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Legal and Constitutional Affairs Legislation Committee
01/08/2018

ADAMS, Ms Keren, Director of Legal Advocacy, Human Rights Law Centre

CHAIR: I call the hearing back to order. I welcome Ms Keren Adams from the Human Rights Law Centre. Thank you very much for coming along, Ms Adams. I understand that we have given you information on parliamentary privilege and the protection of witnesses. You're aware of that information. Have you given evidence before?

Ms Adams : I gave evidence to the inquiry previously.

CHAIR: The House of Representatives inquiry, yes. You will be reasonably familiar with how parliamentary committees work, although this is a Senate inquiry and we do things much more efficiently than the House of Representatives do, I have to say! We are here for a purpose. The legislature has been introduced into parliament and referred to this committee to hear from people with an interest as to whether it's 100 per cent right or whether it means additions, deletions or other things. That's what this committee's role is. This committee comprises some government members and some opposition members, but it is a committee of parliament rather than a committee of government. We try our best to improve, if that's needed, any legislation. That's what the whole purpose is about. We'll ask you to make a short opening statement.

Ms Adams : Thank you, Senator Macdonald and their committee, for having me along today. My name is Keren Adams. I'm the director of legal advocacy at the Human Rights Law Centre, and I lead our work on business and human rights. First of all, I just want to acknowledge, as the previous participants did, the enormous work that has gone into producing this piece of legislation and would really commend the government on consulting so broadly and having a lengthy consultation period, which has seen almost unprecedented participation. I know some of you were directly involved in that inquiry as well.

I just wanted to make a few points in opening. Most of the things that I want to say have been covered in the submission. I just wanted to make the point that three years ago the UK government introduced the world's first modern slavery act. That legislation was hailed at that point as groundbreaking. In many respects, it has been. But three weeks ago, the UK's Independent Anti-Slavery Commissioner, Kevin Hyland, and a large coalition of businesses, investors, parliamentarians and civil society organisations took the unprecedented step of writing to the UK government and publishing an open letter highlighting some significant problems with the regime. In particular, the letter highlighted that only around 30 per cent of UK companies required to report under the UK act are currently doing so and many of those that are reporting are not even complying with many of the most basic requirements of the act.

I think that Australia has a unique opportunity at this moment to make sure that our modern slavery law doesn't fall into those same traps and same pitfalls. Last year's inquiry generated enormous interest from the Australian public and came up with an excellent set of recommendations, which we see as a real blueprint to ensure that Australia becomes a world leader in the fight against trafficking and slavery. A number of the inquiry's recommendations are reflected in the current bill, and we would welcome in particular the government's decision to include detailed mandatory reporting criteria and a central accessible government registry to compile reports made under the act. Both of those features build substantially on the UK act, and they're likely to improve both the quality and the relevance of the information that's given and ensure that the information can be more easily retrieved and monitored. The government's decision to lead by example and publish annual information on its own procurement is also genuinely groundbreaking.

Other key recommendations of the inquiry have not been included in the bill, and we believe that's to its detriment. Our submission highlights three of those in particular. Firstly, we think that the legislation does need penalties for companies that fail to report or provide false or misleading information. We have no problem with the idea of trying to encourage a positive start to this and provide as much assistance as possible to business to ensure that they comply. But the idea that reputational risk alone will drive compliance and lead to a race to the top is just not borne out by the evidence elsewhere. Both in the UK and in California, which have similar voluntary legislation, the regimes have been characterised by very low compliance rates. It is estimated to be about one in three in the UK and as low as one in five in California, according to some studies.

We don't believe that just including the central register provides a complete answer to that problem. Some Australian organisations will undoubtedly be motivated by a genuine desire to do the right thing, by the fact that it's the law of the land, by investor pressure or by reputational damage to report voluntarily. I think that where the legislation currently falls down is that we need to acknowledge that there will be a proportion of businesses that aren't motivated by those factors, particularly those without a public facing aspect to their business or who have little interest in corporate social responsibility. Those businesses will need additional motivators. We think that it's good to have a balance of measures, and we have no problem with the idea that there should be a delayed onset date for penalties to kick in, for instance, to give businesses sufficient time to adjust. But we do think that there needs to be a way to ensure that the proportion of businesses who aren't going to report voluntarily do so.

Secondly, we believe that the bill needs to require the publication of a list of companies. I understand from all of our discussions with the government that it has not been easy to come up with a complete list of companies. But if we can't do so and if we can't find a way to ensure that the legislation does give us a very clear idea of the companies that are required to report, again I think that we're going to see very low compliance rates. This is particularly true if penalties aren't included. If the key compliance driver is supposed to be reputational risk, then organisations need to understand that they will be held up to public scrutiny at least in relation to whether they report. If we can't be clear about which organisations are covered, let alone compare their record over time or against similar organisations, it will be very difficult to hold them to account or measure the effectiveness of the legislation. That's what we've seen in both the US and the UK, that it's impossible to get a completely accurate figure as to the number of companies that are supposed to report under those two pieces of legislation, which has subsequently made it very difficult to monitor approximate compliance rates, so we only end up with estimates.

