Director’s approach to ethical and sustainable work practices

Businesses are increasingly expected to take a stand and lead on social issues. Across New Zealand, consumers, employees and investors want businesses to treat workers fairly and ethically and are scrutinising what businesses are doing — not just in their own operations but across their supply chain and other organisations they work with.

As a director, you need to show that your organisation is acting responsibly and addressing risks of modern slavery and worker exploitation. This isn’t just the right thing to do – it’s good governance and part of your duties as a director.

Promoting ethical and sustainable work practices across your organisation and its supply chain also helps address business risk (‘ethical and sustainable work practices’ means treating workers lawfully and in a fair and decent way that can be maintained over time).

Find out more about ethical and sustainable work practices:

About ethical and sustainable work practices

Directors have an opportunity to lead on ethical work practices and fair treatment of workers. They can promote a culture where social responsibility and impact matter and make a difference.

Modern slavery: boards must lead with integrity — IoD NZ(external link)

Why ethical and sustainable work practices are important for directors

Your duties

As a director, you have legal, ethical and commercial duties and obligations that include making sure your organisation and its supply chain do not contribute to worker exploitation or harm.

Under the Employment Relations Act 2000

You can be held personally liable for company breaches of employment standards. You can also be held personally responsible if you are connected to a business that breaches employment standards.

Employment Relations Act 2000 s142(w) – New Zealand Legislation(external link)

Employers who breach employment standards may be restricted from supporting visa applications and put on the employer visa stand-down list. They may also be fined.

Employers on stand-down

Under the Companies Act 1993

You must act in good faith and in the best interests of your organisation. Acting in the best interests of the company may not be just about maximising profit but also taking other factors into consideration (for example, environmental, social and governance matters).

Companies Act 1993 s131 Public Act Directors' duties — New Zealand Legislation(external link)

What it means to be a director — Companies Register(external link)

Manage business risk

Making sure your organisation operates ethically and sustainably makes business sense. Good work practices protect your organisation against investment, trading and reputational risks.

Work practices that are not ethical or sustainable can:

• risk legal penalties for your organisation and you personally
• damage investor and consumer confidence in your organisation and brand
• expose your organisation to operational risks, like supply chain disruptions, and affect its ability to trade overseas.

You should also consider how your organisation can position itself as an attractive place to work that’s able to hire and keep talented staff — for example, by giving workers more than minimum employment standards required by law. This could include things like paying the living wage or more and offering learning and development opportunities

Find out more about the legal requirements, ethical considerations and best practice areas for directors to consider to be effective in their role.

The Institute of Directors New Zealand(external link)

01 Ethical Standards — New Zealand Corporate Governance Forum(external link)

What you can do

Below we suggest some things you can do, and questions you can ask, to promote ethical and sustainable work practices in your organisation.

The answers to these questions should be available from your organisation’s management team. You could monitor these by requiring regular reporting to the Board directly or in the Annual Report.

Promote the right organisational culture

You can encourage ethical work practices by ensuring your organisation has vision and values statements, and a code of conduct, which say how workers will be valued and treated. A code of conduct tells workers what your organisation’s goals, values and rules are. It can also empower workers to speak up if the code is breached. They set the scene for everything that happens in your organisation, so it’s important they are clear and meaningful.

Questions to ask

Question 1: Do we have mission and value statements that say how workers are valued and treated?

Answer: The answer should include details of your organisation’s statements or policy about how workers are treated. Ask for the most recent examples of these documents.

Question 2: Do we have a code of conduct that outlines our expectations about ethical behaviour and employment practices, for example, how conflicts of interest or unethical decision-making will be managed?

Answer: The answer should include details of your organisation’s code of conduct – ask for the most recent example.

Question 3: Does everyone in our organisation know our code of conduct? Have we shared it with important stakeholders like suppliers and business partners?

Answer: The answer should include who you have told, when and how (including where they can find the information), and how you share policies with new workers and suppliers.

Question 4: Do members of your organisation and your supply chain receive training on spotting the warning signs of modern slavery and worker exploitation and how to report it?

Answer: The answer should describe what training staff in your organisation and supply chain receive and how often.

Find out about creating a code of conduct, and what you can do to educate and set expectations, here:

Employer’s approach to ethical and sustainable work practices

01 Ethical Standards — NZCGF(external link)

Reporting and certification

Reporting on corporate social responsibility, or doing ESG reporting, shows that your organisation takes worker exploitation seriously. It also demonstrates transparency around what your organisation is doing to make sure workers are treated fairly. Obtaining a relevant certification gives your organisation an opportunity to prove it makes a positive social impact (many of these also have strong reporting requirements). Examples include:

• ISO 26000(external link)
• Global Reporting Initiative (GRI)(external link) (you may need to create a free account to browse this site)
• Integrated Reporting(external link)
• B-Corp Certification(external link)

Questions to ask

Question 5: Do we regularly do any corporate social responsibility reporting, including reporting on fair treatment of workers?

Answer: The response should explain what you report, when and how. Ask for the most recent example of the report. This could also be covered in an annual report.

Question 6: Do we hold any relevant certifications, or have we considered becoming certified?

Answer: The response should tell you if the organisation is certified and if so, which certification they hold.

Build worker exploitation into risk management

Your organisation should have systems in place to identify, address and mitigate risks of worker exploitation. Make sure the organisation’s approach is comprehensive and includes a range of tools that complement each other and help identify actual issues, along with possible gaps in systems and processes. The simplest way to do this is by making sure modern slavery risks are considered as part of the risk management process, for example, when considering reputational or financial risk.

Questions you can ask

Question 7: Which areas in our operations and supply chain are most at risk of unethical and unsustainable work practices, for example, breaching employment standards for New Zealand employees?

Answer: The answer should include information that the organisation has identified in a map of its supply chain, or in a risk table. For examples of risk factors to consider, see:

Risk factors to manage [PDF, 225 KB]

Question 8: Do we have any systems and processes in place to identify and mitigate non-compliance ?

Answer: The response should explain how your organisation identifies and manages actual issues that present in the organisation itself, as well as across its supply chain and business networks, and how regularly it reviews the supporting systems and processes. The answer should identify which specific tools are in place — for example, third-party audits, worker-voice tools and an internal escalation process for reporting worker exploitation— and how it checks what suppliers and business partners have in place.

Question 9: Do recruitment processes include questions to identify whether a person may have been trafficked, paid a premium (fee) to get a job or was exploited whilst seeking employment?

Answer: The answer should tell you if questions that can help identify whether someone has been exploited whilst seeking employment are asked as part of the recruitment process.

Question 10: Are suppliers required to tell your organisation if the Labour Inspectorate, Employment Relations Authority or Employment Court investigates them? Have any suppliers reported this?

Answer: The answer should tell you what expectations your organisation has set around this, and if any suppliers have been investigated. If they have, the response should include information about:

• what the findings were, and
• what has been done to address any non-compliance.

For more information, see:

Auditing compliance with employment standards

A guide for Directors [PDF, 1.4 MB]

Find out more about identifying and minimising risks of worker exploitation and issues of non-compliance in your organisation:

Employer’s approach to ethical and sustainable work practices