24 Apr 2024

Australian government must introduce human rights due diligence obligations for businesses

Australian businesses received a clear message from the EU’s passage of the Corporate Sustainability Due Diligence Directive this week. Reporting on your human rights and environmental practices is not enough. Active due diligence is the way forward.

Canberra - Parliament House
Parliament House in Canberra, Australia. Photo Credit: Kokkai Ng via Getty Images.

The European Union’s Corporate Sustainability Due Diligence Directive will oblige companies to look for, and remedy, modern slavery throughout their supply chains.

By not introducing the same standards to Australia, the government is risking Australia’s third-largest trade relationship – and also missing the chance to become a preferred supplier to the EU.

Why does Australia, once a global leader in modern slavery legislation, lag so far behind?

Strengthening the Modern Slavery Act to include clear due diligence obligations is not simply the right thing to do to protect the tens of millions of people around the world in forced labour. But it is now a matter of competitive advantage.

The EU is Australia’s third-largest trading partner. Access to its markets is crucial for the continued functioning of our economy. The Australian government must act quickly and decisively to ensure Australian businesses are compelled to look deep into their supply chains and eradicate unacceptable human rights and environmental practices to maintain, and potentially increase, its share of European trade.

Understanding the impact of the requirements

Businesses should not relax when they hear that only 0.05% of EU companies will be required to report on their due diligence efforts under these laws. Those 5,400 “in scope” companies are the EU’s largest transactors, and they are now obliged to examine the human rights and environmental practices of everyone in their supply chains.

Anyone, anywhere, who produces a widget that wends its way through the global supply chains to these companies – or even to any of their lower-tier suppliers – is de facto in scope. They need to start taking a hard look at their behaviour.

The Directive will strengthen protection for workers across the globe. With penalties of up to 5 per cent of global turnover, European companies will take this seriously.

How Australian companies can lead in global supply chains

Rather than see this as just another regulatory burden, Australian companies that embrace this new reality have the potential to differentiate themselves from the global competition to supply to the EU.

The EU Directive is a game changer. The Australian government should seize this opportunity to amend the Modern Slavery Act to include a human rights due diligence obligation – it’s the right thing for business and the right thing to protect vulnerable workers everywhere.