Finally, we also, as the Walk Free Foundation and the Salvation Army were previously saying, would support the appointment of an independent antislavery commissioner to oversee the legislation and ensure that it achieves those objectives. We think that having a high-profile independent statutory body that's charged with promoting best practice and driving improvements in Australia's overall response to modern slavery is key to ensuring an effective response. We think that the function should include but also go beyond merely ensuring compliance with this bill, including engaging the private sector on the issues, ensuring effective coordination between agencies and monitoring the effectiveness of the legislation in Australia's broader response. I think that without those three key ingredients there's a real risk that the legislation will face the same difficulties and the same lacklustre compliance rates that we've seen in the UK and the US and fall short of the ultimate goal, which is to tackle the widespread growing problem of forced labour in Australian supply chains.

Senator HUME: I want to ask about the penalties. It is a compelling argument, but I'm not entirely sure what the evidence is that would suggest that, if there were penalties in place, compliance would be more effective, or whether if compliance were more effective—the end goal is to reduce the incidence of modern slavery, not to punish companies necessarily. What evidence do you have that penalties actually improve compliance with reporting requirements and reduce the incidence of modern slavery?

Ms Adams : Obviously, none of the other regimes that exist internationally at the moment have penalties included in them. All we can say at this stage is that not having penalties certainly leads to low compliance rates. With this particular regime, as I think Heather was saying previously, we have a three-year period in which to try to get this right. We think that, given the low compliance rates elsewhere, it's worth Australia trying penalties to see whether they do improve things. We think that if the penalties are set at a sufficient rate then they should encourage businesses to take them seriously and send a strong message that the Australian government takes this issue very seriously. We currently already have legislation in place that provides for penalties in relation to the importation of illegally logged timber. Surely with this, which everyone acknowledges as one of the most serious crimes on our statute book, we should be including penalties that are commensurate with the nature of what we're trying to address.

Senator HUME: I hear you, but I would suggest to you that the fact that Australia has taken the lead in drafting this legislation in the first place would suggest that it does take the issue very seriously. The fact that it has also recommended a three-year review of the legislation would suggest that, potentially, it would be better to try the carrot before the stick—but the stick is certainly an option.

Ms Adams : I think that that might be the case if this were a genuine pilot and it was a world first, but we already have two examples from other countries that we can look to to see what hasn't worked. We've already had three years of the UK legislation without penalties and without a register, and it's clear that that's not working well enough and that we can do a lot better. Having the review is excellent, and I think that that's a very good inclusion. I'm sure that we'll be able to improve the bill further once we've had that learning, but we can already look to learnings from other countries to see what hasn't worked.

Senator HUME: It's interesting that you say that the UK legislation hasn't worked. It has been in place for three years. It has an independent commissioner, which is one of the other recommendations that you've made. Do you think that it has any successes that it can hang its hat on? You go onto its website and it will tell you about plenty of its successes.

Ms Adams : I'm not trying to say it suggests that the entire UK act doesn't work; I'm saying that the supply chain reporting requirement has faced significant compliance issues. I think that there are a number of reasons for that. The UK's Independent Anti-Slavery Commissioner resigned recently on the basis that he felt that he wasn't being given sufficient independence from government to undertake his function properly, for instance. I think that there are a number of successes that can be pointed to in the UK, and obviously the increase in prosecution rates is one of those, but I don't think that 30 per cent compliance can really be classed as a success by anyone's measure.

Senator HUME: So 30 per cent compliance is of the companies in the UK that have 36 million pounds turnover—isn't that the threshold?

Ms Adams : Yes.

Senator HUME: I suppose it's reasonably comparable to our $100 million. Why is having a turnover threshold or a revenue threshold inadequate? Why do we need to publish the names of the companies or identify the companies that should fall within that sphere if other jurisdictions haven't?

Ms Adams : I think, firstly, one of the problems—this has also been a problem in terms of not having a central registry—is it's been very difficult to know which companies are expected to comply, and that's meant that investors and consumers haven't been able to easily compare companies' records. If the entire compliance driver here is supposed to be about investors and consumers putting pressure on companies to do the right thing, they can only do that if they've got the readily accessible information available to them.

Senator HUME: Have you got any examples of companies that potentially are over that $100 million turnover threshold—or, in other jurisdictions, over their particular turnover threshold—that perhaps don't have the public face that you're talking about and that don't apply a corporate social responsibility policy or framework and continue to commit or ignore modern slavery issues within their organisations?

