8 minute read 8 Jan 2019
Hands reaching for grain

How do you respond to new obligations whilst also making the most of new opportunities?

Authors
Mathew Nelson

EY Oceania Chief Sustainability Officer

Leading a purpose-driven team that shares a common passion for creating positive impact. Workplace diversity and equality advocate. Engineer. Father of two boys. Australian Football League fan.

Matthew Bell

EY Asia Pacific Climate Change and Sustainability Services Leader

Climate change and sustainability leader. Engaging in purposeful change and creating long-term value for global organizations. Savvy in science and technology.

8 minute read 8 Jan 2019

As a key human rights risk for many businesses, modern slavery continues to be a serious problem both in operations and supply chains.

Since the experience of apparel companies in the 1970’s – 1990’s, businesses have been aware of the risks to brand value and reputation, as well as risks to security of supply when serious labour rights issues are uncovered. Only recently have organisations become more aware of the volume of labour rights issues, both in extended supply chains overseas and shorter supply chains (e.g. within agriculture) on-shore in Australia, as well as within the engagement of labour hire. Consumers, the media and NGOs were outraged with the apparel companies in the 1990’s and with management’s apparent attitude that a lack of ownership of factories equated to a lack of influence and a corresponding lack of responsibility.

Today we see businesses taking a very different approach. Where organisations have started to see their influential relationships with their supply chain as a trigger for responsibility – the business community and broader stakeholders are seeing these relationships as a crucial opportunity to influence positive change and put an end to modern slavery. The nature of supplier relationships and actions required to address slavery also lend themselves to improving business operations, security of supply and supply chain efficiencies.

Australia now has a Modern Slavery Act, which came into effect on 1 January 2019.

Investors have taken notice of human rights and supply chain risks in their investment portfolios. Not only because of reputational risk concerns, but also due to the understanding that an organisation’s commitment and maturity to address environmental, social and governance (ESG) risks is an indicator for overall strong governance, corporate ethics, resilience and long-term value creation potential.

The EY 2018 Investor Survey found that human rights practices and supply chain risks are two areas that saw the most substantial increase in investor attention between 2017 and 2018. In 2018 investors reported that 52% and 49% would rule out an investment due to supply chain ESG risks and human rights practices, respectively.

Although there is a clear case for organisations to review their supply chains to address incidences of modern slavery and build stronger businesses, action to date has been predominantly reactive and isolated to a few market leading businesses.

The Modern Slavery Act requires disclosure of:

  1. The entity’s structure, its operations and its supply chains,
  2. The modern slavery risks present in the entity’s operations and supply chains,
  3. The actions taken by the entity to assess and address those risks, including due diligence and remediation processes
  4. How the entity assesses the effectiveness of such actions
  5. The process of consultation with any entities that the entity owns or controls

What is Modern Slavery?

Modern slavery includes the crimes of human trafficking, slavery and slavery like practices, such as forced labour, the sale and exploitation of children, and bonded labour. The most common form of modern slavery in corporate supply chains is bonded or indentured labour that occurs through the exploitation of vulnerable migrants who are subject to debts from labour recruitment fees.

Summary

As a key human rights risk for many businesses, modern slavery continues to be a serious problem both in operations and supply chains. Latest estimates suggest that over 40 million people are currently subject to forced or bonded labour or servitude. This historically under-regulated area is now subject to mandatory reporting in Australia.

About this article

Authors
Mathew Nelson

EY Oceania Chief Sustainability Officer

Leading a purpose-driven team that shares a common passion for creating positive impact. Workplace diversity and equality advocate. Engineer. Father of two boys. Australian Football League fan.

Matthew Bell

EY Asia Pacific Climate Change and Sustainability Services Leader

Climate change and sustainability leader. Engaging in purposeful change and creating long-term value for global organizations. Savvy in science and technology.