The ‘S’ in ESG is refers to “Social” – or the way businesses treat their human stakeholders, including those in their supply chain, who may be at risk of working in conditions which constitute modern slavery. “Social” includes areas such as health and safety, diversity and inclusion, comparative living wages, the gender pay gap, charitable giving, employee engagement and human rights, including modern slavery. Importantly, it must consider stakeholders both within and outside the corporation. This is particularly pertinent to companies with complex supply chains which span multiple jurisdictions. Such chains can obfuscate the social grievances which ESG requires companies to take responsibility for.
Modern slavery is one such issue that has been receiving attention recently. Modern slavery refers to various practices utilised by employees which constitute a violation of an individual’s human rights. These can include; slavery, servitude, human trafficking, forced labour, forced marriage, debt bondage or child labour. Industries considered ‘high risk’ include agriculture, fashion, construction, electronics and hospitality, amongst others. Conditions of modern slavery certainly exist in Australia (approx. 15 000 people on any given day, according to the Global Slavery Index) but what is even more certain is the risk of importing goods produced using modern slavery, somewhere in a business’s supply chain. The graph below shows those products at greatest risk of modern slavery being imported into Australia.
Notable developments to monitor and stamp out modern slavery have occurred in NSW, where new laws recently came into force which require state governments, local councils and state-owned entities to take “reasonable steps” to ensure that goods and services procured are not the product of modern slavery. The Modern Slavery Amendment Act 2021, built on the Modern Slavery Act 2018 (NSW), established an independent Anti-Slavery Commissioner who is tasked with educating businesses, administering mandatory due diligence, and handing out penalties when appropriate. Many NSW government entities will be expected to report on the steps they are taking to avoid modern slavery in their supply chains by the end of this financial year. This of course means than any company tendering for new work or carrying out existing contracts must be able to answer questions about how their own procurement practices are designed to avoid modern slavery. The Commissioner recently put out a discussion paper to elicit advice on building a framework around the new obligations. It offers a first glimpse at the types of things businesses will need to consider.
Federal modern slavery laws already require companies with a turnover of more than $100 million to report the risk of slavery in their supply chains. Interestingly the original legislation included a requirement for companies with a turnover of more than $50 million to report as well as government entities, however this provision was removed by the state government.
The products at greatest risk of modern slavery being imported into Australia Source: Global Slavery Index
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