Dexus, Vicinity and Mirvac are three REIT operators taking the biggest steps to identify supply chain risks that are going to become an issue for large Australian companies when new federal and state anti-slavery legislation comes into effect next year, fund manager Ethical Partners says.
Dexus, which has already has an embargo policy for suppliers that do not meet its modern slavery standards, Vicinity, which reviewed security contracts at its malls and changed some providers based on their employment practices, and Mirvac which is about to take a “deep dive” into its cleaning services supply chain, are the leading companies Ethical Partners chief executive Matt Nacard said.
“They to us really stand out,” Mr Nacard said.
“Companies are going to have really take on and understand their supply chains more thoroughly.”
Australia’s property industry leads others in preparing for the federal government legislation that will from next year require all companies with revenues over $100 million to publicly report on the risks of modern slavery in their operations and supply chains and to demonstrate the actions they are taking to mitigate those risks.
In addition to the Federal Modern Slavery Act, separate NSW legislation will require companies employing staff in that state and with a turnover of between $50 million and $100 million to make a similar declaration.
The Property Council of Australia, which helped draft legislation leading to the act passed in November, has convened a group of 15 companies to design an online questionnaire members will be able to send to their suppliers to understand and reduce modern slavery risks, particularly around working conditions and fair payment.
“There are known geographic hotspots and known commodity or category hotspots,” said Sarah Clarke, Mirvac’s general manager for sustainability.
“Cleaning, security, steel – these are very high-risk areas.”
For companies, it’s also about reducing risks to their business, Mr Nacard said.
Share valuations remain crucial. Investors won’t automatically put money into companies because they cut out unethical practices from their supply chains. Ethical Partners, which runs a wholesale fund of undisclosed size, only currently holds Vicinity shares, despite favouring Mirvac and Dexus as well. Nor are all property companies leading the way.
“Some of the smaller REITs have more ground to make up,” investment director Nathan Parkin said.
“All else being equal we’d steer away from those.”
All else being equal, the fund manager is more likely to own a stock that managed its risks to that degree than one that didn’t. And companies that were across that level of detail were more likely to also be on top of their more traditional financial aspects as well, Mr Nacard said.