How Businesses Can Assess and Address Modern Slavery Risks in Their Supply Chains
Every year, an estimated 50 million people are living in modern slavery globally, often hidden within complex international supply chains. From clothing and electronics to raw materials, exploitation can exist at multiple tiers of production without visibility to end buyers. For Australian organisations, the Modern Slavery Act 2018 (Cth) requires large entities with annual consolidated revenue of at least AUD $100 million to report on the risks of modern slavery and the actions taken to assess and address those risks. While the Act is primarily a transparency framework rather than a punitive regime, it has driven significant improvements in governance, risk awareness, and ESG accountability. Leading organisations are now using modern slavery due diligence not only for compliance, but as a strategic tool to strengthen supply chain resilience, improve ESG performance, and enhance long-term business sustainability. What is Modern Slavery in Supply Chains? Modern slavery is a specific legal concept, distinct from broader worker exploitation. While poor working conditions, wage theft, and unsafe environments are serious concerns, modern slavery refers to situations where individuals cannot refuse or leave work due to threats, coercion, deception, or abuse of power. Behind every case are real people, often invisible within complex supply chains, whose freedom has been taken from them. Common forms include: Risk is highest in industries relying on migrant labour, temporary labour, and complex global sourcing, including agriculture, construction, cleaning services, garment manufacturing, electronics, and transport and couriering. Any sector where the hiring entity is at arm’s length from the business using the services carries elevated risk. Exploitation rarely occurs at the surface level. It tends to exist in Tier 2, Tier 3, or deeper, making it difficult to detect without structured due diligence. When issues are identified, businesses should work with suppliers to understand and remediate the problem. Cutting ties does not eliminate exploitation. It can worsen conditions for affected workers and push the problem further out of sight. The Modern Slavery Act 2018 (Cth): What Australian Businesses Need to Know The Modern Slavery Act 2018 (Cth) requires certain organisations to report annually on modern slavery risks within their operations and supply chains. The Act aims to strengthen corporate transparency, accountability, and responsible business practices. Who Must Report Under the Modern Slavery Act? Organisations must submit an annual Modern Slavery Statement if they: These statements are lodged on the Modern Slavery Statements Register, a public database maintained by the Australian Government. The register enables investors, regulators, customers, and civil society groups to assess how organisations are identifying and managing modern slavery risks. How to Assess Modern Slavery Risks in Your Supply Chain A meaningful modern slavery risk assessment requires a structured, proactive approach that goes beyond compliance. Businesses should focus on improving supply chain visibility, supplier engagement, and due diligence processes. Step 1: Map Your Supply Chain Supply chain mapping is the foundation of effective modern slavery risk management. This involves identifying: Many organisations are surprised not only by the complexity and reach of their supply chains, but by how many labour practices within them are invisible. A common example is the outsourcing of hiring to labour hire firms who further subcontract recruitment, creating layers of distance between the business and the workers it is responsible for. Step 2: Identify High-Risk Areas Once mapped, businesses should prioritise risk based on: Industry riskSectors such as agriculture, construction, hospitality, cleaning, and manufacturing typically carry higher exposure. Geographic riskRegions with weak labour laws, limited enforcement, or high migrant worker populations increase vulnerability. Supplier riskSmaller suppliers, informal operators, and those relying on labour hire arrangements may have weaker governance controls. Step 3: Conduct Supplier Due Diligence Supply chain audits are a widely accepted best practice for modern slavery due diligence. While not mandatory, they help: Key areas to cover include: Step 4: Analyse Risks and Take Action Data collection is only valuable when it drives action. Businesses should review supplier responses to identify: Where risks are identified, organisations should work with suppliers to: In higher-risk cases, escalation or supplier disengagement may be required. What Must a Modern Slavery Statement Include? A Modern Slavery Statement must meet mandatory requirements under the Act and is submitted to the Modern Slavery Statements Register, where it can be reviewed by stakeholders. It must include: Australia’s framework aligns with the UN Guiding Principles on Business and Human Rights (UNGPs), reinforcing global expectations for ethical supply chains. The Attorney-General’s Department also provides guidance and tools to support compliance. Beyond Compliance: Risks, Benefits and Strategic Value Modern slavery reporting is more than a compliance requirement it is an opportunity to strengthen governance, reputation, and supply chain resilience. What Happens If You Don’t Comply? While the Modern Slavery Act 2018 (Cth) does not currently impose financial penalties, non-compliance can still have serious consequences, including: This “name and shame” approach can result in reduced stakeholder trust, and increased scrutiny from investors and partners. Following the 2024 review of the Act, the Australian Government has agreed in principle to introduce civil penalties for non-compliance. For businesses, this is a matter of when, not if. Voluntary Reporting Organisations below the reporting threshold are encouraged to submit voluntary Modern Slavery Statements. This helps businesses: Voluntary statements are encouraged to align with the same reporting criteria to ensure consistency and comparability. Strategic and ESG Value Going beyond compliance delivers long-term business benefits, including: Ultimately, treating modern slavery risk as a strategic priority rather than a reporting obligation helps organisations build more resilient, ethical, and sustainable supply chains.
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