Modern Slavery: The state of play and where investors fit in
Modern slavery has become a key issue for the responsible investment community in recent times. At the RI Australia 2023 conference, Tomoya Obokata, the United Nations’ Special Rapporteur on Contemporary Forms of Slavery presented on the global state of modern slavery. During his keynote speech and interview with RIAA Chair, Ross Piper (CEO of Australian Ethical Investments), Tomoya reflected on current trends, provided an update on efforts to combat contemporary forms of slavery, explained international laws and norms, and explored what investors can do to reduce instances of modern slavery in their portfolios and supply chains.
What is modern slavery?
Modern slavery refers to situations where individuals endure exploitation that they are unable to refuse or escape from because of threats, violence, coercion, deception and/or abuse of power. It encompasses forced labour which can take the form of debt bondage, slavery or slavery-like practices, and human trafficking, and forced marriage. According to the most recent global estimates by the International Labour Organization, 50 million people were held in modern slavery on any given day in 2021. Of these, 28 million were ensnared in forced labour and 22 million were trapped in forced marriage. Alarmingly, these figures have increased since 2016, where there were 40 million people entrapped in modern slavery. Globally, the five sectors most affected by forced labour are services, manufacturing, construction, agriculture and domestic work.
Is modern slavery an issue in Australia?
Modern slavery is prevalent in Australia, with the sectors most at risk of labour exploitation being agriculture, food processing, construction, cleaning, hospitality and food services. Tomoya said that many of these workers are low-skilled migrants, who come to Australia on a Temporary Work scheme. An increasing amount of international goods are also being imported into Australia, which may have been produced using forced labour. This includes laptops, computers and mobile phones from China and Malaysia, clothing and accessories from Southeast Asia and Latin America, rice from India, and cacao from Africa. Tomoya argued that private and institutional investors may be “pouring their investments into many companies which may have direct and indirect links to forced labour”. In 2018, the Australian Government introduced the Modern Slavery Act, which requires entities based, or operating, in Australia having an annual consolidated revenue of more than $100 million, to report annually on the risks of modern slavery in their operations and supply chains, and actions to address those risks. All other Australian-based or operating entities can choose to voluntarily report as well.
The importance of human rights due diligence
Criminal justice responses have typically been the main approach to address forced labour and modern slavery. However, Tomoya said that “many governments have increasingly been promoting so-called human rights due diligence amongst businesses in order to encourage them to take action before labour exploitation occurs”. Human rights due diligence is an ongoing risk management process that a reasonable and prudent company needs to follow to identify, prevent, mitigate, and account for how it addresses its adverse human rights impacts. It includes four steps: assessing actual and potential human rights impacts; integrating and acting on the findings; tracking responses; and communicating about how these impacts are addressed.
Many countries have drafted national action plans to implement human rights due diligence, including Southeast Asia and Japan. The United Kingdom and Australia also promote transparency in business operations and supply chains by encouraging companies to undertake self-disclosure practices. Tomoya explained that self-disclosure has raised awareness amongst businesses about the risks of modern slavery. However, he said that “promoting accountability has been regarded as problematic, as there are no effective penalties against companies which fail to report annually or do not implement human rights due diligence”. As a result, there has been a steady movement towards mandatory due diligence, which is already prominent in Europe and the Americas.
Now is the time for investors to address modern slavery
Tomoya outlined several ways investors can address modern slavery. These include:
- Adapting an internal policy of modern slavery and human rights due diligence, in accordance with the UN Guiding Principles on Business and Human Rights and incorporate this policy into investment strategies.
- Conducting human rights due diligence effectively, by acknowledging that modern slavery is a clear risk to the human rights of workers. This includes assessing whether the investment activities directly or indirectly facilitate labour exploitation, in companies both in Australia and around the world.
- Focusing on the risks to workers, and not the company’s profits. When risks are identified, it is important to mitigate them.
- Engaging with companies to implement human rights due diligence effectively, including the provision of access to justice and remedies for victims who have been affected. Divestment should be treated as a last resort.
- Building good working relationships with companies invested in through open communication, and rewarding them when demonstrating robust implementation of human rights due diligence.
- Being more proactive in collecting up to date and accurate data on modern slavery, such as conducting an effective ESG analysis, using the appropriate metrics and indicators.
- Working closely with governments, civil society, organisations, trade unions or workers, regional and international bodies, to promote a joined-up approach to effectively tackle modern slavery.
Become part of RIAA’s Human Rights Working Group
RIAA’s Human Rights Working Group is an investor led initiative which supports RIAA members in their stewardship responsibilities of respecting human rights in their business operations and their portfolio of companies. The Working Group allows RIAA members to come together in the interests of building stronger stewardship capabilities through more deeply understanding human rights, being able to identify and comment on due diligence processes and understand investor and company roles in remedying human rights abuses and violations. Access the Working Group’s recent toolkit publication on Human Rights and Armed Conflict here, and view upcoming Working Group meetings here.
Panels referred to:
Modern Slavery: The state of play and where investors fit in
If you attended the conference, please check your email for a link to view session recordings, to continue taking valuable learnings from RI Australia 2023, year-round.
By Isabella Marotta, Working Groups Officer at Responsible Investment Association Australasia (RIAA).