Modern Slavery Act: Does Business Realise What It’s Asking For?

Vanessa Zimmerman, CEO, Pillar Two

Sweated labour

At a recent conference, international business colleagues asked why Australian businesses had been so vocal in supporting the Modern Slavery Act when business generally avoids regulation. One asked how sustainability practitioners had made their case. These questions were not new – in visiting Canberra with business colleagues to support the legislation we faced perplexed glances from parliamentarians on all sides of politics, an almost ‘are you sure you realise what you’re asking for’?

My answers were straightforward. The reason was not, as some may believe, that this was low hanging fruit, especially for companies already reporting under similar UK legislation. An easy win would not suffice if business did not see good, long-term reasons for its support. And support was generally not focused on avoiding stronger legislation, really.

The companies I advised wanted to be part of global and domestic efforts to combat modern slavery. And they genuinely thought the legislation was good for business. Why?

  1. It would help them to meet growing expectations around transparency
  2. It would facilitate a more level playing field between leaders and laggards
  3. Beyond reporting it would support them to manage the risk of involvement in modern slavery

Transparency

Investors, civil society and customers are asking for growing information on business’ management of social risk including human rights. Companies are answering with commitments to be more transparent, but these can be difficult to fully integrate throughout the business.  Especially given its mandatory reporting areas, legislation like the Australian and NSW Modern Slavery Acts can provide leverage for in-house practitioners to drive cross-functional support for transparency and show that its benefits outweigh the risks. Requiring the board to approve, and a director to sign, modern slavery statements, help ensure that transparency on modern slavery cannot slip off the agenda, and can be a catalyst for the business to better report on broader human rights issues.

In the UK, market responses such as benchmarking, including the Business and Human Rights Resource Centre’s FTSE100 ranking, enable companies to see how their transparency performance compares to their competitors, often prompting improvement. And resources like the Modern Slavery Registry, and the forthcoming Australian Government registry, can also highlight how business partners are faring, providing an opportunity to work with those companies to improve transparency and encourage better practice.

A more level playing field

Businesses are doing more to prevent and address their involvement in modern slavery. Some, because of more pressure from investors, civil society and consumers. Some, as part of their broader human rights commitments. Others, because of operational, legal and financing challenges from actual involvement in modern slavery. Concrete action to manage modern slavery risks takes resources, time and effort. This can be difficult to justify if competitors are not taking the same steps. It is also hard to achieve meaningful results on the ground without a consistent sectoral response, especially where there are collective impacts. Many companies still see benefits in differentiating their performance, and there can be positives to the market rewarding better performers. But there is increasing recognition that we need a more robust starting place. The legislation, through facilitating transparency and encouraging better performance within and across sectors, should make it harder for the laggards to continue their status quo.

Developing guidance

Most businesses are not modern slavery experts. Even for companies with in-house expertise, challenges arise, from how to prioritise thousands of suppliers for due diligence to how to build suppliers’ capacity to recognise modern slavery in their own supply chains. Businesses need meaningful support, not only on how to report but on identifying their risks. The legislation has already helped increase this support.  

It will be positive to see the Australian Government release its draft guidance on implementation of the Act. While rightly focused on reporting, it is also likely to provide companies with a roadmap of where to start to manage their risks. Business has also welcomed new forums to share best practice and challenges. Examples include the Global Compact Network Australia’s Modern Slavery Community of Practice, where leading companies from different sectors discuss implementation of the legislation as well as risk management processes on the ground.

It is important that support is fit for purpose, avoids compliance driven approaches and does not result in companies ignoring their other human rights risks.

The legislation too has brought further clarity on expectations of investors and civil society, which hopefully will only continue. Some of the best guidance for businesses implementing the UK legislation has come from civil society, explaining not only why certain information is important to report but what steps rights-holders expect companies to take to prevent and address their involvement in modern slavery.

Of course, not all Australian businesses supported the legislation, and there remain concerns, including from small and medium sized enterprises, on how the legislation will impact interactions with business partners. In supporting the legislation, the companies I spoke with encouraged parliamentarians to develop collaborative responses to these and other dissenting views. They also worked alongside other stakeholders, including civil society, promoting a united front.

For my part, I’m proud of Australian business’ role in helping to get the legislation over the line. The Act provides a good foundation on which to build transparency and concrete action on one of today’s greatest human rights challenges, modern slavery. And yes, we knew what we were asking for.