Modern slavery is propped up by corporate culture as much as dodgy supply chains

Recently, I had the privilege of spending time with an NGO in Thailand that rescues slaves in the fishing trade. I wrote about the experience for the Lowy Institute. Despite spending some 25 years in social justice and human rights areas, I was astonished at both the extent of the modern slavery problem and the cruelty it manifests.

Companies facing the new regime of reporting on modern slavery in Australia (as part of a wider trend) may face a similar shock — not only in regards to the slavery itself, but due to just how pervasive and insidious the practice is. 

With reporting legislation now existing in NSW, and with the Commonwealth’s Modern Slavery Act now passed, the pressure on company managers to be on top of their risks of, and exposure to, modern slavery is acute. 

An estimated 40+ million slaves (2016 figures) worldwide have a lot at stake. But so do the companies covered in the legislation. 

The Modern Slavery Act requires companies to audit their current impact on slavery in their supply chains, to ensure staff are equipped to understand modern slavery and to issue a publicly available report on their risks, policies and operations in relation to forced labour and trafficking.

The emphasis on supply chains in the legislation is understandable as this is the easiest means of tracking the underground labour market. However, companies that simply follow the letter of the law — and silo off their supply chains for auditing under the act — are going to fall short. 

Modern slavery is two things: it is an act and it is an attitude. While acts of slavery can be relatively simple to define, and to articulate in a report, an attitude throughout a company’s culture is far less so. 

For example, having a view that companies are justified by their profits and that revenue is its sole bottom line — the fiduciary obligation argument — will require a decision-making process throughout the company that reflects that view. Driving down costs in the interests of increased profits for shareholders — and executive bonuses — is the perfect soil in which to grow a slave system. 

As an example, one major retailer which I researched recently was able to crow about how it increased sales across one financial reporting period by 4.5%, while cutting costs to a 1% increase. This suggests that the benefits of added profits have not been passed on to suppliers, thus creating the space for worker exploitation and even slavery. One division of this company, in a sector particularly noted for the prevalence of slave labour, increased profits by over 6% while holding down costs to that 1% level. 

According to draft figures from a report I am currently finalising, just 9% of the top 100 publicly listed companies in Australia mention the Modern Slavery Act (or the bill before it) in their latest annual report. Only 18% mention slavery at all. 

Such findings should set off alarm bells. 

By pressuring suppliers to in turn place added stresses on its workforce, this company is setting a firm foundation for slavery to occur. But this culture of savings and cost-cutting is unlikely to come up in the meetings about slavery and about the new reporting regime. 

They should, because such a mindset will continue to drive modern slavery and all the audits and legislated reporting will not stop it. For companies, not only will they have the accusations of “slave drivers” to deal with, the ever-deepening modern slavery reporting era that is looming will only get more complicated and difficult for them to manage.

They are setting up for a trainwreck. 

Company managers need to ask: what are the factors in our organisational culture that may be leading to the attitude of slavery, driving a decision-making direction that actually supports and even encourages its presence? 

These may be found in a range of areas that don’t necessarily fit into the procurement manager’s department or within the definition of a supply chain — loose as that is anyway. 

Are there directors on the board with appropriate experience with human rights issues? What’s the demographic spread of the company’s employees; is it representative of the actual spread of the company’s business operations, especially among marginal communities? What’s the pay gap between the company’s leading earners and its lowest earners? Factors such as this can help set the broader human rights culture of the company and are a likely impact on its slavery risks.  

The reality is that large companies are the sum of the many small, daily decisions that are being made in its name, at every level of its operation and across all departments it maintains. Slavery is often the result of what we might call “incremental creep”.

Ensuring these decisions are based on an attitude that is inimical to slavery is likely the only honest way that companies can be sure they are not part of the problem that is modern slavery. 

And, even if only to stay legal, that should be the goal of every company, every manager, every shareholder.