New report shows companies failing to comply with modern slavery laws
The Modern Slavery Act 2018 (Cth) (MSA) was widely hailed as a critical first step by Australia towards tackling the global problem of modern slavery, with the government proclaiming that it would transform the way businesses respond to modern slavery by prompting a business-led ‘race to the top’.
A new report, Paper Promises? Evaluating the early impact of Australia’s Modern Slavery Act, examines statements submitted to the Government’s Modern Slavery Register by 102 companies sourcing from four sectors with known risks of modern slavery: garments from China, rubber gloves from Malaysia, seafood from Thailand and fresh produce from Australia.
Executive Summary
The Modern Slavery Act 2018 (Cth) (MSA) was widely hailed as a critical first step by Australia towards tackling the global problem of modern slavery, with the government proclaiming that it would transform the way businesses respond to modern slavery by prompting a business-led ‘race to the top’.
Two years into its operation, close to 4,000 statements have now been published on the government’s modern slavery register. Yet the extent to which the legislation
is transforming business practices or making a tangible difference to the lives of workers remains highly uncertain.
This report analyses 102 company statements published in the first reporting cycle of the MSA, to evaluate how many companies are starting to implement effective measures to address modern slavery and how many are lagging.
Rather than focusing on the largest ASX-listed companies, we examined statements published by companies sourcing from four sectors with known risks of modern slavery:
– garments (sourced in China)
– healthcare – rubber gloves (PPE) (sourced in Malaysia) – horticulture (sourced in Australia)
– seafood (sourced from Thailand)
We first examined whether the statements complied with the mandatory reporting criteria under the MSA and provided meaningful information against all these criteria. We then compared the information about modern slavery risks in each statement with publicly available information about the risks and working conditions in these sectors in order to understand whether companies are appropriately identifying the most salient risks present in their operations and supply chains. Finally, we analysed whether companies appear from their statements to be taking effective and meaningful actions to address these risks.
“Many company statements remain mere ‘paper promises’ with little evidence of effective action in the areas most likely to improve conditions for workers…”
Snapshot of key findings
Companies are failing to comply with the mandatory reporting requirements
Most companies reviewed demonstrate superficial and incomplete compliance with the reporting requirements of the MSA; addressing just 59% of the mandatory criteria
on average. Less than one in four companies (23%) fully address the mandated reporting requirements, with
areas such as risk assessment, remediation, measuring effectiveness, and consultation particularly poorly handled.
Companies are failing to identify or disclose obvious modern slavery risks
More than half of the companies reviewed (52%) are failing to identify and disclose salient sectoral risks in their operations and supply chains, despite sourcing from sectors that have been repeatedly identified in public reports as having systemic abuses.
- Three in four garment companies sourcing from China fail to mention risks of Uyghur forced labour in their supply chains.
- More than one in two healthcare companies sourcing personal protective equipment (PPE) gloves from Malaysia fail to identify modern slavery risks in that industry, despite obvious increased risks posed by the COVID-19 pandemic.
- Just under one in two food companies identify sourcing horticultural produce in Australia as high-risk for modern slavery practices.
- Two in five seafood companies fail to identify seafood as a high-risk product in their supply chain.
Companies are failing to demonstrate effective actions to address risks
Less than a third of companies reviewed (27%) could demonstrate that they are taking some form of action against modern slavery risks that lifts supplier working conditions or tackles root causes.
- Only one in four companies report that they undertake human rights due diligence on new suppliers at the selection stage.
Less than a fifth of companies (19%) disclose procedures to ensure responsible purchasing practices (eg: adequate pricing, prompt payment, managing workload changes).
- Just 14% of companies express a commitment to ensuring workers in their supply chains are paid a living wage.
- Only 13% of companies describe processes for ensuring that workers are not being charged recruitment fees.
- Only 34% of companies disclose collaboration with key stakeholders such as trade unions, migrant worker groups, or civil society organisations, with just 13% demonstrating evidence of stakeholder consultation in developing or reviewing relevant policies.
Across all four focus sectors, our analysis did reveal small clusters of leading companies that appear at least from their reports to be taking a more detailed and rigorous approach to both their reporting obligations and actions to address modern slavery risks. Significantly, this is not always dictated by size, with several of the smaller operators achieving strong results in significant areas such as responsible purchasing. We have highlighted examples of these better practice approaches throughout this report by way of guidance for other companies wanting to ensure that the changes they are implementing ultimately reach workers and change their lives for the better.
This report covers the first stage of a longer collaborative study on the effectiveness of the MSA. An analysis of the second round of company reporting is already underway as part of that study and it remains to be seen whether companies ultimately lift their game over time. So far, however, it seems that many company statements remain mere ‘paper promises’, with little evidence of effective action in the areas most likely to improve conditions for workers.
Where to next?
The next 12 months will be critical to strengthening the corporate practices that underpin mandatory reporting.
To drive meaningful change, companies and other reporting entities must examine their business models and procurement practices and start embedding responsible sourcing practices that support workers’ rights, and avoid downward pressure onto suppliers and, ultimately, workers themselves. They must integrate due diligence throughout their operations and supply chains and develop more worker-centric approaches and processes based on genuine stakeholder engagement.
As the three-year review of the MSA approaches in 2022, the Government should also be considering ways to strengthen the legislation so that it drives concrete action and improvement by companies, particularly those that are currently lagging.
At a minimum, consideration should be given to the addition of penalties and other consequences for companies that fail to report, provide false or misleading information, or submit incomplete reports that fail to address the mandatory criteria. The Government should also provide further guidance and support for companies sourcing from high-risk sectors or locations such as those identified in this report to assist them to address these risks in meaningful ways.
More fundamentally, however, the legislation should be reoriented towards requiring companies to take action to address modern slavery, rather than simply reporting on their existing approach. Many other countries are now moving beyond voluntary reporting towards enforceable obligations on companies to investigate and address modern slavery and other serious human rights abuses in their supply chains. If Australia is serious about ending modern slavery, it should be moving in the same direction.
Read full report here.