Modern slavery no match for market forces

By Mark Smith, FSC Media Manager

The Government may only be implementing a simple reporting process with its proposed modern slavery legislation, but it will go a long way to blighting the evils of human trafficking and forced servitude through the power of market forces.

Modern slavery is a significant global issue, with more than 45 million people around the world trapped in some form of slavery.

This staggering figure involves a range of exploitative practices including human trafficking, forced labour, wage exploitation, child labour and debt bondage.

Reporting requirement

On 16 August, the Minister for Justice released a consultation paper on the Government's proposed model for a Modern Slavery in Supply Chains Reporting Requirement.

The proposed model will require large corporations and other entities operating in Australia to publish annual statements outlining their actions to address modern slavery in their operations and supply chains.

The FSC represents institutional investors – fund managers and superannuation funds. As stewards of $2.7 trillion and significant investors in Australian companies, we take an interest in ensuring increased transparency and disclosure by corporate Australia.

This is because investors require increased disclosure in order to accurately assess and price risks and make informed decisions about where to invest their money, the vast majority of which is derived from the contributions made by ordinary Australians to their superannuation.

The higher reporting standards proposed by the Government leverage standard institutional due diligence practices to shine a spotlight on company supply chains.

Companies that do adhere to the new reporting regime by ensuring all workers in their supply chains are properly employed and paid fairly will attract investment from pension funds and investment managers. Those with less robust reporting mechanisms will not.

Positive feedback loop

This is a self-policing system that will continuously lift standards as time goes on.

To attract investment from institutions, listed companies will need to prove they have thoroughly investigated their supply chains for signs of modern slavery.

At the same time, to avoid the devastating reputational risk that would accompany any evidence that a large asset owner held shares in a company that was shown to exploit workers, institutional investors would need to raise their standards of due diligence.

It’s a positive feedback loop that very quickly leads to best practice.

It’s also likely that these listed companies, asset managers and pension funds operating in Australia are likely to have operations around the world. Any improvements in Australia would no doubt introduce best practice disclosure throughout their global businesses.

It’s clear how a simple reporting framework can quickly remove the incentives for unscrupulous businesses, traffickers and other participants to further the modern slave trade.

As Minister for Justice Michael Keenan said in announcing the proposed legislation: “It will support the business community to respond more effectively to modern slavery, raise business awareness of the issue and create a level playing field for business to share information about what they are doing to eliminate modern slavery.

“Importantly, it will also encourage business to use their market influence to improve workplace standards and practices.”

Building on a strong record

It is an unacceptable reality that millions of people are trapped in modern slavery.

Australia has one of the strongest responses to modern slavery in the world, including tough criminal offences, dedicated teams within the Australian Federal Police and a Government-funded support program for victims. This legislation will build on that record.

The consultation paper is available online at the modern slavery consultation page on the Attorney-General's Department website. The deadline for submissions is 20 October 2017.