Ms Adams : I don't have names of individual companies to hand. What I can say is that before I did this job I spent a decade working in the UK, looking at serious abuses by UK companies in their overseas operations, and that included, on at least two occasions, investigating instances where UK companies had been involved in sourcing from places that employ child labour. When I started doing this work and I looked at the public statement that those companies had produced, there was very little in there to actually give you any useful information that would have allowed you to identify those companies as having a problem in their supply chains.

Senator HUME: Was that before or after the 2015 UK legislation was introduced?

Ms Adams : This is after the legislation was introduced. I would highlight that as a particular problem—them not having mandatory reporting criteria and allowing companies to simply decide which information they provide, in which case many of them provided very little. Some of the latest studies in the UK of some of the top publicly listed companies suggest that many aren't even providing information about the risks of modern slavery in their supply chains—the most basic information that the act is trying to elicit. Certainly this particular company, which I won't name, I had personally investigated, so I knew exactly what the situation was with their supply chains. Their document was a two-page thing that essentially repeated information that was already available on their website. I really think that we want to be steering away from a course that would enable companies to produce information that is so meaningless, because that will impose red tape on business without actually achieving anything.

Senator HUME: I think we all agree on that point. Do you not think that the fact that this legislation provides for clear guidelines to be provided to organisations, as well as having a central register, addresses that issue?

Ms Adams : I don't think it provides a complete answer. I think it provides a partial answer to the problem, certainly for those businesses, for instance, that may not be as aware of what they need to do to comply. I think someone said earlier that some of the very top companies will already be doing much more than this legislation requires, and there will be a band in the middle that doesn't necessarily know what best practice looks like but wants to do the right thing. But then there's another group that doesn't particularly care about this sort of legislation and that is the group that I think this legislation needs to highlight: the people who, as was said previously, import T-shirts at $1 a T-shirt and turn a blind eye to the fact that it's simply not possible to make a T-shirt that cheap without employing—

Senator HUME: Do you have a sense at all of the size of that problem in Australia with companies that have a turnover of more than $100 million?

Ms Adams : It depends very much on the sector. One of the things that we would really encourage the government to do is publish a list of high-risk industries and locations, which is one of the recommendations of the other inquiry. At the three-year point, we would ideally like to see a potential drop in the threshold, at least for companies that are operating in that space, because it's a more targeted response that's more likely to yield the sort of information that's genuinely useful than a very broadbrush approach.

Senator HUME: Thank you, Ms Adams.

Senator PRATT: I'm interested in what you think the consequences are if we don't have penalties and the scheme is essentially optional, and it's optional because of those threshold questions? Where do we have issues, then—for example, in creating a false sense of security that we might well be papering over real issues within companies?

Ms Adams : What I think the likely outcome will be if we don't have penalties?

Senator PRATT: Yes.

Ms Adams : I think it's very likely we'll end up in a very similar position to the UK and the US where a proportion of companies do the right thing and are motivated and put in good statements and the majority do not comply.

Senator PRATT: In terms of the companies that aren't complying, what kinds of public accountability and culture are being created? Is anyone paying attention to the fact that they haven't complied or is the existence of the antislavery regime giving them cover for their bad practices?

Ms Adams : Obviously, there's always a danger that, when you introduce legislation, whether or not it's effective, people perceive the problem has been addressed. One of the real issues in the UK is that it's been essentially left to civil society organisations to try and monitor what's going on, and there have been a number of different ways in which they've tried to do that. There have been a number of good studies which have pulled out a select number of companies or have highlighted a particular industry and the reports just aren't up to scratch.

Senator PRATT: It's not that they haven't reported but their submissions to—

Ms Adams : Both. There have been low rates of reporting, but also the quality of the reports has been of questionable value in certain respects. There have been reports, for instance, in the electronics industry, which has a lot of high-risk factors, which have looked specifically at that. The difficulty is that the resources that are required to do that kind of really deep dive to see not just whether companies are not filling in all the right boxes but also whether they are actually giving correct information and accurate information. That is something that requires quite a lot of resourcing and I think that's not been done sufficiently. There's a genuine lack of oversight of the scale of the problem.

Senator PRATT: So, while we might have some independent investigation of breaches, we actually need proper investigation of the reporting so that the quality of that reporting can be monitored? Is that something that needs to be audited in the same way that the tax office audits someone or other agencies audit for compliance?

Ms Adams : That could be one way of approaching it. I guess depends a little bit on how the resourcing is best spent. There are obviously a number of roles for the business unit that is currently envisaged—

Senator PRATT: For compliance?

