Australian companies need to take modern slavery seriously

“We don’t have any modern slavery in our supply chain.”

This is what I recently overheard at a business meeting. It begs the question whether Australia’s corporate world is aware of modern slavery and understands what it looks like.

Australia’s Modern Slavery Act came into effect on January 1. It requires businesses above a certain income threshold to report yearly on the risks of modern slavery in their operations and supply chains, the actions taken in response, and the effectiveness of these actions.

The first reporting cycle starts in July, so time is running out for those companies who have not done their homework.

The fact that an estimated 40.3 million people around the world are trapped in modern slavery is perhaps easier to fathom than the 15,000 victims that currently live in Australia.

This is partly due to the term “modern slavery”. It is an expression that conjures up historical slavery and invokes images of the most shocking kinds of exploitation, therefore neglecting cases that are less likely to make news headlines.

Such flawed views make it less likely that companies adequately review their operations and supply chains, as the existence of modern slavery remains beyond their comprehension.

The truth is that modern slavery refers to any kind of involuntary labour, performed under threat of punishment for reduced or no payment.

Think for a moment about international students, backpackers and migrant workers in Australia. Visa restrictions and lack of rights leaves them highly vulnerable, for example when workers breach work-related visa conditions or overstay their visa. This gives unscrupulous employers the chance to subject workers to exploitative conditions.

Fear of retaliation by the employer or deportation by the government leaves victims without an alternative course of action. This has led to documented cases of modern slavery in the Australian agricultural, construction and meat processing industries.

But is this enough for Australian companies to take this issue seriously?

Australia’s Modern Slavery Act does not impose penalties on companies for failing to lodge a report or for lodging an incomplete report. Neither has the government appointed an anti-slavery commissioner with the authority and resources to oversee compliance.

Instead, enforcement relies on civil society and consumers.

The idea is that mandatory reporting enables civil society to expose poorly-performing companies, prompting a consumer backlash. On the flipside, reporting provides companies with an opportunity to showcase their social performance and enhance their reputation.

This reliance on non-state actors for soft enforcement is not without issues.

A parallel can be drawn with the position of women in the corporate world. Laws that mandate corporate reporting on gender equality have existed in many countries for years, among which in Australia. Companies that perform well are branded as an “employer of choice”, while poorly-performing companies are publicly chastised.

Despite the existence of such laws, women are still drastically under-represented in senior positions around the world, and the gender pay gap is reducing at a glacial pace.

This raises the question whether there is a critical mass of consumers who care enough to
make companies feel the pain and change their behaviour.

Fed up with the lack of progress made by companies, the Norwegian government introduced mandatory quotas for women on corporate boards and threatened companies with large fines. Half of the board seats in Norway were swiftly filled by women.

This implies that it is more effective for governments to penalise companies that do not comply with legislation, rather than relying on enforcement by the public.

The British counterpart of Australia’s Modern Slavery act was introduced in 2015 and also relies on a soft enforcement mechanism. In 2017, 43 per cent of companies on the London Stock Exchange did not bother to submit a report on modern slavery, nor did 42 per cent of the top 100 companies that were awarded government contracts.

Evidently, the lack of hard sanctions has resulted in many businesses considering compliance with this law as something discretionary rather than obligatory. They had no fear of a consumer backlash, even if that consumer was the government itself.

Fortunately, the NSW government also passed its own Modern Slavery Act this year. Unlike the federal act, it has created the post of Independent Anti-Slavery Commissioner, and it provides for penalties for businesses that do not comply of up to $1.1 million.

For those reasons, the NSW Modern Slavery Act is much more likely to be taken seriously.

The article was originally publish by the Sydney Morning Herald.

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