While few people want to purchase products that involve the enslavement and exploitation of workers, the harsh reality is that most Australians are doing it every day.
From garments to agriculture to technology, various sectors in the global supply chain rely on the labour of an estimated 40.3 million victims trapped in modern slavery.
To complicate matters, COVID-19 has presented new challenges for auditors, who struggle to visit factory sites or can be led down a deceitful path by suppliers looking to circumvent regulation.
Speaking to Business News Australia, Informed 365 co-founder and CEO Nicholas Bernhardt explained how there have been a significant number of incidents where auditors are sent to counterfeit workshops designed to hide the true nature of a company’s operations.
“Companies set up a model factory that looks as if all the employees are happy, but that's not where the actual work happens. The work might happen 10km down the road under the worst conditions that you could possibly imagine,” Bernhardt said.
A former investment banker, Bernhardt established Software-as-a-Service (SaaS) platform Informed 365 alongside investor Andrew Banks to help organisations track, calculate and visualise their environmental and social performance.
As part of its offering, the company provides a turnkey supply chain management app that provides governance, human rights (including the Modern Slavery Act), environment, community, fair operating practices, consumer issues and climate risk analysis.
Another business looking to help companies tackle compliance in the space is Sydney-based modern slavery consultant firm Unchained Solutions, founded by Dr Stephen Morse in 2018.
The boutique firm, which provides modern slavery analysis tools, e-learning courses and improvement strategies, also gives a portion of its profit to social enterprises working directly with survivors.
When asked about how COVID-19 has impacted modern slavery in the global supply chain, Morse noted companies producing personal protective equipment (PPE) were willing to turn a blind eye toward regulations as a result of increased demand.
“In Malaysia, where once there would be high regulation and restrictions in terms of producing rubber gloves…suddenly that's not a priority anymore,” Morse said.
“It's amazing how COVID shifted the dynamic in terms of what we're willing to overlook in order to service our immediate needs around healthcare.”
Bernhardt adds the pandemic has also resulted in job loss and that desperate workers might take on roles they previously avoided.
“They’re in conditions that are not conducive to their health and their family’s wellbeing,” he said.
When it comes to tackling these issues, he added there is “no one solution that’s going to solve it all in one go.”
“I'm not a big fan of announced audits. We need to work with local non-government organisations (NGOs) on the ground to start developing [a] picture of factories with the local population [and] establish where workers can air their grievances before it gets really bad.”
Other measures include increasing consumer awareness and seeing businesses delve into their own procurement practices.
“Don’t just look at price, quality and delivery time…start looking at where the product is coming from - I think that has to start becoming the norm rather than the exception and we're a long way away from that,” Bernhardt said.
“If you are a business, you need to start really delving into who are your suppliers. You need to do forensic examinations and use technologies such as ours to try to unravel your often very complex supply chain.”
Morse adds that we also "live in an age of increased purpose awareness".
"Younger workers, Millennials, Gen Z, Generation Alpha - there's a lot of evidence that these people don't just want a job, they actually want a career that has impact," he said.
"If you actually engage your team around issues to do with environmental or social sustainability and good practices, then you have increased retention.
“Rate and recruitment are expensive, so to shut that revolving door is a cost-saving for companies.”
The call for a stronger approach in Australia
In December 2021, research by the University of South Australia found that one in five large Australian businesses were likely to fail with their legal obligations under the Modern Slavery Act (2018) heading into this year.
The legislation stipulates entities in the Australian market with annual revenue of more than $100 million must submit a modern slavery statement each year and discuss the actions they’ve taken to address risks in their operations and supply chain.
However, Bernhardt points out there is often little consequence for companies that fail to adequately tackle the issue.
“There's no penalty other than a non-government organisation or an activist reading your statements and putting it on social media,” he said.
A study conducted by the Monash Centre of Financial Studies in 2021 found a wide variation in the amount of information disclosed by ASX 100 companies in their modern slavery statements.
Top performers included Woolworths (ASX: WOW), Fortescue Metals (ASX: FMG), Wesfarmers (ASX: WES), Westpac (ASX: WBC) and Ansell (ASX: ANN) while companies such as IDP Education (ASXL IEL), Fisher and Paykel Healthcare (ASX: FPH), Cleanaway (ASX: CWY), Resmed (ASX: RMD) and Nine Entertainment (ASX: NEC) scored poorly.
To score highly, companies had to demonstrate transparency in how they assess and address the risk of modern slavery practices, in addition to making it a priority. Of all the modern slavery risks present, the most mentioned were forced labour, child labour and debt bondage.
However, research from the Australian Council Superannuation Investors in 2021 found that within the ASX 200, the majority of companies followed a “race to the middle” approach, which satisfied the minimum legal requirements without revealing more to key peers.
According to the University of Sydney, it is estimated up to 15,000 people are living in conditions of modern slavery in Australia.
Both Bernhardt and Morse are in support of seeing stronger legislation, which may come to fruition after the Modern Slavery Act is reviewed by the government later this year.
Being led by Professor John McMillan AO, the assessment will determine whether further measures will be implemented to improve compliance.
“What I'm seeing in Australia at the moment is the lack of urgency in sustainability issues,” Morse said.
“I'm looking forward to a bit more noise, clarity, and focus from Home Affairs and the Australian Border Force and what companies should be doing and putting more pressure on.”
Meanwhile, the Customs Amendment (Banning Goods Produced by Forced Labour) Bill 2021, which passed through the senate in August 2021, is yet to pass through the lower house.
The bill, introduced by independent senator Rex Patrick, would allow federal customs to prohibit the import of goods in any region made by forced labour.
“Having the Customs Act amended to prevent products made in forced labour into the country. That is a huge shift in gears,” Morse said.
“If a company hasn't used the Modern Slavery Act to understand, verify and really be clear about who they're buying from, then there's no way they can front up to customs and say this product is not made by forced labour.
“I think that piece of legislation will be a game-changer.”
While Bernhardt said the move would be a “step in the right direction,” he also noted it has the potential to cause problems with one of the nation’s biggest trading partners.
“There’s that challenge of certain countries saying: Well, we don't really care whether you take our products or not. Our markets are big enough and we'll find someone to buy it.
“If we're trying to tell Chinese manufacturers how to behave…how big a market are we to China? We are minuscule.
“I imagine Australia would suffer more than China, especially short to medium term.”
Nicholas Bernhardt and Dr Stephen Morse will both be speaking at the Modern Slavery Online Summit held between 15-16 June 2022.
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