Australian companies continue to fall short of developing robust responses to modern slavery risk management, according to fresh analysis by the Australian Council of Superannuation Investors.
The report from the proxy advice firm, ‘Compliance without ambition: Taking stock of ASX200 reporting under Australia’s Modern Slavery Act’, found that although investors support the ongoing identification and remediation of instances of modern slavery, only 8 per cent of companies identified a modern slavery incident or allegation. ACSI said it does not believe this accurately reflects the extent of the modern slavery challenge.
“Investors should reinforce to companies how material they consider the risks of modern slavery to be,” ACSI CEO Louise Davidson said.
“In the context of the Modern Slavery Act, it’s not just about financial materiality, it’s also about human rights, and modern slavery is clearly also a risk to the person. Investors also need to reinforce that important point.”
She added that investors can also reassure companies that identifying an instance of modern slavery and remediating can be good.
“We know millions of people are subject to modern slavery, but only 8 per cent of companies reported identifying an example in their business,” she said.
“This clearly doesn’t reflect the size of the problem, and the only way to fix it is to identify and remediate.”
Davison explained that practical steps can be taken once a modern slavery risk has been identified.
“If it’s in the supply chain, work should be done on supplier codes of conduct and procurement processes,” she said.
“Companies shouldn’t stop at identifying modern slavery risks. They should put practices and processes in place to address it.”
A federal government review of the Modern Slavery Act was finalised on 31 March. A key suggestion in its submission for the review was calling for the Act to be further strengthened by including an independent Anti-Slavery Commissioner to monitor the impacts and functioning of the law.
Additionally, it suggested a due diligence requirement to ensure entities are improving their risk assessment and mitigation; a more robust enforcement of non-compliance through penalties and other incentive measures; additional details in the mandatory reporting criteria to ensure entities are providing sufficient granularity in their modern slavery statements; and access to remedies for victims of modern slavery.
“There is nothing stopping companies from improving their reporting now,” Davidson said.
“We don’t actually need a strengthened law. Investors like ACSI want to encourage best practice, not just compliance.”
For example, she said companies can consider the government guidance that sits alongside the Act.
“It goes into some detail about how companies might report in a way that meets the expectations and aims of the Act, as opposed to just focusing on compliance,” she said.
Examples of best practice, according to the ACSI report, includes improving reporting on company structures and enhancing disclosures around supplier engagement and capacity building.