From the voluntary to mandatory regime: An account of modern slavery disclosure from Australian companies
27th October 2022
Authors: Ms. Isabella Panozzo, Dr Searat Ali, Professor Millicent Chang, Dr Jenny Wang
An estimated 40.3 million people are victims of modern slavery (International Labour Organisation (ILO), Walk Free Foundation and International Organisation for Migration, 2017) and as this estimate continues to rise (Stringer and Michailova, 2018), so too do pressures on government and business to take 'immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking' (SDG 8.7, UN Department of Economic and Social Affairs, 2015). This begs the question: how, amidst a plethora of regulatory and humanitarian initiatives, does slavery continue to emerge and persist in a modern world?
The governance gaps created by globalisation have enabled companies to structure their activities in such a way that they operate on the margins of institutions where they can bypass rules and capitalise on a cheap and unprotected workforce (Ruggie, 2008, p. 3; ILO, 2005; Michailova and Stringer, 2018). While developing countries tend to bear the brunt of this – a situation Crane (2013, p. 54) refers to as 'value trap slavery' – there is compelling evidence to suggest that modern slavery is everywhere, even in Australia (Christ, et al., 2020).
To eliminate this serious societal and business issue, the Australian federal government introduced the Modern Slavery Act 2018 (Cwlth) (hereafter 'the Act'), requiring companies with more than $100 million of revenue to provide an annual disclosure statement outlining how they identify and mitigate modern slavery in their operations and supply chain. The Act follows similar laws enacted in the United Kingdom (UK) and American state of California, which have been criticised for allowing companies to approach modern slavery disclosure as a mere tick-box exercise (Flynn and Walker, 2020; Birkey et al., 2016). We test whether this observation is applicable to the Australian Act by comparing modern slavery disclosure of the Australian listed companies overtime (i.e., pre-Act 2018 and post-Act 2020) from the two largest sectors (i.e., financial and materials). This is a timely investigation as there is both an immediate urgency and opportunity to substantively improve Australia’s response to modern slavery during the first legislative review of the Act in 2022-23.
The results show that between 2018 and 2020, there has been a small, albeit significant improvement in both the volume and quality of modern slavery disclosure across both industries. On average, materials companies have reported more words per statement than financial companies. They have also included more quantitative, higher quality information. While they are relatively shorter and of low quality, financial companies improved their modern slavery disclosures at a faster rate than materials companies, who were early adopters of reporting. We also observed a change in the strategic direction of companies in the post-Act period. This observation is striking when we compared ANZ’s disclosures of remediation in 2018 with that from 2020:
'If prospective or existing customers do not meet our standards and are not willing to adapt their practices in an appropriate timeframe, we may decline financing or exit the relationship' (ANZ, 2018, p. 2)
'If through our assessment a supplier’s performance is found to be below acceptable standards, our preference is to identify best practice and engage with them to remediate the issues, rather than to terminate the relationship. This is consistent with the approach advocated in the UN Guiding Principles on Business and Human Rights' (ANZ, 2020, p. 5).
Although these disclosures signal the adoption of a new moral compass in the post-Act period, there is a long way to go before companies can ensure that all voices are heard. Continuing with the theme of ‘remediation’, the analysis showed that companies only disclosed an average of 242 (106) words per statement in 2020 (2018). We acknowledge that for some companies, remediation may not have required much attention because there were 'no incidents of modern slavery or human trafficking' during the reporting period (BHP, 2020, p. 10). However, it is difficult to discern whether this is accurate or whether it reflects inadequate risk assessment and management processes. In some cases, disclosures of remediation may have been purposefully avoided, which supports the tick-box argument. But in some cases, business leaders have 'felt that stakeholders may not understand that identification and disclosure of cases could be an indicator of an effective modern slavery response' (Coward et al., 2021, p. 51).
This belief highlights the need for all stakeholders to work with, and not against companies to call out inequity and take steps towards a fairer society. It is necessary, given the current non-punitive measures increase the risk of the Act amounting to a statutory endorsement of voluntary reporting.
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