hands on fence

I was particularly surprised at one of the findings in this year’s Annual Review of the State of CSR in Australia and New Zealand. It called out how unprepared Australian business appears to be for the imminent introduction of the Modern Slavery Act 2018.

Although we spoke to more than 1000 individuals across multiple organisations, we only asked that particular question of those in corporate social responsibility roles. So I was really concerned as to the extent senior CSR people were underestimating the likelihood of problems to deal with and report on in their modern supply chains.

Australian businesses need to be aware that some 4300 people were estimated to be enslaved in Australia in 2016, and that 45 million people in the world suffer from slavery conditions that generates US $150 billion (AU $200b) of illicit profits a year. And more than half of those people are in our major trading partners. 

Looking back at where we’ve come from 

That said, this year, our 10th, gave us the opportunity to be retrospective. And it is pleasing to see how the business case for CSR is stacking up. Its status has improved significantly over the past 10 years, making for a better understanding of how CSR achieves competitive advantage.  

This year it was the electricity, gas and water supply industries that showed the strongest CSR management capabilities, up eight per cent on 2017 to 82 per cent today, eclipsing the information technology industry, last year’s best performer at 78 per cent. Manufacturing’s CSR capabilities improved from 73 per cent to 81 per cent according to its employees, but higher education continues to lag at 68 per cent, not much better than in 2016.

The sense of social accountability is our weakest CSR capability overall, 18 per cent lower than stakeholder engagement, which at 86 per cent is the strongest capability. However, the upside is that it did grow 36 per cent to 58 per cent over the period, mirroring the rise in sustainability reporting over the last decade.

But back to modern slavery

In our experience exploitative labour practices are on a continuum, but the law isn’t. It is time to act and businesses need to start examining the risk in their operations and supply chains. We know they can’t be complacent and assume that this risk doesn’t happen in their business. Our experience is it is more than likely to. 

To manage this, a new level of cooperation and collaboration necessary across the enterprise is necessary where the teams dedicated to procurement, sustainability, legal issues and compliance need to work together.

The pressure to change is also being driven by the new generation of employees and customers. Millennials, who will comprise 75 per cent of the workforce in Australia by 2025, have high expectations around corporate social responsibility and purpose. In the Deloitte 2017 annual Millennial Survey, some 8500 tertiary educated and fulltime employed Millennials want the businesses they work for to focus more on people, products and purpose, and less on profits. 

In this year’s Deloitte 2018 Human Capital Trends, 84 per cent of Australian businesses recognise the intensifying call to action to serve a social purpose, citing corporate citizenship as important or very important, yet only 23 per cent of Australian respondents say social responsibility is a top priority reflected in their corporate strategy. More than half (53 per cent) say it is not a focus for them.

This is and will continue to change – it is getting the processes and policies in place to ensure it does. And given that now ASX200 organisations deal with these issues at board level, we should all feel a sense of urgency to take a closer look, to think more deeply and take more action.

Dr Leeora Black is a principal at Deloitte, and leads a social sustainability team within the broader 50-strong sustainability and resilience team.

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