Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 210

Let's focus on modern slavery in Australia

Corporate supply chains are bigger and more complex than ever. Wesfarmers recently reported it has relationships with over 15,000 suppliers in more than 20 countries. Consumer pressure for eco-friendly goods and services supports the argument that sustainable supply chains can be profitable supply chains.

Incorporating environmental, social and governance (ESG) factors into the company’s sourcing and purchasing practices is now being viewed as good business practice. If a supply chain activity results in the violation of an environmental, labour or human rights standard or regulation, there can be material negative financial and reputational outcomes. For example, the Economist Intelligence Unit 2015 global survey of 853 senior corporate executives found 62% of respondents think that:

”Avoiding repeats of the Rana Plaza factory disaster in Bangladesh is primarily the responsibility of multi-nationals that purchase products from these factories not the Bangladesh Government.”

It can be difficult to identify human rights risks given the complex nature of supply chains across many companies. However, changes in regulatory disclosure requirements are prompting asset managers to revisit human rights issues, including what is termed ‘modern slavery’. It is tempting to believe that modern slavery only exists abroad, but it is closer to home than many realise.

 

Modern slavery’s shape and form

Modern slavery affects the lives of millions globally. It encompasses all forms of human trafficking, forced labour, debt bondage, forced marriage and child labour which stem from cultural attitudes or human tragedies such as conflict, poverty or natural disasters. A global slavery survey by Walk Free Foundation estimates that 46 million people have been subjected to modern slavery between 2011 and 2016. Modern slavery is estimated to prevail across 167 of the most populous countries, the majority within our Asia Pacific region.

 

Slavery exists in Australia

Unfortunately, cases of modern slavery have been identified on our soil as well as through indirect forms, where Australian companies with offshore operations or sub-contracting arrangements have been linked to cases of modern slavery. The Walk Free Foundation survey suggests an estimated 4,300 victims of modern slavery exist in Australia. Individual cases have been cited with exploitation of workers - often migrants - being employed ‘off the books’ in labour-intensive work.

Modern slavery tends to be concentrated in food and agriculture production, textiles, retail and technology industries. These industries often feature the use of complex and constantly evolving global supply chains, making it difficult to monitor and manage, even for the companies involved. However, companies can ill afford to be complacent.

Historically, the absence of company data and regulation has meant it was difficult to assess the risk of exposure to modern slavery in corporate operations and across supply chains. However, a series of multi-stakeholder initiatives, legislation and engagement activity globally, including Australia, are changing the investment landscape.

 

Government actions

Legislation to address the issue of human rights violations and poor labour practices now exists in Canada, the US, the UK, France, The Netherlands and Switzerland. The UK is the most recent market to pass legislation through its UK Modern Slavery Act (2015). Enactment of the legislation has not only made a significant impact in promoting compliance but has put transparency on corporate agendas. Public entities in the UK are now required to report on measures taken to address modern slavery in their business and supply chain. Australian companies which operate in the UK such as BHP Billiton, Lend Lease, Qantas and Wesfarmers already report on their anti-slavery efforts under this regime, so a degree of harmonisation with Australian initiatives already exists.

Globally, some of the largest retailers and manufacturers are auditing their lengthy supply chains in response to growing scrutiny. For example, Woolworths, Wesfarmers and other retail operators in Australia established the Retail and Supplier Roundtable Sustainability Council to take action against abuses in their supply chains. Early evidence suggests the legislation on human rights and due diligence in the UK and US is working to improve the quality of disclosure practices. This in turn helps investors make better informed investment decisions and also supports stakeholder engagement with companies.

 

Developing a local regime that is effective

Many in the local investment community were encouraged by the announcement earlier this year by the Australian Government that it had commissioned a Senate Inquiry into the establishment of our own Modern Slavery Act. To date, over 180 submissions have been made to the inquiry, including from large Australian companies such as Wesfarmers, Woodside Energy, Rio Tinto, Woolworths, Qantas, Fortescue Metals Group and BHP Billiton.

As an investment manager, we believe failure to consider ESG factors in a company’s operations or supply chain can present potential financial impacts through reputation damage, litigation and operational risks which may ultimately harm a company’s social license to operate. Of course, the cost to society and the economy more broadly can also be significant and severe.

