Australia must hold companies to account for human rights violations

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When the UK Modern Slavery Act was introduced in 2015 and its Australian counterpart followed it three years later, these laws were called groundbreaking.

Both laws require entities that meet the annual income threshold to report on the risks of modern slavery in their operations and supply chains, what steps they have taken to address those risks, and what the outcomes have been. these efforts.

Basically, the modern slavery law in each country does not have severe penalties for non-compliance and relies solely on stakeholder scrutiny and market forces for its enforcement.

The UK Home Office declares that “failure to comply […] can damage the company’s reputation. It will be up to consumers, investors and non-governmental organizations to initiate and / or exert pressure when they believe that a company has not taken sufficient action ”.

In Australia, the Home Office says that non-compliance can “damage your entity’s reputation, undermine your ability to do business with other entities and damage investor confidence.”

Although Australian entities have yet to report, reports in the UK have been disappointing. In 2017, 43% of companies listed on the London Stock Exchange did not file a report, nor did 42% of the top 100 companies that were awarded public contracts.

It appears that many businesses in the UK weren’t afraid of a backlash from consumers not to comply with the law, even though that consumer was the government itself.

The vague threat of reputational risk therefore seems insufficient to trigger action. This is corroborated by the United Nations Special Rapporteur on Contemporary Forms of Slavery, who stated that “soft law” frameworks […] has had limited effect in ensuring corporate and state accountability ”.

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Progressive developments in other jurisdictions

While the British and Australian governments are busy congratulating themselves, other jurisdictions – in Australia and abroad – are pursuing more gradual legislative changes.

The NSW Modern Slavery Act was passed in 2018. Its main point of differentiation from its federal counterpart is that the NSW Act can apply a penalty of up to $ 1.1 million for non-compliance.

Unfortunately, the New South Wales government will be reviewing the New South Wales law and “making the necessary changes to the law to begin the elements of the New South Wales law that complement the law. of the Commonwealth and which are not incompatible with it ”.

This is a roundabout way of saying that the amended NSW Act will not include penalties.

The overseas jurisdictions where more ambitious and more vigorous legislation has been introduced or is being considered are France, the Netherlands, Switzerland and the European Union.

Human rights due diligence and accountability

France adopted its law on the duty of vigilance in 2017. As a world first, this legislation can be used to hold a parent company and its subsidiaries, or a multinational and its subcontractors, responsible in the event of violation of human rights. man or the environment.

Any party can ask a judge to make an order for a business to comply with the law. If the non-compliance of a company has caused damage to a third party, the latter can then request compensation under the ordinary law of civil liability.

A Dutch law introduced in 2018 introduces a duty of care to prevent the supply of goods or services that have been produced using child labor. It is the first of its kind to introduce criminal penalties for a company’s failure to comply with human rights due diligence.

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A national referendum will be held in Switzerland in November on the Responsible Business Initiative. If the initiative is supported by a majority, mandatory human rights and environmental due diligence will be introduced for Swiss companies.

Under the Swiss bill, a company would be liable for damages abroad for violations of human rights or international environmental standards caused by companies under its control, unless it can prove that it has taken all necessary precautions to avoid the violation.

What is revolutionary in the Swiss bill is that it partially reverses the burden of proof: it obliges the company to establish that it took care to prevent violations, or to demonstrate that the damage would have occurred even if adequate care had been provided. .

The European Union intends to introduce new environmental and human rights due diligence for business in 2021. There are few details on the final form the legislation will take, but it is clear that the new regime will include penalties for non-compliance.

Consequences for Australian businesses

While these European laws do not apply directly to Australian companies, they may apply to Australian companies with subsidiaries in those jurisdictions.

These laws significantly raise the bar for Australian companies operating or seeking to operate in the European market. A generic statement on modern slavery or human rights, which would imply compliance with Australia’s modern slavery law, would be insufficient.

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Australian companies indirectly exposed to the European market (e.g. through the supply of goods to companies to which due diligence legislation applies) can expect a non-negotiable demand from their European trading partners to demonstrate the human rights and / or environmental due diligence as part of contractual agreements.

The legislative trend in Europe shows that the days of soft law and voluntary initiatives to hold companies to account for human rights violations are drawing to a close.

Australia must be careful not to fall behind

Australian industries cannot compete with countries or companies that are able to keep their prices and costs of production low with disregard for human rights.

The competitiveness of Australian businesses is best served by taking the high road and offering products and services accompanied by leadership in human rights.

Beyond the moral argument and contributing to global efforts to combat human rights abuses, it is in Australia’s interest to introduce policies that bring Australian businesses into line with global best practices.

This also applies to other policy areas such as climate change.

Scott Morrison’s reaction to Joe Biden’s proposed target of net zero emissions by 2050 is alarming. Morrison said that “Australia will always set its policies according to Australia’s national interests and the contributions we make in these areas”.

Australia’s interests are to take the lead on human rights and climate change, not to fall behind.

UTS lecturer in management Martijn Boersma, QUT research assistant Justine Coneybeer, UTS management professor Emmanuel Josserand and QUT associate professor in Alice Payne mode

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