Murky waters: what lurks in the depths of Australian supply chains?
A lot seems to be happening around the world to combat modern slavery. The UN Sustainable Development Goals include Target 8.7, which commits to taking “immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking”, including putting an end to child labour by 2025. Here in Australia, we’ve passed legislation in 2019 requiring large companies to demonstrate that they are taking reasonable steps to combat slavery by lodging Modern Slavery Statements; in doing so, we’ve joined a handful of nations around the world including the UK, France and the Netherlands.
But despite good intentions and well-meaning policies, modern slavery has only grown since the Sustainable Development Goals were announced back in 2015; in fact, far from child labour being abolished, UNICEF estimates that 8.4 million more children have become enslaved in the last four years. COVID-19 has made more and more people vulnerable to slavery, while heightening risks for people already exploited, while disrupting response efforts in turn. At the same time, climate change and modern slavery form a vicious, mutually-reinforcing cycle, where climate change leads to an increase in modern slavery, and many of those slaves are forced to do work that causes environmental harm.
So, where does Australia fit in? What role do Australian businesses have to play in combating modern slavery, and are our large companies delivering on their commitments?
Firstly, it’s important to note that while Australia does have modern slavery on its shores, our greatest link to modern slavery lies in our imports. The APAC region, by far our largest trading partner, is home to two-thirds of the world’s slaves. The Global Slavery Index estimates that 24 million of the world’s 40 million slaves live in the APAC Region. With an estimated $12 billion worth of goods sold in Australia each year being at risk of connection to modern slavery, it’s almost a certainty that the average Australian consumer owns or consumes products that are linked to modern slavery; in particular, computers, mobile phones, and agricultural products. Furthermore, there is significant scope for modern slavery exposure in the supply chains of many large Australian companies. And while some industries are more high-risk than others, modern slavery can show up in many unexpected places as well.
The Modern Slavery Act: an exercise in box-ticking?
In 2019, Australia passed the Modern Slavery Act (MSA), requiring reporting entities (particularly, companies with $100m+ revenue) to lodge Modern Slavery Statements describing the due diligence they have conducted regarding potential risks of exploitation in their supply chains, including how they have assessed such risks, their remediation processes and so on. However, key criticisms of the Act include a lack of penalties for non-compliance, with critics highlighting that non-compliance with other corporate laws results in penalties. An analysis by human rights lawyer and activist Dr Vijeyarasa, published in the Adelaide Law Review1, finds a significant gap between the opinions expressed in submissions to the Parliament of Australia during the drafting process and the final Commonwealth law, with “a surprising disregard for the majority of submissions made to the Australian Joint Standing Committee on Foreign Affairs, Defence and Trade”; this analysis identifies several alternatives to what the Act looks like now, including that Parliament could have considered a risk-based approach for companies within a lower turnover bracket, forcing them to assess their exposure to exploitative supply chains.
Dr. Vijeyarasa finds “the architecture of the law has shifted the burden of determining if a human rights violation has taken place from government to businesses. For this to work, it must be accompanied by strong incentives to ensure such due diligence is adequate and that businesses respond to the outcomes of investigations. Yet, the Australian sanctions are weak at best.”
As a result, the MSA has been criticised as only targeting a fraction of Australian businesses, relying on ‘tick-a-box’ reporting mechanisms and not requiring the creation of an independent commissioner to ensure compliance2.
Furthermore, the COVID-19 pandemic has significantly increased modern slavery, worsening modern slavery risk exposure in turn. Companies should be acting now to ensure that they have robust strategies and measures in place, not only to tick the MSA boxes, but to ensure that they are taking proactive steps to go above and beyond the minimum requirements of the MSA. The ethical implications of profiting from modern slavery are of course reason enough to take action; but the reputational and potential legal risks to companies with proven links to modern slavery should not be underestimated.
Modern slavery in the ASX100?
While modern slavery is often thought of an overseas problem that Australia is only linked to through imports, the risks of modern slavery on our shores should not be forgotten; the Global Slavery Index estimates that at least 15,000 people live in modern slavery conditions in Australia. A recent analysis by the Australasian Centre for Corporate Responsibility finds that ASX100 companies are only reporting to shareholders and the public about their direct employees, while information about their ‘indirect’ workforces remains unknown; of the companies analysed, 42% made no material disclosure about their labour hire and/or contracting workforce in annual reporting documents. There is evidence that the use of labour hire introduces significant risks, include involvement in modern slavery, labour exploitation and theft; this data gap can put ASX100 companies at risk of perpetuating modern slavery in their domestic supply chains.
Furthermore, Monash University’s Monash Centre for Financial Studies has conducted an analysis of the ASX100’s Modern Slavery Statements, which find a wide dispersion in terms of the disclosure quality of the Modern Slavery Statements submitted in 2020; their report can be found here, including recommendations to companies, investors and government. Notably, the Centre recommends that companies collaborate with peers to maximise effectiveness, focus time and resources on areas of possible influence rather than areas of general concerns, and engage and educate suppliers. Similarly, analysis of 121 modern slavery statements submitted found that only 8% of reporting entities went beyond their Tier 1 (direct) suppliers, leaving them open to litigation (AFR).
Modern slavery is a complex problem, requiring many actors to work together effectively for better outcomes. For the most part, it is an illegal activity wherever it is being conducted, and significant efforts are taken to ensure that it remains an invisible one, further complicating the issue – how do you solve something that you cannot see? Fortunately, a significant emerging body of best-practice does exist; from working with modern slavery experts, to leveraging the power of data, to working together collaboratively across your industry to share knowledge rather than reinventing the wheel.
The power of data to combat modern slavery
Taking effective steps to combat modern slavery is often put in the too-hard basket, even by large companies with legislative obligations. Collaborating with your competitors isn’t something that comes naturally; most companies won’t have in-house expertise on modern slavery; and it’s hard to even know where to start. Unfortunately, this can and does lead to ineffective strategies and bare-minimum disclosure.
Data management and collaboration must both form key components of a modern slavery strategy. Here at Informed 365, we assist thousands of Australian businesses and consortia to manage their data more effectively, understand their risk exposure and work together towards combating modern slavery. Our work with the Property Council of Australia is an excellent exemplar of how companies can band together to do better; their collaborative platform powered by Informed 365 captures tens of thousands of suppliers and billions of dollars in annual procurement spend, providing a customizable framework including supplier questionnaires, risk analysis and more.
“Our strong intention is to create resources that are open-source for the entire sector, and that remove the barriers for suppliers to engage with our members on these issues. It is for that reason that the supplier questionnaire developed for this platform will be freely available for anyone to use, and it will be free for suppliers to log into the platform and provide responses to these questions. By only answering these questions once on the platform, we are also streamlining the reporting burden on our supply chain, a critical component of this initiative” – Frankie Muskovic, National Policy Manager, Property Council of Australia3
Informed 365’s platform enables at-a-glance and in-depth analysis, tracking, reporting, and predictive analytics. We enable organisations to protect their brand reputation, efficiently manage and monitor suppliers in real-time, meet and exceed government and consumer standards, and better understand and manage their supply chain.
As Australia’s leading data management tool for combating modern slavery, we’d love to demonstrate to your company the power of our platform to make better-informed ESG & CSR decisions. Get in touch today for a free demo and to understand how we can work with you to ensure your modern slavery commitments are much more than a box-ticking exercise.