One in five large Australian businesses are likely to fail their legal reporting obligations on the effectiveness of modern slavery actions in their supply chains by the end of 2021, a review of statements to the Australian Modern Slavery Register shows.
Analysis by the University of South Australia says that by midnight on 31st December, those businesses with a turnover of more than $A100 million in Australia won’t have reported on the risks of modern slavery in their operations and supply chains, and actions to address those risks. The reporting is a requirement for major companies under Australia’s Modern Slavery Act, which came into effect on 1st January, 2019.
Researchers Dr Katherine Christ (top) and Professor Roger Burritt (below).
In their research paper, ‘Exploring effectiveness of entity actions to eliminate modern slavery risk – Early Australian evidence’ published in the journal British Accounting Review, lead author Dr Katherine Christ and Professor Roger Burritt from the Australian National University assessed the first 255 modern slavery statements published on the Australian Government’s register by 27th December, 2020.
The paper said, “[r]esults indicate great diversity in approaches to reporting on effectiveness of actions, ranging from a total lack of reporting, through basic compliance, to going beyond compliance”. Analysis of the modern slavery statements found that 38 entities (15 per cent) made no mention of effectiveness, 69 (27 per cent) mentioned aspects of effectiveness in the general text of their Modern Slavery Statement or MSS, while 148 (58 per cent) addressed effectiveness in a separate sub-section.
The paper said “somewhat in defiance”, 15 per cent of entities reporting “do not address effectiveness in their MSS. They fall short of the requirement to provide a descriptive report on how they effectively manage modern slavery in their operations and supply chains”.
This included Amari Metals Australia, American Airlines, the Victorian Independent Schools Superannuation Fund, Chartered Accountants Australia and New Zealand, Osaki Electric Co, Bisley Workwear, Arup Australia and Tabcorp Holdings.
Another entity, Western Health, said there were “no specific identified risks and therefore there can be no assessment of the effectiveness of any actions’.”
Santos Limited and Baby Bunting Group both described and identified planned actions and goals for their modern slavery roadmap, as well as Fujitsu Australia and Sun Rice, while the ANZ Bank, Lululemon Athletica Australia, Simba Textile Mills and Cromwell Corporation had stated measures to increase accountability.
Speaking to Sight this week, Dr Christ said there was no particular profile of the kind of businesses that were not complying with reporting requirements, but also of concern were companies that had reported they were not undertaking any assessment of modern slavery in their supply chains.
“You would expect that they could come up with some way of assessing their effectiveness and complying with all the requirements. Even though we have got one in five that aren’t complying at all with this requirement, a lot of the others are saying ‘well, we are not assessing it’,” she said. “Strictly speaking, they are complying with the Act, because they’re saying, ‘we don’t assess it’, so that’s a problem too.”
She said there was a lot of confusion on the part of business about what to do, and many were waiting to see how consumers, buyers and non-government organisations responded to their initial statements.
Global estimates of modern slavery, published by the International Labour Organization and the Walk Free Foundation, suggest more than 40 million people were living in modern slavery in 2016, of which about 70 per cent were women and girls.
Dr Christ said there were opportunities for churches, Christian organisations and NGOs to partner with business to tackle issues like bonded or slave labour, as those organisations often had first-hand knowledge on the ground.
“What we need is a ‘top-down’ approach, where we get the commitment from business and push it down the supply chain, but we also need a ‘bottom-up’ approach’; so we all need to understand the conditions right at the end of the supply chain: why they come about – socio-economic, cultural – so that ultimately we can bring these two approaches together in what we often refer to as a ‘twin track’ approach.”
She said really good businesses would seek to work with communities where cultural challenges made breaking the bonds of slavery difficult, including setting up schools and initiating small loan schemes.
“I think business can be creative. Just look at some of the technological problems they’re able to solve. They need to start putting their thinking caps on when it comes to some of these socio-economic problems because they really have been a big contributor to some of what has happened.
“Yes, it’s gone on in these countries for years, it’s culturally embedded, but at the end of the day, Western business offshoring to these places to take advantage of it – they’ve certainly not helped and they’ve made it part of their business model.”
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While the focus of their analysis was on large companies, Dr Christ acknowledged more needs to be done to educate a broad range of business enterprises, including smaller companies.
“When you talk to a lot of SMEs [small to medium enterprises]…they don’t understand this issue at all. They don’t know it exists; they don’t know what to do about it,” she said.
This was particularly problematic when some of them were being approached by buyers from large companies who wanted assurances of supply chains.
“I would like to see the government take charge of to a greater extent. I think we need more education programs for [SMEs] – the agricultural sector is a big one.
Their review of compliance statements revealed they were currently falling short “and will need to move beyond the processes of assessing effectiveness of actions, to reveal whether actions are actually effective, as for example Santos, BT Australasia and CSR Building Products already do. These entities go beyond compliance with the legislation”.
Australia’s parliament is due to review its Modern Slavery Act in 2022 and Dr Christ said submissions to strengthen the legislation and give it “more teeth” are likely to be received from herself and organisations such as Australian Red Cross and Be Slavery Free.
This includes better guidelines around assessing effectiveness of actions, addressing false or misleading statements and introducing a penalty system for non-compliance.
“I don’t think it’s acceptable or good enough for large business to say, ‘there is no way of doing this’; these are big companies, they’ve got smart people.”
She said there currently are no penalties – financial or otherwise – in the Act, something that a “large number of non-government organisations, academics and some of the businesses that are better players in this space” have said needs to change.
Correction: A comment from Dr Katherine Christ was reported as ‘twin trap’. It has been corrected to ‘twin track’.