Recent research by the Australian Council of Superannuation Investors (ACSI) has identified financial services as a high-risk sector for modern slavery.
Eradicating slavery is a mainstream corporate responsibility that is now enshrined in law. Under the new Modern Slavery Act, Australian business must report on their exposure to modern slavery risk – this includes superannuation funds.
The term ‘modern slavery’ covers a range of practices that use coercion, threats, violence or the abuse of power to exploit and deprive people of their freedom.
This includes human trafficking, labour and debt bondage, deceptive recruiting for labour or services and child labour, among others.
More than 40 million people globally are living and working in slave-like conditions, according to the International Labour Organization. Of these, the 2018 Global Slavery Index estimates that 15,000 are living in Australia.
Until recently, Australian businesses were not obliged to assess or address their exposure to slavery. ACSI has engaged with listed companies on labour and human rights standards for many years and campaigned actively for a modern slavery reporting requirement.
Legislation requiring businesses to report on slavery in their operations and supply chains commenced on January 1, 2019.
The Act requires businesses with more than $100 million consolidated annual revenue to produce an annual public Modern Slavery Statement and report on the effectiveness of the measures they are taking to manage modern slavery risk.
Most Australian super funds (excluding SMSFs) meet the revenue threshold and will be required to report.
The Act is short on details regarding its application to different types of businesses. We have been advised by the Department of Home Affairs that it will produce guidance on how the law applies to super funds.
The first wave of Modern Slavery Statements is a way off, however, giving funds adequate time to prepare.
Businesses don’t have to report until they have a full year of operating under the new legislation. For funds that have a June 30, year end, this means reporting to June 30, 2020.
Engaging with suppliers
The risk of slavery in the apparel and textile sector is well known, but recent ACSI research identified a further five ASX200 sectors with high exposures to modern slavery: financial services; mining construction and property food, beverages and agriculture healthcare.
Super funds are exposed through their participation in the financial services sector. Funds typically rely on a highly skilled workforce, meaning their direct business operations are unlikely to be affected.
However, they may be exposed through their supply chains. Activities such as IT procurement, e-waste disposal, sourcing of promotional merchandise and facilities management (such as cleaning and building maintenance), for example, all give rise to the risk of modern slavery.
Funds need to consider how they can engage with their suppliers (including second tier suppliers and beyond) to assess their exposure.
As well as being subject to the Act, super funds can play an important role in encouraging meaningful disclosure by listed companies. Investors are ready to work with companies to identify and end forced labour practices.
Through our company engagement program, ACSI will ensure that companies are aware of investor scrutiny on this issue.
We will call out companies that don’t take their reporting obligations seriously to enable the market to make informed decisions. Companies that fail to look or inquire fully will be judged harshly by investors.
The financial services sector is in the very early stages of managing its exposure to modern slavery, having traditionally considered itself low risk.
ACSI’s new guide for companies and investors, called‘Modern Slavery: Risks, Rights and Responsibilities’ (available at www.acsi.org.au) will assist all businesses to prepare to meet the new reporting requirements.
Right now, Australian businesses have an opportunity to make a real difference in the fight to end slavery. They must commit the necessary resources to investigate and report on their exposure and take steps to reduce.
No one wants to be complicit in perpetuating slavery. But that’s exactly what businesses who fail to act will be.