 

Growing power of the social conscience

Consumer preferences for eco-friendly goods and services mean the link between a company’s sustainability performance and consumer loyalty is growing. Studies like the Nielsen Global Survey on Corporate Sustainability (2015) which covered 30,000 consumers across 60 countries found that 73% of millennials are willing to pay more for sustainable brands, compared with 50% in 2014.

Slavery is often a hidden risk in a company’s operations and supply chain. This is not only a human rights issue, it is also a financial issue with potential material implications for investment portfolios. Violate human rights regulation and a company pays twice: the fine for the breach and the damage to your brand with a related drop in sales and possible funding.

Encouragingly, stakeholders (customers, shareholders and government bodies) are now actively engaging with businesses to take action to address their exposures. Companies that establish a whistle-blower policy, consolidate supplier arrangements and build loyalty through greater transparency will be recognised as industry leaders.

Meaningful disclosure of supply chain management when integrated with traditional financial drivers can contribute to a company’s competitive advantage and strengthen its long-term financial stability. The business case is strong for integrating social issues such as modern slavery into the investment decision process. Investor and consumer voices are louder and ignorance is no longer an option.

 

Edwina Matthew is Head of Responsible Investments at BT Investment Management.

4 Comments
Edwina
July 14, 2017

Hi Kath, thanks for your query. The Canadian (Act Against Slavery) and Swiss legislation are related to anti-slavery/human rights more broadly. Yes, as yet neither country has introduced mandatory human rights due diligence legislation - although momentum is building. The Swiss "Responsible Business Initiative" (based on the UN’s Guiding Principles on Business and Human Rights) is a positive development and earlier this year the Canadian government introduced legislation to strengthen human trafficking laws, also local media reports suggest broader support for human rights due diligence as well (e.g. a World Vision study found 87% of Canadians support transparency requirements as a means to combat labour and trafficking issues). Regards, Edwina

Cat Daddy
July 14, 2017

Slavery is closer than you think. Just finished 3 hours delivering pizzas in Granville. Was paid the grand sum of $54. After a tax deduction of $40.92 (66kms @ 66cents) my net pay was gross and net $13.08 or $4.36 per hour. Fair - I think not. Slavery - I thonk so

Kevin
July 15, 2017

Two or 3 yrs ago after that fire(?) in Bangladesh I made a point of talking to Richard Goyder at the AGM.

We need to pay them a fair wage and offer fair working conditions.If dividends drop slightly then so be it.The needs of the poor are far ahead of the wants of the rich.

I like R Goyder,he seems a very decent and honourable man.The answer was he had just got back from Bangladesh and kicked a few bums.I can only hope it was true,and I think it probably was.

 

Leave a Comment:

RELATED ARTICLES

Why August company reporting season was poor

It’s the large stocks driving fund misery

Maintaining dividend income in turbulent times

banner

Most viewed in recent weeks

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

The hidden property empire of Australia’s politicians

With rising home prices and falling affordability, political leaders preach reform. But asset disclosures show many are heavily invested in property - raising doubts about whose interests housing policy really protects.

Latest Updates

Investment strategies

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Superannuation

Meg on SMSFs: Indexation of Division 296 tax isn't enough

Labor is reviewing the $3 million super tax's most contentious aspects: lack of indexation and the tax on unrealised gains. Those fighting for change shouldn’t just settle for indexation of the threshold.

Shares

Will ASX dividends rise over the next 12 months?

Market forecasts for ASX dividend yields are at a 30-year low amid fears about the economy and the capacity for banks and resource companies to pay higher dividends. This pessimism seems overdone.

Shares

Expensive market valuations may make sense

World share markets seem toppy at first glance, though digging deeper reveals important nuances. While the top 2% of stocks are pricey, they're also growing faster, and the remaining 98% are inexpensive versus history.

Fixed interest

The end of the strong US dollar cycle

The US dollar’s overvaluation, weaker fundamentals, and crowded positioning point to further downside. Diversifying into non-US equities and emerging market debt may offer opportunities for global investors.

Investment strategies

Today’s case for floating rate notes

Market volatility and uncertainty in 2025 prompt the need for a diversified portfolio. Floating Rate Notes offer stability, income, and protection against interest rate risks, making them a valuable investment option.

Strategy

Breaking down recent footy finals by the numbers

In a first, 2025 saw AFL and NRL minor premiers both go out in straight sets. AFL data suggests the pre-finals bye is weakening the stranglehold of top-4 sides more than ever before.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.