Investors have a responsibility to ensure decent supply chains

While this year marks 75 years after the adoption of the UN Convention for the Suppression of the Traffic in Persons and of the Exploitation of the Prostitution of Others on 2 December 1949, slavery in our modern world is still widespread.

The rates of modern slavery are growing, with estimates highlighting that 10 million additional people have been trapped across the world since 2018. In the Asia Pacific region, it is estimated that 29.3 million people are living in modern slavery of which one in four are children [1].

As modern slavery rates rise, so to do annual profits generated from the exploitative conditions, with profits reaching an estimated US$236 billion in 2024 [2]. Exploitation and inhumane working conditions are embedded in global supply chains due to strict price targets and tight delivery deadlines set by companies. While governments around the world continue to enact policies to combat these abuses by ensuring compliance with labour and social standards, there is still work to be done to provide greater protection for human rights in supply chains.

This issue became more relevant for Australian-based investors with the introduction of Australia’s first Modern Slavery Act in 2018, requiring companies to report on how they are addressing and preventing modern slavery in their value and supply chains. A recent report from the First Sentier MUFG Sustainable Investment Institute and Walk Free titled ‘Modern Slavery & Remediation – An Investor’s Guide’ outlines that no investment is immune from the risks of modern slavery. The report highlights the role that investors can play in providing or facilitating access to remediation for those who have been victims of modern slavery, and how investors can go about identifying and addressing these risks.

The report provides an overview of international legal frameworks, national legislation and presents concrete recommendations on how investors can individually and collaboratively detect, act to prevent and offer remediation against suspicious cases of modern slavery.

The report suggests that investors should engage in upfront conversations with portfolio companies to ensure transparent reporting of violations. In the event of a violation, investors should offer support in the investigation and clarification process, as well as work with other investors to increase leverage in addressing the problem.

Redress plays a crucial role in implementing human rights standards, but it is often misunderstood. Entering a critical dialogue with a portfolio company regarding controversial practices with its suppliers, escalating the issue with other investors, and monitoring progress are all elements of remediation.

The need for investors to prioritise modern slavery remediation is reflected in the Investors Against Slavery and Trafficking Asia Pacific‘s (IAST APAC) goal of finding, fixing and preventing modern slavery in operations and supply chains. The investor led initiative, comprising of 50 investors with A$12 trillion in Assets Under Management (AUM), works collaboratively with other bodies such as Walk Free to accelerate understanding of how they can collectively work towards ending all forms of modern slavery.

We all have a role to play in fighting modern slavery, from companies improving local working conditions, to investors engaging with companies and influencing decisions to improve their supply chains, to consumers making purchasing informed decisions.

Access more information on modern slavery remediation by reading the First Sentier MUFG Sustainable Investment Institute and NGO Walk Free Modern Slavery & Remediation – An Investor’s Guide report, and by visiting the IAST website.

Kate Turner is the Global Head of Responsible Investment at First Sentier Investors, and Chair of the Investors Against Slavery and Trafficking Asia Pacific (IAST APAC). IAST APAC recently published its Annual Report 2023-2024, detailing the work that its coalition of 50 investors has done in investor advocacy, company engagement and knowledge sharing to find, fix and prevent modern slavery in operations and supply chains across the APAC region.