Australian retailers are failing to disclose labour and human rights (LHR) supply chain risks despite an increased trend towards sourcing imports from the least developed countries in Asia.
Australian Council of Superannuation Investors (ACSI) chief executive Ann Byrne said the issue was significant 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 looked at 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 had shifted sourcing from China to lower-skilled and lower-wage markets — heightening LHR risks in companies supply chains.
Imports sourced from Bangladesh, Cambodia and Vietnam increased 15-fold, six-fold and 2.7-fold respectively between 2006 and 2012.
Despite an increased risk of LHR issues, 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 of companies 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.
Prior research undertaken by ACSI showed consumer staples and discretionary companies — particularly retailers — had high exposure to LHR abuses in their supply chains.
ACSI said it would pursue dialogue with companies regarding labour and human rights considerations.
"We acknowledge this is a complex area that needs investor attention and are supportive of companies that are proactive and transparent about their handling of these risks," Byrne said.
