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.

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.

Cat Daddy
July 15, 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

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

July 14, 2017

Edwina mentions Canadian legislation. I'd like to ask Edwina for the name (and details, if available) of this legislation. I'd also like the name of the Swiss legislation as I am only aware of proposals for human rights due diligence legislation. Thanks, Kath


Leave a Comment:



Why August company reporting season was poor

It’s the large stocks driving fund misery

Changing times as share investors settle in for the long haul


Most viewed in recent weeks

10 reasons wealthy homeowners shouldn't receive welfare

The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?

House prices surge but falls are common and coming

We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.

Survey responses on pension eligibility for wealthy homeowners

The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?

100 Aussies: five charts on who earns, pays and owns

Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.

Three good comments from the pension asset test article

With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.

The sorry saga of housing affordability and ownership

It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.

Latest Updates


$1 billion and counting: how consultants maximise fees

Despite cutbacks in public service staff, we are spending over a billion dollars a year with five consulting firms. There is little public scrutiny on the value for money. How do consultants decide what to charge?

Investment strategies

Two strong themes and companies that will benefit

There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.

Financial planning

Reducing the $5,300 upfront cost of financial advice

Many financial advisers have left the industry because it costs more to produce advice than is charged as an up-front fee. Advisers are valued by those who use them while the unadvised don’t see the need to pay.


Many people misunderstand what life expectancy means

Life expectancy numbers are often interpreted as the likely maximum age of a person but that is incorrect. Here are three reasons why the odds are in favor of people outliving life expectancy estimates.

Investment strategies

Slowing global trade not the threat investors fear

Investors ask whether global supply chains were stretched too far and too complex, and following COVID, is globalisation dead? New research suggests the impact on investment returns will not be as great as feared.

Investment strategies

Wealth doesn’t equal wisdom for 'sophisticated' investors

'Sophisticated' investors can be offered securities without the usual disclosure requirements given to everyday investors, but far more people now qualify than was ever intended. Many are far from sophisticated.

Investment strategies

Is the golden era for active fund managers ending?

Most active fund managers are the beneficiaries of a confluence of favourable events. As future strong returns look challenging, passive is rising and new investors do their own thing, a golden age may be closing.



© 2021 Morningstar, Inc. All rights reserved.

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. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). 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.

Website Development by Master Publisher.