Australian investors fear modern slavery proposals don’t strike right balance

ACSI investor body consults ahead of planned legislation

The Australian Council of Superannuation Investors (ACSI), the investor membership body that represents 37 Australian and international asset owners, managing over A$1.6trn (€1trn) in assets, has rejected as “inadequate” draft anti-slavery in supply chain measures proposed by the Australian government.

The investor group has warned – in its response to a government-led public consultation on the issue – that without amendments the proposed legislation risks becoming a “boxing-ticking exercise” that will continue to leave “investors to operate in an informational vacuum”. It is now calling on the government to introduce changes that compel companies to engage meaningfully with the mandatory reporting requirements.

At issue is the freedom the companies have in the current formulation to “determine what, if any, information they provide against each of the four criteria and whether to include any additional information”.

Whilst the investor group “strongly supports” the government’s decision to introduce such legislation, it is calling for the adoption of an “if not, why not” approach to reporting. This would make companies to either “address mandatory criteria or state why slavery is not a material risk” – forcing them to engage with the issue more profoundly.

Speaking to a spokesperson for the ACSI, RI was told that the requirements – as they stand – do not “strike the right balance” between effecting change and not unduly burdening business. The spokesperson continued, “the reporting requirement needs to be stronger or the legislation may not be effective in bringing about the changes that investors want to see”.

The addition of an “if not, why not” requirement is, according to ACSI, consistent with other reporting frameworks that companies in Australia report against, such as the ASX Corporate Governance Principles.As it stands, the proposed Modern Slavery in Supply Chains Reporting Requirement would mean that “entities” operating in Australia with total annual revenues of at least A$100m would be obliged to “report annually on their efforts to address modern slavery in their operations and supply-chain”.

The ACSI is also calling for the addition of a fifth criterion dedicated to reporting on “the structure and implementation of their whistleblowing system”.

Following the UK, which was the first to introduce a corporate requirement to report against slavery risk in 2015, the Australian government has proposed four criteria for companies to report against:

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 entity’s policies and process to address modern slavery in its operations and supply chains and their effectiveness (such as codes of conduct, supplier contract terms and training for staff), and
4. The entity’s due diligence processes relating to modern slavery in its operations and supply chains and their effectiveness.

ACSI’s Chief Executive Louise Davidson stated that, “Australian companies lag behind their global peers when it comes to the disclosure and management of slavery risks. A reliance on voluntary self-reporting has not led to the level of transparency expected by long-term investors”.

The consultation, which is a part of the Australian government’s National Action Plan to Combat Human Trafficking and Slavery 2015-19, ended on October 20 and it is expected that draft legislation will appear in the first half of 2018.