delivery of great products to our customers.

Our businesses regularly engage with workers in tier-one factories in our supply chain through factory visits (both announced and unannounced), our audit program and our grievance mechanisms. Through these engagements, we seek feedback on how well the policies and procedures outlined in Table 2 work in practice.

For example:

  • Coles’ Agronomy Group was active during the year, with approximately 20 growers volunteering their time to work together with Coles to address industry challenges around varietal development, sustainable farm practices, water use and labour practices in the fresh produce industry.
  • Kmart and Target’s membership of the ILO/IFC Better Work program as Buyer Partners sees the companies working even closer with suppliers. Together they will make sustainable improvements in working conditions within the apparel industry and make the industry more competitive overall.

We are committed to continuous improvement and recognise we are on a journey to improve our modern slavery risk identification and mitigation. We will continue to track and publicly report on our progress annually in our Sustainability Report.

Rob Scott Signature

Rob Scott

Managing Director

13 September 2018

1 At the time of publishing, the Australian Modern Slavery Bill was before the Australian Federal Parliament. 
2 At the time of publishing, the Modern Slavery Act 2018 (NSW) was not yet in force and the proposed regulations under the Act had not been published.
3 Modern slavery is an umbrella term used to describe human trafficking, slavery and slavery-like practices, such as forced labour and forced marriage.
4 Verisk Maplecroft, 2016, 'Human Rights Risk Index 2016'. Verisk Maplecroft is a global risk and strategic consulting firm. 
Workplace Gender Equality Agency (WGEA)
6 Note this does not extend to Coles proprietary brand suppliers

GRI 102-9, GRI 102-10