Carrot vs stick: reducing modern slavery risks for real world impact

More than 40 million people around the world are victims of modern slavery, according to the most recent figures from the United Nations' International Labour Organization¹.  These vulnerable children and adults are exploited and deprived of their basic human rights. 

With deep, complex, global supply chains around the world, this means that every country, investor, business and consumer are potentially exposed to modern slavery risks, including Australia. 

The stick – compliance with legislation

To address the breadth and depth of the problem, the Australian government introduced the Modern Slavery Act 2018²,  which sets out the minimum obligations legally required of Australian entities to address the risks of modern slavery in their organisations.

The carrot – CSC’s approach

At CSC, our mission is to be a trusted and valued partner who achieves long-term objectives for our customers’ retirement. As the superannuation provider to employees of the Australian Government and members of the Australian Defence Force, we recognise our responsibility to take meaningful action towards eradicating modern slavery. We are committed to taking action across our operations, supply chain and investments, and to working with others, to identify, remediate and prevent modern slavery, labour exploitation and human trafficking.

We aim to make a genuine impact to the lives of real people and do what we say we will do, rather than treating the legislation as a tick box compliance exercise.

CSC’s first Modern Slavery Statement (2020) was rated by Rainmaker as one of the most comprehensive documents amongst those lodged by superannuation funds in Australia. 

Our second annual Modern Slavery Statement (2021) has just been released and summarises our progress in the last 12 months. 

Tackling modern slavery across our corporate and investment supply chains 

We assess whether our suppliers are aware of modern slavery risks in their supply chains, how they are managing supply chains via policies and procedures to minimise instances of modern slavery including remediation, and how exposed they are to sectors and countries which have higher risks of modern slavery. 

Our assessments rank suppliers into high and low risk groups and considers how much influence we have on them. This helps us to identify risks more clearly and prioritise how we – and they – can make the greatest genuine impact.

Recently, we introduced a Supplier Code of Conduct, which includes directions on how to identify and address modern slavery – we expect all our corporate suppliers to follow the code. 

For our investment managers, we include modern slavery risk management requirements in their Investment Manager Agreements (IMAs) or in side letters for some pooled funds. 

New investment initiatives 

We focus on achieving sustainable financial outcomes for our customers. We believe that over time, as we consider long-term risks holistically in all the investments we make on your behalf, this may also achieve positive externalities – things that improve people's lives such as cleaner air and water, and better and safer treatment of workers.

Changes to global supply chains take time and co-ordinated efforts. We seek to make genuine incremental impact and prioritise our engagement according to the level of control and influence we have on the investment manager or supplier. 

In addition, this year, we actively participated in two new industry collaborations as we recognise that more meaningful and effective change can be achieved together with other institutional investors and modern slavery experts, in addition to our own engagement with investment managers and suppliers individually: 

1. Investors Against Slavery & Trafficking (IAST-APAC)³  is strongly focused on industry collaboration, including sharing knowledge and tools to address risk. It is inspired by the UK's ‘Find It, Fix It, Prevent It' investor initiative.
2. Our Chief Investment Officer (CIO) was invited to contribute to the global flagship United Nations/Brookings Institution SDG 17 Rooms: Modern Slavery initiative,   initiative to accelerate progress towards the Sustainable Development Goals. In particular, she has been involved in Room 17, which focuses on the role institutional investors can play in the fight against forced labour and modern slavery, while supporting inclusive growth, consistent with the trend towards increasing investor focus on real world impact. 

This program has designed a valuable tool to estimate forced labour risk and improve transparency in an opaque and complex area. The tool allows investors, regulators and those who set standards to efficiently identify, measure and mitigate modern slavery risks across all markets.

The Chair of our Board of Directors, Garry Hounsell, stressed the importance of the corporation's ongoing actions in this area: "Slavery is not just something from the history books," he said. "Sadly, it happens today too, in businesses and organisations here in Australia, as well as overseas. We need to play our part in Australia and internationally by doing what we can to identify and mitigate the risks of modern slavery. It's a key element of our drive to be a responsible corporate citizen and uphold and defend human rights."

_{1. https://www.ilo.org/global/topics/forced-labour/lang--en/index.htm}

_{2.  Modern slavery includes trafficking in persons, slavery, servitude, forced labour, forced marriage, debt bondage, the worst forms of child labour and deceptive recruiting for labour or services. Modern slavery risk refers to the potential for an organisation’s operations and supply chains to expose an individual to modern slavery practices, rather than any risk directly suffered by that organisation.}

_{3. The secretariat and knowledge partner of IAST-APAC is Walk Free - a not for profit organisation seeking to strengthen systems and eradicate slavery from all supply chains (publisher of the Global Slavery Index), along with the Liechtenstein Initiative for Finance Against Slavery and Trafficking (FAST).}

_{4. Members:
• Institutional investors: Bridgewater Associates, CSC, Transport for London Pension Fund
• Forced labour experts: Humanity United, Transparentem, Verité
• Research organisations: McCain Institute, Brookings Institution, Rockefeller Foundation}