Australian retailers are failing to disclose labour and human rights (LHR) risks despite an increased trend to source labour from the least developed countries in Asia.
Australian Council of Superannuation Investors (ACSI) chief executive Ann Byrne said the issue was particularly relevant in light of increased disclosure requirements for superannuation funds.
“Poor management of risks by the companies in which funds invest inevitably impacts upon their reputation as responsible investors as well,” she said.
A new ACSI report has assessed the sourcing patterns and LHR risks for 34 countries in the consumer staples and consumer discretionary sectors of the S&P/ASX200 Index, where investor valuations and consumer confidence were important in maintaining prominent retail brand names.
It found companies were shifting away from sourcing labour from China to lower-skilled and lower-wage markets, which heightened LHR risks in companies’ supply chains, such as apparel.
Bangladesh, Cambodia and Vietnam were the highest source of Australian imports from these markets at 15-fold, six-fold and 2.7-fold respectively between 2006 and 2012.
However, ACSI found that in most cases, Australian companies lagged their overseas peers in public disclosure.
Only 38 per cent of the 34 companies studied have a publicly disclosed labour and human rights supply chain policy; only 30 per cent disclose their child labour and forced labour policies; and one third disclose supplier audits or risk assessments.
“The emerging risks in supply-chain labour and human rights have profound implications for long-term shareholder value,” Byrne said.
Earlier research undertaken by ACSI highlighted the high exposure that consumer staples and discretionary companies - particularly retailers - have to LHR abuses in their supply chains.