The pandemic is masking risks of slavery in global supply chains

The coronavirus pandemic is complicating the task of rooting out modern slavery by making it impossible for companies or investors to visit factory floors in many countries, adding to the challenges of addressing supply-chain risks.

The economic shock caused by the coronavirus outbreak is also making people more vulnerable to exploitation, further compounding the problem, Mans Carlsson, the Sydney-based head of ESG research at Ausbil Investment Management, told the Bloomberg Inside Track webinar on Thursday.

Australia has gone further than the U.K. and California with laws requiring companies and investors to have a detailed plan on how they will assess and tackle the risk of modern slavery in their supply chains. With more than 40 million people working in slave-like conditions even before the pandemic, more than any time in human history, it’s a complex issue to address, Carlsson says.

The global nature of supply chains can make the issue overwhelming, said fellow panelist Danielle Welsh-Rose, ESG investment director for the Asia Pacific at Aberdeen Standard Investments.

“We’re at the beginning of this long journey into really understanding the complexity of supply chains and the interrelation with other issues,” she said from Melbourne. The issue can be further complicated by geopolitical tussles, she said, citing the Trump administration banning imports from Chinese companies on human rights concerns. Investors must analyze the alleged rights abuses, but also determine whether such bans are influenced by the wider trade dispute, she said.

Liza McDonald, the Melbourne-based head of responsible investment at First State Super, said she was undertaking a long-term assessment of supply-chain risk and had asked more than 80 fund managers that have mandates with the firm to explain how they address the issue.

Carlsson said other jurisdictions including the U.K. are looking at Australia’s modern slavery laws and more legislation would likely follow elsewhere in the world.

“This is just a start,” he said. “There will be much much more legislation coming in this field going forward.”