A recent report by the Monash Centre for Financial Studies has found that a number of ASX companies have not adequately considered the risks posed by modern slavery within their supply chains.
Monash’s study evaluated the quality and depth of statements made by ASX 100 companies on their efforts to combat modern slavery over the last financial year.
Notable poor performers on the modern slavery scale included Nine Entertainment, Cleanaway and ResMed, while Woolworths, FMG and Westpac were top performers.
Modern slavery is a prevalent issue globally, impacting 40.3 million victims and $354 billion of at-risk products imported by G20 countries. It also remains prevalent in Australia, with 1,567 incidents recorded domestically.
Key risks identified for ASX companies were forced labour (applicable to 29 per cent of companies), child labour (2 per cent) and debt bondage (23 per cent).
On a sector-by-sector basis, materials and financials were best in class while consumer stables and communication services were the worst performers.
The main differential seen in companies performing well was large employee numbers and a high supply spend.
Furthermore, companies scoring higher on the modern slavery scale had shown a history of actively considering modern slavery risks and human rights issues.
“Of the top companies we identified with the best scores, these companies had made managing modern slavery risks a priority,” Said Dr Nga Pham, a researcher from Monash.
“This meant that they were transparent in how they assess and address the risk of modern slavery practices in their operations and supply chains and monitor such actions against the mandatory criteria outlined by the Commonwealth Modern Slavery Act.”
In improving future results, the report made numerous recommendations for companies, investors and regulators alike.
“We’ve presented these findings in a way which allows investors to identify priorities in engaging with their portfolio of companies in a transparent and open manner,” said Dr Pham.
“This means that investors can communicate the possible areas of concern and modern slavery risks relevant to each company or each sector.
“They can help companies to enhance their due diligence and remediation processes, while also ensuring the board has oversight of modern slavery and human rights risks.”
ASX 100 companies were first required to give statements on modern slavery risk in their supply chains in the 2021 financial year.
Furthermore, the Commonwealth Modern Slavery Act, commenced on 1 January 2019, also requires entities based or operating in Australia, which also have an annual consolidated revenue of more than $100 million, to report on the risks of modern slavery in their operations and supply chains and actions.
Despite a mixed performance across the ASX, the report expects the now ongoing requirements to report on modern slavery to improve results across the board.
“It’s important to note that this is the first year that ASX companies have had to report on modern slavery and based on our findings we expect that majority of these companies will take action and improve their disclosure quality in the next financial year,” said Dr Pham.
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