Date posted: 21/08/2017 5 min read

Modern slavery and how accountants can fight it

Australian companies will soon be required under proposed federal legislation to report any exposure in their supply chains to slave labour.

In Brief

  • The true extent of modern slavery remains hidden.
  • A parliamentary inquiry into establishing a Modern Slavery Act in Australia has released an interim report.
  • Accountants can discover and disclose modern slavery practices and make sure they are minimised in domestic and global supply chains.

Authors: Dr Katherine Christ (University of South Australia)

             Professor Roger Burritt (ANU)

             Dr Kathy Rao (University of South Australia)

Pic credit: Zakir Chowdhury/Barcroft Images/Getty Images

In 2013, when the Rana Plaza garment factory collapsed in Bangladesh killing more than 1,100 people, branded companies worldwide including Benetton, Mango and Walmart had to face an uncomfortable truth: irrespective of corporate responsibility programmes and good intentions, their products and supply chains had become hotbeds for slave labour. 

As evidence of appalling work conditions began to surface, companies scurried to distance themselves from the disaster, with many signing global compacts committed to developing slavery-free business networks.

The public outcry also rang in the halls of government, with Australia the latest country to consider implementing a Modern Slavery Act (see Box 1). This follows recent moves in the UK, France and US. 

With a focus on transparency and disclosure, these events will impact work undertaken by a large number of accountants, whether they are engaged in business, in professional practice advising clients or the audit function. 

What is modern slavery?

Although there is no universally agreed definition, modern slavery can be characterised as control, by powerful people or organisations, over vulnerable individuals in order to obtain a personal gain or profit. Modern slavery in this sense can take several forms including forced labour, debt-bondage, child labour, wage exploitation, human trafficking, forced marriage, involuntary domestic servitude or any other practice where victims are coerced to engage in unreasonable work through physical or mental threat. 

Examples include people forced to work to pay off generational debts or threatened with harm if they leave; women, men and children forced into prostitution against their will; and children forced to work in factories under harmful conditions. 

From a business perspective though, modern slavery is specific to business-related activities. With globalisation leading to longer and more complex supply chains, opportunities for slavery-like activities including forced labour and human trafficking have continued to grow. Thus it can be argued business has a moral and ethical obligation to combat slavery in their supply chains.

Where do accountants fit in?

Accountants are the gatekeepers of information about business. Long recognised as providers of financial information to oil the wheels of the capital market, they have in recent years been more heavily involved in developing useful non-financial information about corporate activities. 

Because of its close association with illegal activities the true extent of modern slavery remains hidden. Nonetheless, accountants can help to improve transparency in this area. One way accountants can help is to look for and help guard against modern slavery within the businesses and networks for which they work. 

Accountants in business and practitioners can discover and disclose modern slavery practices and provide assurance to stakeholders in business that such practices are minimised in domestic and global supply chains. 

Finally, accountants can be proactive with policy advice on how best to establish taxation and subsidy incentives for companies who do the right thing and show this to be the case over time. But unless they themselves are aware of the practices of modern slavery accountants might be bypassed in the current push for transparency.

What should the profession do?

The first step is to recognise the skills and expertise offered by professional accounting firms in relation to discovery about matters which might otherwise be kept invisible by unscrupulous companies, or in the majority of cases by companies who are unaware or turn a blind eye to modern slavery practices. 

Accountants in business or practice can check the Global Slavery Index managed by the Walk Free Foundation which lists the prevalence of modern slavery in 167 countries, together with information about the steps each government has taken to respond to this issue. Australia and New Zealand have a low prevalence, but companies often purchase from and sell into supply chains overseas where the prevalence of modern slavery is high. Trading with others in these hot spots should be a red flag to consider; the largest source of over 45 million slaves worldwide is in global supply chains.

Business has a moral and ethical obligation to combat slavery in all supply chains.

Next, accountants should develop awareness of specific industries with which their business employer or client is involved, due to the higher prevalence in some labour-intensive areas. Agriculture, construction and textiles are three mainstream industries where modern slavery occurs. 

Whether it is backpackers in regional areas, textile workers in the suburbs, employees in nail bars, or people with special working visas on construction sites, modern slavery practices can also be home-grown. Familiarisation is advisable with SA8000, an auditable social accountability certification standard that encourages organisations to voluntarily develop and apply acceptable practices in the workplace, many linked with modern slavery.

Finally, it’s wise to be familiar with slavery-related regulation, which is a critical third step. This is where knowledge of the types of modern slavery becomes important as legislation in many countries is concerned with granularity in relation to slavery through forced labour, child labour, bonded labour and connections with trafficking. Alignment with professional legal services is essential for a unified approach to building suitable information systems.

Submissions indicate little engagement between the accounting profession and the Inquiry into establishing a Modern Slavery Act in Australia. Instead, legal service providers dominate, which represent multiple stakeholders: government regulators, victims, businesses, NGOs, etc. This could signify a missed opportunity for the accounting profession, which has a wealth of skills applicable to modern slavery in the areas of indicator development, reporting, independent assurance, taxation and management services such as registration, annual statements, and web disclosure. 

Fast-tracking draft accounting and assurance standards for modern slavery, in collaboration with other professions and international bodies such as the UN, IFAC and WBCSD would establish Australia's driving leadership. 

It would guide members in business, especially in the context of modern slavery in global supply chains and show the profession takes social sustainability seriously in an era when cynicism is rife about global business and the service providers who ensure its continuation at the expense of the public interest.

Box 1. Inquiry into introduction of Modern Slavery Act in Australia

On 15 February 2017, a parliamentary inquiry into establishing a Modern Slavery Act in Australia was launched. In terms of reference for enquiry, the United Kingdom’s Modern Slavery Act 2015 and relevant findings from the Joint Standing Committee on Foreign Affairs, Defence and Trade’s report, Trading Lives: Modern Day Human Trafficking were specifically considered. Nearly 200 submissions were made by various stakeholders including business, government, non-government, community organisations, unions, professional service organisations and the accounting profession with the majority supporting introduction of an Act in Australia. An interim report of the inquiry has now been released and is available online. In addition, information about the proposed Global Supply Chains Reporting requirements can be obtained from the Attorney General’s Department and is available for comment until 20 October 2017.

Box 2. Case Study: Forced labour and human trafficking in Nestlé’s global supply chain

After a year-long investigation into practices on prawn farms and fishing boats in Thailand, giant multinational food company Nestlé discovered forced labour and human trafficking within its own supply chain. The investigation revealed workers from Thailand’s poorer neighbours, Myanmar and Cambodia, were illegally employed and forced to work under inhumane conditions. Nestlé immediately initiated an action plan which aimed to control and prevent such labour and human rights abuses in its seafood supply chain in Thailand. Although Nestlé’s commitment to eliminating slavery in the seafood supply chain seems promising, other civil litigation suits against slavery in core business operations questions such promises. Read more

Related links

CAANZ members wishing to keep an eye on developments can refer to the following sources that provide a foundation for predicting what might eventuate in the coming years: