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The Modern Slavery Act (2018) requires large entities operating in Australia to report on actions they have taken to address modern slavery risks in their operations and supply chains. The Act also requires companies to report on how they assess the effectiveness of those actions.
Deloitte collaborated with UNSW to host a panel discussion with Associate Professor Justine Nolan, Professor Stephen Frenkel and MSCI ESG Research Analyst Morgan Ellis, and chaired by Lecturer Hannah Harris, to explore some of the challenges and opportunities associated with assessing the effectiveness of actions taken to address modern slavery.
Process versus outcome
As has been the case in the UK, there is a risk that companies will focus their efforts on achieving a base level of compliance with the Act and the process of reporting, rather than on taking effective action to reduce the instance of modern slavery in their operations and supply chain.
In September 2019 the Department of Home Affairs released a guidance document to assist entities in complying with the Act . The guidance states that companies need only describe how they have assessed the effectiveness of actions and not whether the actions have themselves been effective – i.e. it fails to distinguish between process and outcome.
Instead of thinking about what their final statement will look like, companies should be asking ‘Is what we are doing making a difference?’ Where ‘a difference’ means reducing modern slavery risks in their operations or supply chain, from the perspective of those affected on the ground.
The intent behind The Act is good, but for it to avoid being a compliance-driven, box ticking exercise, there needs to be collaboration and meaningful disclosure that focuses on outcomes for victims. Accountability, not just countability. Substantive change rather than cosmetic change.
Conditions bordering slavery
Professor Frenkel’s perspective was that more attention needs to be paid to outcomes that border modern slavery but are not actually slavery.
Exploitation occurs on a continuum of exploitation of human rights, with modern slavery at the most extreme end. If companies are too focused on purely complying with the Act, they might miss the warning signs and other indicators of abuse.
For example, there had been an audit of the Rana Plaza in Bangladesh just months before its collapse in 2013 that killed 1134 garment workers. Many of the conditions observed did not constitute modern slavery specifically, but instead involved health, safety and construction issues.
View from the ground
Professor Frenkel’s research into the garment industry in Bangladesh has highlighted the complexities surrounding local communities and contexts where these labour practices are embedded .
The events and conditions surrounding the tragic Rana Plaza collapse turned the world’s attention to global firms’ labour standards and supply chains. Since then, the conditions in many factories have improved. But while poor safety conditions and work environments do not constitute modern slavery, the issue is pervasive. 80% of garment export factories do not meet all the key minimum standards set by the International Labour Organization. Wages are below the living wage with long work hours.
The business model as root cause
There is growing consensus that the current business model, involving cheap labour to produce increasingly cheap products, is one of the primary reasons why such exploitation persists. In Bangladesh, many firms maintain minimal labour standards in order to maximise profits, while trying to avoid the reputational crisis that can unfold if exploitation is discovered, as has been the case for a growing number of brands.
It is crucial that entities reporting on modern slavery engage with a range of stakeholders in their supply chains, because the company may not have the internal expertise to assess whether their actions are effective or not. Engaging with stakeholders such as workers and unions gives a voice to those most harshly affected by the business model, and it is one of the clearest ways of assessing whether actions to redress have been effective or not.
Transparency from origin to end consumer
Morgan Ellis from MSCI spoke about the challenge of obtaining accurate information below tier one or two of a company’s supply chain.
As a result, collaboration is key. Businesses, industry bodies, worker unions and NGOs must all collaborate to create the transparency that allows for accountability. Businesses aren’t expected to know everything and have the capacity to solve these systemic issues on their own. As such, collaboration with those stakeholders that do have the expertise is imperative. Importantly, companies mustn’t lose sight of the fact that gaining visibility over their supply chains is only the first step, and not the end goal.
Focusing solely on process is insufficient, especially if there are no meaningful sanctions for non-compliance. With collaboration and reporting that focusses on the outcome rather than the process, and being aware of the conditions that border slavery, The Act has the potential to create substantive structural change for workers on the ground.
Paul has 20 years of experience and leads Climate Risk services in the Risk Advisory Sustainability practice. He has extensive experience working with complex sectors including energy, mining, manufacturing and property with a particular focuses on carbon, energy and sustainability services.