The Australian Government’s half-hearted formal response to last year’s independent review of the Modern Slavery Act is a lost opportunity to make Australia’s larger companies seriously address modern slavery in their own operations and supply chains.
There was no action on the review recommendation that the Government amend the Act to create a legal obligation on companies who report under the Act to conduct human rights due diligence to proactively address modern slavery.
The Government’s response – released on the International Day for the Abolition of Slavery – merely “noted” this recommendation and offered to “undertake consultations to identify how the Act could be amended to enhance its due diligence requirements”.
This lack of action is despite the Government acknowledging “broader global developments towards human rights due diligence”, including the recent passing of the European Union’s (EU) Corporate Sustainability Due Diligence Directive, requiring large companies in all EU countries to identify and address adverse human rights and environmental impacts in their operations.
‘A-rating’?
The latest annual benchmarking of the modern slavery statements of ASX 100 companies by the Monash Centre for Financial Studies should be read as confirming what is seriously wrong with Australia’s modern slavery regime.
The Modern Slavery Disclosure Quality Ratings study focuses on the “great increase” in the number of companies to which Monash now gives an ‘A rating’ for the quality of their modern slavery reporting (see chart below).
Unfortunately, this improved reporting seems to have had little real-world impact.
Monash also noted that while in FY2022 and FY2023, 33 ASX100 company statements mentioned potential modern slavery concerns none of these were confirmed to be instances of modern slavery (it should be noted Woolworths’ 2022 statement did confirm that a potential case of debt bondage in Malaysia initially reported in its 2021 statement was a case of modern slavery).
Problematic progress
Similarly, in the past few annual reports of the Investors Against Slavery and Trafficking Asia Pacific (IAST APAC), the only reference to any confirmed case of modern slavery by the companies they engaged with is the Woolworths case.
In its recently-published 2023-2024 annual report IAST APAC – whose foundation members include the Australian Council of Superannuation Investors (ACSI), Aware Super, AustralianSuper, Fidelity International and Ausbil – noted the “progress” it was making.
“In the 2022-23 financial year our engagement objectives began to shift from ‘Finding’ to ‘Fixing’ modern slavery risks in operations and supply chains. In the 2023-24 financial year this evolution continued with our engagements across 21 focus companies shifting from ‘Fixing’ to ‘Preventing’ modern slavery,” the report said (see chart below). IAST APAC says its engagement approach is inspired by the “Find It, Fix It, Prevent It” investor initiative being run by CCLA Investment Managers in the UK. Here “finding” means identifying or proactively searching for modern slavery; “fixing” means remedying cases of modern slavery; and “preventing” means ensuring they don’t continue or re-occur.
However, it seems strange that IAST APAC’s program can progress so quickly from finding to fixing/preventing when no modern slavery cases (apart from Woolworths) seem to have been identified in the first place. If companies are not finding cases of modern slavery (and believe they have done everything they can to find them) then it is unclear exactly how they can remedy them and/or prevent them from happening again.
Detecting is not failure
In its 2024 Modern Slavery UK Benchmark report released last month CCLA tells investors to “view cases where evidence of modern slavery is detected as ‘normal’ rather than de facto evidence of a governance failure”, and to focus attention on “companies that claim not to have found anything”.
CCLA’s benchmarking of the largest listed companies in the UK gives the highest weighting to ‘finding’ modern slavery’ (see pie chart below).
CCLA said only 30 of the 110 companies assessed either found evidence of modern slavery in their supply chains or indicators that some sort of forced labour was taking place (although this is dramatically higher than what ASX-listed companies report).
The chart below shows that while companies score reasonably well on statutory reporting and conforming with government guidance it is a different matter when it comes to active due diligence and achieving real impact in dealing with modern slavery.
CCLA noted that the part of its assessment which scores how companies are addressing the impacts of modern slavery on the people (Fix it) saw the lowest marks, with an average of just 1.6 marks out of 8 (see chart above).
This mark was of course also low because companies need to disclose a case of modern slavery that it has found before it can disclose actions taken to remedy it.
In its inaugural 2023 Benchmark report CCLA said only 59 companies had paid attention to assessing the risks of modern slavery in their own businesses, as opposed to 94 companies who had taken steps to assess the risk of modern slavery in their supply chain.
