2 in 3 companies still failing to meet modern slavery reporting requirements
While the new Modern Slavery Act legislation has been in effect for over four years, many organisations still have work to do to make sure their corporate reporting is up to scratch, according to this HRLC lawyer.
Freya Dinshaw is a senior lawyer at the Human Rights Law Centre (HRLC), which recently released its report, Broken Promises, which covers two years of corporate reporting under Australia’s Modern Slavery Act.
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Speaking recently on The Corporate Counsel Show, Ms Dinshaw outlined the findings of the report, which found that two in three companies had failed to comply with the legal reporting requirements.
Broken Promises is the second report the HRLC has published on the effectiveness of the Modern Slavery Act, which first came into force in early 2019. It follows Paper Promises, which found that 77 per cent of companies were failing to even meet the basic reporting requirements of the Modern Slavery Act.
“When it was enacted, there were some concerns around the extent to which it would be driving actual change to modern slavery and exploitative labour practices that were happening in the supply chains and operations of Australian companies,” Ms Dinshaw explained.
“And that was because research in the UK had shown that there was a limited effect on the actual circumstances in which workers found themselves from a similar act that the UK has had in place for several years now. But rather than looking at just like the top ASX 100 companies or companies that are in one sector alone, what we thought would be interesting was to look at companies that sourced high-risk goods from sectors with known modern slavery risks.”
The report surveyed several companies that sourced personal protective equipment (PPE) and rubber gloves from Malaysia, seafood from Thailand, garments from China, and horticultural produce from here in Australia to see whether companies were actually mentioning these risks in their modern slavery statements — or taking effective actions to address these risks.
“In Broken Promises, we wanted to look at the rate of improvement because the premise of the Modern Slavery Act, year on year, companies will improve upon what they’re doing to drive this race to the top to act on modern slavery. But our findings were that there was just a 7 per cent average increase in the score of companies from their second-round statement, from their first-round statement. And that two-thirds of companies were still failing to meet basic mandatory reporting requirements,” Ms Dinshaw said.
“Risk awareness improved slightly, but still nearly half, around 43 per cent, were failing to mention those key bits. And the statistics around companies taking effective action remained relatively stable. It was still about a third of companies that were taking the form of an effective action.”
In terms of why these companies are failing to meet these obligations, Ms Dinshaw said it could be that companies don’t necessarily understand what’s expected of them, as well as don’t fully grasp what their ESG and human rights and modern slavery risks are “in a deeper way”.
“I think that that educated piece is well recognised, and it does take time to shift the corporate mindset from focusing solely on risks to the company to risks to people who are impacted by the company’s operations. But I think that the bigger factor is that the Modern Slavery Act itself is just not that well equipped for driving that kind of change that we want to see,” she noted.
“There [are] no penalties for failing to comply with the act. If you don’t put a statement in, nothing happens. I think there’s that ‘why’ question that may come up among companies. Why do we have to do all of this? What do we even need to do, and what are the consequences if we fail to undertake this action? And that’s not that well understood when a law doesn’t have that kind of hard regulatory effect. There’s a review of the act at the moment. I think that this question of whether or not it needs to shift will come out of that when the report comes out later this year.”
With a review pending, Ms Dinshaw said that to a certain extent, both the companies and the legislation should be blamed for those requirements not being met.
“Legislation has to drive shifts in corporate culture and is that kind of ultimate law essentially to the standard that we expect of companies, that the responsibility of boards and legal departments is to push their companies to the top and to not just do the bare minimum, but to look at it in a holistic way. Taking action on modern slavery or human rights is protecting the company, and is in the company’s best interest.
“And yes, it might require hard decisions at points, yes, it might cost money, but it’s the right thing to do, and it’s the responsible thing to do in the long run because a company that benefits from cheap labour or exploitation of workers or any other kind of human rights violation isn’t sustainable in the long run and isn’t going to deliver returns for investors and the like. And even though, as we all know, it should just be basic that companies respect people’s dignity in the way they do their business,” she added.
“But I think that internal departments and boards play a really important role in not just complying with the bare letter of the law, but going beyond that and investing in capacity building internally so that people across the organisation really understand what it is that they’re looking for. And if they sense that the business may be contributing to some exploitation.”
This is also something in-house lawyers and legal departments can be focusing on and pushing for moving forward, according to Ms Dinshaw.
“I think that general counsel and others working within companies are really a very important part of the framework for the protection of people that companies touch upon. And using your ability and influence within a company to use the law and the Modern Slavery Act and the UN Guiding Principles on Human Rights, which [is] another really foundational document for how companies should be doing business,” she said.
“Using those as a basis for driving your company to do better on these issues, to take it seriously and understand the legal and reputational risks that can come from failing to take these things seriously is such an important aspect of what lawyers can do to use their ability to make their companies make the world better place.”
The transcript of this podcast episode was slightly edited for publishing purposes. To listen to the full conversation with Freya Dinshaw, click below: