New modern slavery laws are at risk of becoming a “tick the box” exercise after a new report found a third of S&P/ASX 200 companies appeared to not be complying with all the disclosure requirements and many were only scratching the surface.
Research from the Australian Council of Superannuation Investors found that most of the 151 companies out of the top 200 that it examined were following a “race to the middle” approach to modern slavery reporting by disclosing only the minimum and not wishing to reveal more than their key peers.
About 33 per cent of the companies’ statements were “potentially non-compliant” with one or more of the act’s requirements, including describing how they had consulted entities within their group about the risk or to detail how they assess effective responses to modern slavery.
ACSI will seek to use the report at its annual conference on Wednesday to advise industry super fund investors to push companies for greater disclosure and actions.
“While this is the first year of reporting and there is a lot to learn, this shouldn’t be seen as a tick-the-box exercise,” the council’s chief executive, Louise Davidson, said.
“Companies that do not meaningfully identify and properly report their modern slavery risks face serious reputational and financial risks.”
The Modern Slavery Act requires companies with revenue of more than $100 million to publicly disclose their supply chain exposure to risks of worker exploitation including the use of child labour.
The report found that in the first year of reporting many companies were not going further than looking at their tier-one suppliers, despite most modern slavery risks likely lying beyond that level.
Companies also did not appear to take the same lens to their own operations.
Overall, not one company reported an actual modern slavery incident even if they referred to potential red flags such as passport retention, underpayments, forced overtime or recruitment fees charged to workers.
“Modern slavery involves serious criminal conduct and, as with other crimes, boards are likely to be reluctant to publicly disclose any occurrences in companies’ operations and supply chains,” the report said.
The report found companies often focused on “paper over practice” and the quality of their statements was “frequently undermined by insufficient detail around the implementation of key actions, such as policies, risk assessments or training”.
“Many ASX 200 companies appear poorly prepared to respond to modern slavery incidents that may be identified in their operations or supply chains and are taking few steps to ensure that grievance mechanisms for vulnerable workers are trusted and accessible,” the report said.
It was not all the bad news, however.
Anonymous interviews with five ASX200 companies revealed the sectors most used to high levels of scrutiny and oversight, such as finance or food and beverages, also did the best reporting.
Those interviewees said for the regulation to work companies needed to go “beyond compliance” and deliver concrete change, warning that some businesses were focused on process and presentation over outcomes.
Almost all interviewees said they struggled to go beyond tier-one suppliers, either with domestic suppliers who did not understand modern slavery can occur in Australia or overseas suppliers reluctant to acknowledge it as an issue or unwilling to provide information.
Interviewees also suggested the lack of previous examples of slavery reporting may have been challenging for some and “contributed to a ‘race to the middle’ as companies take a conservative approach to first-year reporting”, the report said.
The report advised that investors can help change the dynamic by encouraging companies to ensure vulnerable workers have access to grievance mechanisms and for reports to go beyond tier-one suppliers.
The article has been summarised and the original full article can be found at afr.com
(Photo: Wayne Taylor)