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:
- Forced labour – workers compelled to work through threats, debt bondage, or confiscation of identity documents
- Human trafficking – the recruitment, transportation, or receipt of people through coercion for exploitation
- Debt bondage – where workers are trapped by inflated or fabricated debts to employers or recruiters
- Child labour – the exploitation of children in work that is harmful to their development or wellbeing
- Exploitative recruitment practices – where migrant workers are charged excessive fees or deceived about job conditions
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:
- Have AUD $100 million or more in annual consolidated revenue, and
- Are an Australian entity or carry on business in Australia
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:
- Key suppliers (those most critical by spend, volume, or strategic importance) and their direct relationships with your business
- Indirect suppliers across all tiers
- Subcontractors at every level
- The origin of raw materials and services
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 risk
Sectors such as agriculture, construction, hospitality, cleaning, and manufacturing typically carry higher exposure.
Geographic risk
Regions with weak labour laws, limited enforcement, or high migrant worker populations increase vulnerability.
Supplier risk
Smaller 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:
- Improve supply chain transparency
- Promote ethical labour practices
- Support Modern Slavery Statement reporting
Key areas to cover include:
- Labour conditions
- Recruitment practices
- Subcontracting arrangements
- Worker grievance mechanisms
- Compliance with labour laws
Step 4: Analyse Risks and Take Action
Data collection is only valuable when it drives action.
Businesses should review supplier responses to identify:
- Risk indicators
- Information gaps
- Areas needing further investigation
Where risks are identified, organisations should work with suppliers to:
- Strengthen policies and training
- Improve contractual requirements
- Implement monitoring and remediation
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:
- Identification of the reporting entity
- Overview of structure, operations, and supply chains
- Identification and assessment of modern slavery risks
- Actions taken to address those risks
- Due diligence and remediation processes
- Methods used to evaluate effectiveness
- Consultation with owned or controlled entities
- Formal approval and signature from a responsible member
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:
- Requests from the Minister for explanation or corrective action
- public identification of non-compliance through the register and ministerial reporting
- Reputational damage where harmful practices occur in the name of the business, even through hiring chains beyond its direct awareness
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:
- Demonstrate leadership in ethical sourcing
- Strengthen brand trust and credibility
- Prepare for evolving ESG expectations
- Build internal compliance capability
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:
- Greater transparency across supply chains
- Stronger investor and customer trust
- Improved risk management and governance
- Reduced legal and reputational exposure
- Stronger ESG performance and reporting outcomes
Ultimately, treating modern slavery risk as a strategic priority rather than a reporting obligation helps organisations build more resilient, ethical, and sustainable supply chains.
