* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
Why investors have doubts over proposed law on modern slavery
Amy Sinclair is Regional Representative for Australia, New Zealand & Pacific at the Business & Human Rights Resource Centre
Noa picks plums for the Australian market. He works up to 80 hours a week in picking season, resting only when it rains. Thousands of workers like Noa, many from Pacific Islands, populate regional centres across Australia’s food bowls. They provide the much-needed seasonal workforce relied on by Australian farmers and retailers to keep supermarket shelves stocked with fresh produce. Overwork and underpayment are reportedly rife, but workers, fearful of blacklisting or deportation, rarely complain.
Today, the Australian Government introduced a new bill to Parliament to improve conditions for workers like Noa by stamping-out egregious exploitation in supply chains supplying goods to Australian consumers. A Modern Slavery Act could be enacted in Australia within the year. But opinions differ about whether the imminent law is fit for purpose, with investor groups arguing that, without an accompanying list of reporting entities, its value is limited.
Modelled on the UK’s landmark legislation of 2015, Australia’s Modern Slavery bill aims to create visibility on corporate measures to eliminate harmful labour practices from supply chains. Retailers can be easily caught-out. Recent scandals include supermarkets supplying fresh fruit, harvested by exploited migrant workers, and prawns fished, or processed, overseas by slaves. With growing awareness about the prevalence of modern slavery in consumer supply chains, calls for action have intensified.
To address this, the Australian Government will require companies to report on modern slavery. The Modern Slavery Act will apply to all Australian companies, and foreign companies operating in Australia, with an annual consolidated turnover of $100 million or more. Reporting entities must publish a statement each year, detailing action taken to address modern slavery. The statements will be held on a public, government-run register where they can be accessed and scrutinised.
The bill does not include financial penalties for companies that fail to report. The intent behind the legislation is for the power of public scrutiny, particularly by investors, to induce companies to comply with the reporting requirement. Whether or not a company produces a statement when required by law is a blunt, but accurate, indicator of how seriously the company takes the issue. Investors need to know this to help them manage their risk and due diligence.
Transparency and availability of information about companies’ responses will be key to the success, or otherwise, of the new legislation.
In thrashing-out the details, legislators, civil society groups and business itself, have agreed, in the main, on one fundamental – Australia’s new law should not be a carbon copy of the UK’s Modern Slavery Act. It should build on the UK’s example, but mitigate its weaknesses.
Australia’s Modern Slavery bill does include significant refinements to the UK model. It introduces mandatory reporting against specified criteria, an improvement on the UK Act which merely suggests information that companies may disclose. The central register is another plus.
The greatest failing of the UK’s modern slavery regime is, however, in danger of being replicated in Australia – flagrant and widespread non-reporting by companies. With no financial penalties for non-reporters, compliance with the Australian Modern Slavery Act will rely entirely on public scrutiny by investors, consumers and others. If responsibility for enforcement is to rest with these groups, they must be equipped for the task.
Critically, under current Australian proposals, there won’t be a public list of who must report. Without this information, if companies fail to act, this fact will remain hidden. RIAA’s Nicolette Boele says a list is key to the integrity of Australia’s modern slavery response, enabling investors to engage with companies that fail to report. “Without the roll call, we can’t tell who is missing from class”, she says.
In the UK, the absence of a list has proved a serious legislative weakness, with reportedly a third of companies failing to report. The UK government is now seeking to obtain a list, in a reversal of its initial position that this was not feasible.
An effective Australian Act can accelerate action against modern slavery to improve conditions for workers like Noa. But without the necessary tools, Australia’s Modern Slavery Act will provide insufficient visibility to combat abuse. Laggards will stay hidden, continuing to be rewarded with higher profits, at the expense of workers.
A public list of reporting entities must accompany the Modern Slavery Act. Australia’s new anti-slavery transparency regime will then be suitably structured to meet investor needs, effectively challenge the status quo and lead meaningful action against modern slavery at home, and abroad.