How investors can help send modern slavery bust

Two groups have the power to hold businesses to account in cleaning up their supply chains. Now government needs to step up.

Investors and consumers have become key players in the fight against modern slavery.

There are around 50 million victims of modern slavery, with more than half in forced labour. Australian businesses are directly connected to this human rights abuse through global supply chains, profiting from the forced labour of people exploited overseas and in Australia.

Australia’s Modern Slavery Act 2018 encourages businesses to address this problem by requiring companies with more than AUD$100 million in annual revenue to report on their efforts to address modern slavery in their supply chains. But compliance is a low bar — businesses are only required to produce a report, rather than find, prevent, and remediate labour exploitation. And there’s no penalty for failing to comply.

In place of government-imposed penalties, consumers and investors are expected to serve as an accountability mechanism by punishing or rewarding businesses for their performance in combating modern slavery through political investorism and consumerism.

Political investorism takes many forms, such as divesting from non-complying companies, signing on to shareholder resolutions, lobbying superannuation funds to divest from high-risk industries, or using their financial stake in a business to advocate for more ethical business operations. Shareholders and other investors may have more leverage than consumers in influencing corporate behaviour — investors can target a wider range of industries and are more centrally connected to a company’s governance.

Companies are like democracies, in the view of some civil society organisations. If so, shareholders could use their participatory rights to vote for resolutions on labour exploitation at annual general meetings. The world’s first shareholder resolution on modern slavery was led by the Australasian Centre for Corporate Responsibility in 2019,  calling on Coles Ltd., a supermarket, to address labour exploitation in its horticulture supply chains. This action led to Coles engaging more closely with unions on labour issues.

Institutional investors have also joined forces to encourage companies to act on modern slavery in their supply chains. The Investors Against Slavery and Trafficking Asia Pacific initiative, established in 2020, brings together nearly 40 investors with combined assets under management of approximately AUD$7.8 trillion, to encourage businesses to tackle the problem of modern slavery.

Superannuation funds have also taken a strong lead in this area. The Australian Council of Superannuation Investors has joined forces with the Responsible Investment Association of Australasia to release a best-practice guide for investors to report on modern slavery. These initiatives, along with the Finance Against Slavery and Trafficking initiative, demonstrate the willingness of market actors to make investment decisions based on modern slavery.

And consumers have power in this domain, too, starting with where they spend their money. If consumers refuse to a buy from a brand that facilitates modern slavery, or prioritise brands that are considered more ethical, there becomes a capital incentive for companies to clean up their supply chain. This kind of movement is known as political consumerism, also called ethical consumerism.

Australian civil society organisations have mobilised shoppers in a bid to combat modern slavery in the production of food and fashion. The ‘Be Slavery Free’ scorecard annually ranks chocolate brands including Nestle, Mars, and Lindt across criteria, including paying a living wage and not using child labour.

Baptist World Aid also takes a scorecard approach with its Ethical Fashion Guide, ranking brands like Patagonia, H&M, and Kmart based on criteria including how they respond to labour exploitation and whether they are listening to the workers in their supply chains.

These scorecards aren’t just helpful for consumers — organisers report that in both cases some companies are keen to know how they can do better on modern slavery and improve their scores.

There’s now even an app that can help consumers consider the labour conditions behind their clothing and accessories, giving brands a rating out of five, ranging from ‘Great’ to ‘We Avoid’.

But some consumers are reluctant to pay more for ethically produced goods and services, or lack the necessary information to make a more ethical choice. Ethical consumerism campaigns can be impactful even if consumers do not change their buying habits en masse.

Companies receiving low scores can receive negative media coverage, opening up potential consumer and shareholder backlash. This alone can often be enough to catalyse change. As a tool combatting modern slavery, ethical consumerism is limited as it can only target consumer-facing industries. 

There will likely always be consumers and investors who are unwilling to use their financial power to advocate for an end to modern slavery. Similarly, while some businesses are responsive to consumer and investor pressure, other tools are needed to deal with the laggards. 

Governments must play a role as consumers and investors cannot be solely responsible for solving the problem of modern slavery.  

Governments in other jurisdictions are considering stricter legislation to deal with the problem. For example, the European Union is contemplating adopting a mandatory human rights due diligence legislation. Other legislative proposals target specific industries, such as New York’s legislation which seeks to address labour exploitation in the garment industry.

To keep pace with global trends and make a real commitment to meeting the UN’s Sustainable Development Goal 8.7 to eradicate forced labour and end modern slavery, the Australian government may need to take a greater role, imposing penalties on companies failing to take the problem of modern slavery seriously. Consumers and investors are part of the solution, but alone can’t hold businesses fully accountable.

Erin O’Brien is an Associate Professor and Australian Research Council DECRA Fellow in the Centre for Justice, Queensland University of Technology. Her research examines political advocacy and lobbying, with a focus on political consumerism and investorism on issues including modern slavery and climate change.

This research was undertaken with financial assistance from the Australian Research Council (Grant number: DE210100735)

Originally published under Creative Commons by 360info™.