Ms Adams : For compliance. I presume they will also stay responsible for producing the Commonwealth's statement, which is going to take a fair bit of time in the first instance, I would have thought. It's a matter of trying to work out the most effective way of doing it and ensuring that the industries that are most at risk are being targeted. So I would have thought that broad audits are also important in the first instance to check companies' basic compliance with the legislation. But I think we would want to move to a more targeted approach for certain areas.

Senator PRATT: What provisions exist in the UK to try and compel companies to participate when they should? They've clearly got the threshold. I'm just trying to work out what the differences are between what we are proposing and what the UK is proposing—whether we've got anything mitigating against the kind of failures that they've had.

Ms Adams : The two things we've got currently are, firstly, the mandatory criteria, which mean that companies can't just say that they've reported if they provide information, for instance, on where they're supplying from but not on the risks or what they're doing to mitigate them. Secondly, there is the central register. But how effective the central register will be will depend on the oversight of that register and who's monitoring the information that comes out of that. That needs to be a really key role, either of an independent commissioner or of the business unit. If we're going to learn any of the lessons that we need to ensure that the legislation can be improved in three years time, proper monitoring needs to go on in the meantime.

CHAIR: Do you concede that for smaller big companies who are not already involved in this process, because they're multinational and have to do it for other countries, it is rather a big regulatory stretch which, quite frankly, from conversations I've had, nobody really knows exactly what they have to do or how they have to do it or how far they go? I think the government's idea—and some of the submitters have made this point—is that it's slowly slowly; let's start and get people into the scheme of things; let's work out the bugs in the system and how it will all work; then in three years we will have a look and see that if it's not being complied with penalties might be appropriate. From your experience in the UK, what's your comment on the suggestion that it is a big change for many smaller big companies in setting up this process, doing it correctly and getting it right?

Ms Adams : I absolutely think that's the case. When I went last year to the event that the global compact organised, for instance, with the Human Rights Commission, a lot of businesses attended and spoke quite candidly about their experiences in attempting to pull together this information internally. That did give me an appreciation of how far many businesses will have to go to be able even to provide information about their first year suppliers, for instance. So I think there is definitely scope for including something like a delayed onset date for penalties to ensure that people have appropriate time to adjust. The inquiry's view was that it should apply from the second year of reporting. I'm not sure that we need to wait a three full years until review of the legislation for that take place, but I can certainly see some benefit in having a delayed onset.

CHAIR: You mentioned electronics. Are you saying that for components of electronic gadgetry you access bits from everywhere, and how do you find out whether the chip that you're making includes imports? Is that that point you were making about electronics?

Ms Adams : It's known to be a high-risk industry. It's among those, like seafood, where there are already known to be globally significant problems in relation to exploitative and dangerous labour practices, because of the chemicals that are used in the production of a lot of the electronics that we use.

CHAIR: The issue came up in another committee I was involved in about free trade agreements, in relation to Australian-produced electronics that have inputs from other places. It's a completely different end result, but it's the same sort of principle: Where does it all come from and how do you identify where this little chip was actually made, and does it make it Australian for free trade purposes? I guess the same would apply in what you're talking about.

Ms Adams : Yes.

CHAIR: What were you doing in the UK? What was your role there?

Ms Adams : I was partner at a private law firm which specialised in cases involving human rights and environmental abuses by UK companies overseas.

CHAIR: Acting against those companies or for those companies?

Ms Adams : Acting against those companies on behalf of people in those countries who have been injured or harmed.

CHAIR: I'm not sure if you were here before. I've made a point that I can make as a former lawyer myself about my former profession, that a lot of the lawyers are rubbing their hands with glee at the legal work that will come to them as a result of even this legislation, let alone the penalties. I suspect that if penalties were imposed at an early stage you wouldn't be game to do without having your lawyer at your right hand, which then adds to the complexity. The lawyers would like it, but the cost to business would be very substantial, and therefore you build up a group of people totally opposed to the whole thing. Do you think that's—

Ms Adams : I think that anything that companies put out publicly in terms of what goes into their annual reports and what they say publicly in relation to their policies they tend to run by their lawyers in any event. So I don't see this as changing that practice significantly. This is really just another step in transparency that companies have to comply with. I should say that Australia is very much behind in terms of general international practice when it comes to what companies are expected to report on in terms of transparency. I wouldn't say that this legislation, even though I think it's a very significant positive step, will put us at the forefront of where efforts are internationally to improve transparency. There are some more significant developments that are going on, in Europe in particular.

CHAIR: I'm just trying to see whether we have any lawyers giving evidence to the committee tomorrow. You are a lawyer, obviously.

Ms Adams : I am.

CHAIR: Thank you very much for your evidence. We appreciate your submission and your assistance to the committee.

Ms Adams : I look forward to seeing the legislation going forward.