Australia’s “Modern Slavery” Bill To Impact Global Supply Chains

Australia cracks down on modern slavery.

CFOs concerned with rising business risk and their overworked colleagues in procurement will have another major worry in early 2019. Australia’s Transparency in the Supply Chain Bill, which is set to become law, will require businesses to address modern slavery both in their own operations and in their extended supply chains.

Marriott’s Singapore-based regional CFO Pascale Dillon says it is high time CFOs started taking the bill seriously. She points out that the Walk Free Foundation, which publishes the annual Global Slavery Index, estimates that 30.4 million people are victims of modern slavery in the Asia-Pacific region alone, mainly in agriculture, fishing, sex work, mining, construction, farming and cleaning services.

The devil, as they say, is in the details. The bill imposes global obligations on any entity with operations in Australia with total revenues of $100 million Australian dollars (US$71 million) or more. For non-Australian entities, the provisions will apply irrespective of the size of their Australian operations.

The bill requires entities to submit detailed annual reports on their structure, operations and supply chain, addressing slavery risks both in their operations and those of all subsidiaries and suppliers.

Procurement teams will need to introduce new supply contracts and alert existing suppliers to potential future changes. These will include reporting templates and the power of audit, since companies are liable for anything false and misleading.

The bill does not envisage monetary penalties; it relies on reputational risk and will publish slavery “league tables” for business sectors to compel corporate attention.

For companies that have extended supply chains in Southeast Asia and other geographies with less-than-stellar human-rights records, the risk of being found less compliant than competitors is that reputational damage will affect consumer behavior.

Banks and other lenders have also commented that poor compliance may adversely affect risk ratings based on ESG (environmental, social and governance) criteria. The cost of borrowing and analyst sentiment will be among the things at stake.

As a consumer specialist, Dillon points to the upside: A “race to the top” driven by widely published compliance data creates a compelling opportunity for first-mover companies to benefit by tapping more socially conscious buyer behavior. “Civil society—especially in the West—is increasingly acknowledging and rewarding businesses that lead in eradicating slavery from their supply chains, especially those that also demonstrably source items from environmentally sustainable sources,” she concludes.