CCLA explained that “despite the established prevalence of modern slavery globally, many large firms believe there to be a low risk of issues in their supply chain”.
The 2023 report said “companies disclosed more information on identifying, assessing and managing the risks of modern slavery in their supply chains than in their business operations, implying that they see the greater responsibility to rest on their suppliers to reduce the risk.
“This is illustrative of ‘transferring responsibility’; by using assertive language with suppliers such as ‘mandates’ and ‘expects’ while using vague language such as ‘strive’ and ‘encourage’ with their own actions,” it said.
Wrong risk focus
A recent academic article Understanding Remedy Under the Australian Modern Slavery Act (Pryde et al 2024) also highlighted the problem of having appropriate remedies if companies are not acknowledging or identifying the presence of modern slavery.
“If companies are failing to identify the abuses that give rise to the need for remedy, let alone the contextual particularities of the abuse or rights-holder, they lack the requisite information to ensure that the remedy is effective in such a context,” the article said.
The Journal Of Modern Slavery article found “that the approach to remedy of many companies was not grounded in seeking to achieve restoration for victim-survivors, but rather in a formulation of remedy predicated upon purchaser-supplier relationships”.
“This means that rather than attempting to provide remedy to the individuals directly harmed and prevent recurrence, business is adopting a risk minimisation approach that predicates risk to business above risk to victim survivors and instituting ineffective practices,” it said.
The article also said while the Act is a crucial piece of legislation “it is just a first step” and it is “not facilitating access to remedy, primarily due to the absence of an explicit requirement’ for human rights due diligence.
Special rapporteur
Last month, the United Nations Special Rapporteur on contemporary forms of slavery, including its causes and consequences, Professor Tomoya Obokata made an official two-week visit to Australia.
At the end of his visit (just a few days for the release of the government’s response) Professor Obokata had urged the government to amend the Act to establish a due diligence mechanism.
Professor Obokata said companies needed to “view contemporary forms of slavery in a broader human rights context, based on international human rights standards, including the UN Guiding Principles on Business and Human Rights”.
PALMing off the problem
Professor Okobata – who met with Australia’s recently appointed Federal Anti-Slavery Commissioner (and former Labor Senator) Chris Evans – was particularly concerned by the treatment of temporary migrant workers in Australia under schemes such as the Pacific Australia Labour Mobility (PALM) and Working Holiday Maker programs.
The Special Rapporteur said he received “credible information from a large number of stakeholders, including workers themselves, which clearly reveals disturbing, sometimes very serious, patterns of exploitative practices by employers, labour hire companies and migration agents in various sectors”.
Australia needs to more effectively the power imbalance between employers and employees built into schemes such as PALM, he said.
Be our guests
The Office of the NSW Anti-slavery Commissioner recently released a report Be Our Guests: Addressing urgent modern slavery risks for temporary migrant workers in rural and regional NSW Wales that found temporary migrant workers, particularly low-wage workers in agriculture, horticulture and meat processing face risks of debt bondage, deceptive recruiting, forced labour and, in extreme cases, servitude, sexual servitude or even human trafficking”.
The report said the fact that large numbers of PALM workers had disengaged from the program “further amplifies underlying modern slavery risks and broader risks to safety and wellbeing”(see Figure 1 below).
Unpublished document
Back to Monash’s report, which gave an A-rating to Aristocrat’s 2023 modern slavery statement, and “bookmarked” page 24 (see below) showing its ‘Modern Slavery Governance Structure’ as an example of effective disclosure.
Monash said Aristocrat’s Modern Slavery Working Group was “serving as a bridge between internal stakeholders, the project stakeholder group, and board leaders”.That may well be true, but it seems Aristocrat still hasn’t managed to find any modern slavery.
However, the company did proudly reveal that “while no modern slavery incidents were reported, as part of the supplier audits carried out in Financial Year 2023, the Group did identify an area for a supplier to remediate the supplier’s processes”.
Aristocrat said, “one supplier had indicated their [modern slavery] policy was a finalised and published document”.
“Upon request to sight the document during the audit, it was discovered that no published document existed,” it said.
“Instead, this brought to light that the document was only in a draft stage. Actions were taken by the supplier to commit to a date to publish their policy”.
Given this level of modern slavery sleuthing, the gambling company clearly deserved its A-rating.
