The $6.5 billion LUCRF Super fund is calling on asset owners to keep up the pressure on Coles Group to get the supermarket giant to address modern slavery risks in its supply chains.

The industry super fund lobbied its peers to support the first modern slavery-related shareholder resolution in Australia ahead of the retailer’s annual general meeting in Melbourne. The resolution won 12.8 per cent of the vote which included the support of $140 billion asset manager, IFM Investors.  It was co-filed  with the Australasian Centre for Corporate Responsibility (ACCR), US-based Mercy Investment Services and Catholic society St Columban’s Mission in September.

“We have seen a lot more from Coles in the last six weeks than we have in the previous six years,” said LUCRF chief investment officer Leigh Gavin before the AGM. “It’s important that investors keep up the pressure on Coles to implement meaningful change in the way they oversee modern slavery risk.”

The resolution called on Coles to align its ethical sourcing policies and supplier requirements in its domestic local horticulture supply chains to industry best practice. The company’s own brand fresh fruit and vegetables are estimated to work with 2,500 suppliers across Australia who then employ around 350,000 people.

It was the first time shareholders were able to vote on such a resolution since the Modern Slavery Act came into effect in Australia in January. The law requires large businesses to report annually on actions to address modern slavery risks in their operations, in line with United Nation’s guiding principles on human rights.

ACCR’s director of workers Katie Hepworth said Coles had not done enough since they first started to engage with the company and its parent Wesfarmers in 2017 about the risks stemming from modern slavery and labour rights abuses in its supply chain.

“Among the industry superannuation funds there is a wide amount of support,” said Hepworth, who has briefed asset owners and proxy advisors ahead of the vote. “There is definitely a level of support for Coles to do more,” she added.

Coles will be required to release their first report under the new Modern Slavery Act in the second half of 2020 and identify both the risks in their supply chain and the steps to mitigate them.

“Several workers stood up at the Coles AGM and described instances of worker abuse and exploitation they had faced while working on Cole’s supply chains,” said Hepworth after the AGM. “Board members were emphatic that they need to hear about this abuse but Coles reiterated its commitments to models that have clearly failed.”

Institutional investors have become increasingly worried about owning businesses that exploit slave workforces through their supply chains. The UN-backed Principles of Responsible Investment (PRI) estimates that more than 40 million people around the world are suffering some form of labour abuse, with two-thirds residing in the Asia Pacific.

Sarah Jones is the deputy editor of Investment Magazine. She previously worked for Bloomberg News in London for more than 12 years covering equity markets and global asset management. Prior to moving to the UK, she worked for Australian Associated Press in Sydney covering economics and monetary policy.
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