Complying with Australia’s new modern slavery laws was at times overwhelming for the procurement team at ASX-listed services giant Downer Group, but its head of procurement Ryan Kirgan says the company has been rewarded with genuine competitive advantages.
The new laws, which came into effect from 1 January, require companies operating in Australia with more than $100m annual revenue to prepare a statement describing any modern slavery risks in their supply chain and what’s been done to address them.
For many companies this has meant trying to gain transparency on a labyrinth of complex multi-layered supplier arrangements, and this was certainly the case for Downer.
Speaking at CIPS Australasia Conference in Melbourne, Kirgan said he shifted quickly from “uninformed optimism” to “informed pessimism” as it became apparent that the company had over 30,000 suppliers, which in turn each had their own suppliers — something he hadn’t contemplated at the outset of the endeavour.
“Even just coordinating individuals within the organisation to get a consensus view on the plan and approach, and how much of the organisation this was going to touch, sent me into a bit of a tailspin if I’m perfectly honest,” Kirgan said.
However, he said that with half of Downer’s revenue coming from government, the exercise had started to bear fruit, generating significant competitive advantage for the company. While important, it was no longer being driven purely by concerns about reputational risk and aligning with community sentiment around human rights.
“We talk about compliance and we talk about corporate social responsibility but what we’re finding is that our clients want this. They’re demanding this and legislation has followed this, it’s not the other way around,” he said.
Speaking to SM on the sidelines of the event, Kirgan revealed the depth of the advantage, potentially touching the core of its ability to operate with institutional banks, which are expected to include modern slavery compliance in assessing credit ratings.
“What’s really got the CFO’s attention is the ability to get financing based on green allocation, so to speak,” Kirgan said.
“All the big institutional banks will assess us on governance and gives us access to cash,” he later added.
However, he said Downer also expected to realise advantages in being a customer of choice among its own suppliers. He said that smaller suppliers, that may lack the resources to develop their own expertise with modern slavery compliance, might be attracted by the possibility of leveraging Downer’s internally developed knowledge.
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