About
Photo Credit: Boonchai Wedmakawand via Getty Images.The Issue
Modern slavery is a global issue.
Walk Free and the International Labour Organization (ILO) have estimated that there are 49.6 million victims of modern slavery in the world today. Of these, 29.3 million are thought to be in the Asia-Pacific region, and 27.6 million people worldwide are working in conditions amounting to forced labour. Women and girls account for 54 per cent of modern slavery victims, while one in four victims of modern slavery are children.
Modern slavery is an umbrella term that includes crimes such as human trafficking, forced labour, the worst forms of child labour, and debt bondage. The victims of these offences are disproportionately from vulnerable communities and people – migrant workers, rural and urban poor, Indigenous peoples and minorities, and women and children.
Companies operating or investing in the Asia-Pacific region – including Australia – are particularly exposed to the risk of modern slavery because of the region’s prominent role in the global economy and its high levels of vulnerability for and prevalence of modern slavery.
The business case for taking action
Companies that do not manage modern slavery and labour exploitation risk effectively throughout their business activities can expose themselves to legal, reputational and financial risks. It is imperative for investors to fully understand these risks within their investment portfolios and seek to mitigate them.
The commercial implications of respecting human rights and preventing modern slavery include:
- Efficiency and resilience: Better conditions for workers may lead to improved supply chain productivity and resilience, improved corporate governance and better business performance.
- Investor focus: Weak management of modern slavery risks in operations and supply chains is increasingly seen as a key business risk by investors, which are demanding greater transparency from companies on their ESG practices. Modern slavery is increasingly seen as a core business risk and investors are using data on this to inform investment decisions.
- Stakeholder expectations: Customers and employees are increasingly informed about company sustainability performance, including human rights, and make decisions based on their values and standards.
- Regulatory risk: The global regulatory landscape is evolving rapidly with stronger modern slavery disclosure and sustainability reporting laws, new human rights due diligence laws, and increasing cases of fines / sanctions or market access being denied for products that fail to meet minimum standards on human rights and other ESG issues.
“Modern slavery or human rights abuses in the companies we invest in, or their supply chains, pose significant financial risks to our portfolio, and to our members’ long-term retirement outcomes.”
Liza McDonald
Head of Responsible Investments at Aware Super
Photo Credit: imagevixen via Getty Images.Increasing regional and global attention
In Australia, the entry into force of the Modern Slavery Act 2018 (Cth) (Act) in 2019 was an important step in encouraging large business – including investors – to assess and address modern slavery risks in operations, supply chains, and wider business relationships. Over 3,000 companies are required to report annually. The guidance for and implementation of the Act aligns with operational expectations of the Corporate Responsibility to Respect pillar in the United Nations Guiding Principles on Business and Human Rights (UNGPs), which recommends that businesses put in place human rights policies and procedures, due diligence frameworks and processes, and grievance mechanisms and remediation plans. In 2023, a review of the Act recommended (amongst others), the introduction of a positive requirement to conduct human rights due diligence.
Regionally and globally, governments and regulators are paying growing attention to modern slavery risks, for example:
- The US now prevents goods made with forced labour from entering its territory, creating market access risks for any goods made that way, including in the Asia-Pacific region.
- The UK also has a Modern Slavery Act in place, and similar legislation is under consideration in Canada and New Zealand.
- Several European countries have mandatory human rights due diligence (mHRDD) laws in place, and in early 2024 the EU passed the Corporate Sustainability Due Diligence Directive, which will require large companies to conduct human rights and environmental due diligence across their operations and value chains.
- Hong Kong and Singapore stock exchanges both require listed entities to disclose ESG risks on a ‘comply or explain’ basis, including forced labour and child labour risks expressly in the case of Hong Kong.
More information
Asset owners and asset managers in the Asia-Pacific region interested in joining IAST APAC should contact the Secretariat.