Modern Slavery
The Global Slavery Index revealed that 41,000 people in Australia and 49.6 million globally are currently experiencing modern slavery – a deeply troubling statistic.
These figures emphasis the urgency for the Federal Government to strengthen Australia’s response to modern slavery, and for companies to address the risks of modern slavery within their operations and supply chains in more depth than is currently assessed.
In Australia, the Modern Slavery Act 2018 has been in effect since 1 January 2019, requiring companies to report their modern slavery risk identification and management processes on an annual basis. A three-year review of the Act calls for the strengthening of company reporting obligations, and the potential for penalties relating to non-compliance with the Act’s requirements. It is likely that many reporting entities will need to modify their approach.
In the Law:
Modern slavery is a complex issue that encompasses a range of human rights violations. Forced labour, accounting for approximately 50% of all victims trapped in slave-like conditions, is the most prevalent form. Tactics typically employed in these circumstances include the manufacture of debt, illegal withholding of passports, identify documents and wages, extremely long working hours, lack of a contract, coercion, and psychological abuse.
A review into the first three years of practice under the Modern Slavery Act offered 30 recommendations for improvement. Whilst the recommendations are not yet legally binding, it is likely that they will be adopted. The recommendations proposed changes, including lowering the reporting revenue threshold from AU$100 million to AU$50 million consolidated revenue, introducing penalties for non-compliance, requiring entities to implement a modern slavery due diligence system, and establishing a high-risk declaration procedure.
In the Company Boardroom:
Substantial criticism has been received by Australian companies regarding the quality of many, if not most, of their annual Modern Slavery Statements. A “box ticking” mentality has been observed with regard to reporting requirements, ultimately driving a ”race to the middle” instead of the necessary “race to the top”.
In the event that the recommendations are adopted, reporting entities should seek advice on the adequacy of their current due diligence and reporting approach. The period between now and the implementation of the Act’s proposed amendments is a crucial window for companies to assess their past performance and develop a plan for moving forward.
In the Investment Houses:
When reviewing a company for its ESG considerations, modern slavery and human rights are a key component of the ’S’ pillar. Investment houses may prompt companies to understand modern slavery risk further down their supply chain. This is difficult to do even if these suppliers are onshore.
Procurement practices of companies are also assessed by investment professionals. Do procurement screens exist to alleviate the risk of contracting firms with modern slaves in employment? Are there audits undertaken by procurement professionals to ensure contracts are fair and just? Are their general practices responsible and sustainable? If a company is not able to adequately respond to these types of questions, it may limit their ability to be included in certain investment funds.
Our View:
Modern slavery is an abhorrent concept, that needs to be eradicated from today’s society immediately. We understand that hundreds of company Modern Slavery Statements have been published to date, and yet very few modern slaves have been found. This raises the question: Where are they?
We welcome the tightening of the Modern Slavery Act in Australia to protect our most vulnerable workers. The recommendations suggested have the capacity to significantly improve Australia’s modern slavery prevention and response efforts. Early consideration of these potential changes is essential for companies to remain prepared for future expectations.
For additional information on this important topic or ESG assistance, contact us today at info@anabranchesg.com.au
