OPINION | The importance of investor due diligence on matters like environmental protection is already well understood and institutionalised. Now it is time to apply that discipline to ending modern slavery.

Earlier this year, billions of dollars were wiped off Fiat’s share price after United States regulators found the company had cheated emissions tests for diesel cars.

This is just one example of a business losing consumer trust, share price and brand value by mismanaging environmental impacts in the public spotlight. The Fiat incident followed a very similar case at Volkswagen, and there are countless other examples of companies destroying value in a similar way.

Just as investors need to secure against environmental risks, they need to secure against abuse of the people who are working for – or in the supply chain of – the companies they invest in.

The risk is real. According to the 2016 Global Slavery Index, an estimated 45.8 million people around the world are engaged in modern slavery. And while many think of slavery as a relic of the past, the unfortunate truth is that today’s criminals are adept at finding regulatory gaps, corrupt officials or just weaknesses in social systems, and using them to take advantage of vulnerable people for their own profit.

Consider the situation of the Thai fishing industry, which is worth an estimated $7.3 billion dollars per year and exports to major clients throughout Europe, Asia and America.

According to the Australian Department of Agriculture, “almost all canned tuna sold in Australia comes from Thailand”. Since April 2015, more than 2000 men have been identified and rescued from lives of slavery on Thai fishing vessels, some of which were operating in Indonesian waters.

Men who had been locked up in cages and subjected to abuse including whipping with stingray tails were discovered and freed from the island of Benjina, Indonesia, just 650 kilometres from Australian shores. Many of these enslaved fishermen came from neighbouring south-east Asian countries, notably Myanmar, Thailand, Cambodia and Laos.

Thailand’s seafood industry provides only a small glimpse of the lucrative global slavery economy today.

The United States Department of Labor tracks forced labour in products and recently published its updated list of goods produced by forced labour. The list includes more than 100 products, as diverse as bamboo from Myanmar and electronics from Malaysia.

As governments increasingly look to regulate this issue, the nature of the risk becomes more salient. Anti-slavery laws are already in place in the US, the United Kingdom and France, and a Modern Slavery Act is being considered in Australia.

Investment risk

The recent case of David v Signal in the US is one example of the very real business risks that come with not taking responsibility for slavery and worker abuse in supply chains.

In that case, recruitment agents hired by Signal – a US marine services company – were subjecting hundreds of Indian workers to forced labour. Misconduct included withholding workers’ passports, demanding extortionate recruitment fees and inflicting general abuse such as squalid living conditions and threats of serious harm.

Signal claimed it was misled by the recruiters and was not aware of the offences. The court rejected its arguments and held both Signal and the recruitment agent responsible. Signal was ordered to pay US$14 million ($17.6 million) in compensation to victims, and settled the case for US$20 million ($25.1 million) before later filing for bankruptcy.

The trigger may be concern about increased compliance risk, or simply a moral compass. Either way, investors should be demanding that the companies they invest in have anti-slavery policies in place and are making serious efforts to roll that policy out across the business. No responsible investor wants to inadvertently support crimes of this gravity.

Dr Fiona David is the executive director of global research at the Walk Free Foundation, which produces the Global Slavery Index. She is a lawyer and criminologist.  The Walk Free Foundation is an international human rights organisation with a mission to end modern slavery in our generation. The foundation was founded by Andrew and Nicola Forrest and seed-funded by their philanthropic vehicle, the Minderoo Foundation.

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