Modern Slavery Risks and Compliance: What Boards and Executives Need to Know

The United Nations defines modern slavery as “an umbrella term covering practices such as forced labour, debt bondage, forced marriage, and human trafficking. Essentially, it refers to situations of exploitation that a person cannot refuse or leave because of threats, violence, coercion, deception, and/or abuse of power.” Despite being illegal globally, modern slavery persists in many regions, including Australia.  

50 million people worldwide are trapped in modern slavery, with 41,000 of them in Australia. 

Alarmingly, nearly two-thirds of all forced labour cases are linked to global supply chains, impacting workers across a diverse range of sectors and at every stage of production. 

Modern slavery is fundamentally a human rights violation, placing a significant responsibility on businesses to fight it. This involves actively identifying, preventing, and mitigating slavery risks within operations and broader supply networks. By addressing these issues, businesses not only protect vulnerable populations but also set a positive example for their stakeholders, contributing to wider societal efforts against modern slavery. It’s also about creating a culture of integrity and accountability, where every part of the supply chain reflects a commitment to upholding human rights.

Modern slavery reporting 

The Commonwealth Modern Slavery Act 2018 came into effect on 1 January 2019. This legislation introduced a Modern Slavery Reporting Requirement for large businesses and various entities operating in Australia that generate more than A$100 million in annual consolidated revenue. 

Efforts to enhance the quality of modern slavery reporting have led to several significant recommendations. One proposal suggests allowing entities to submit a comprehensive modern slavery statement every three years, with updates in the intervening years. This streamlined process aims to reduce the compliance burden while encouraging more detailed and insightful reporting. Additionally, the introduction of standardised cover sheets summarising key aspects of the statements, such as incidents and actions taken, is intended to enhance the clarity and effectiveness of these reports.

Another recommendation focuses on lowering the reporting threshold to AU$50 million. For context, consider Canada’s recent actions. Since July 2020, Canada has banned the import of goods produced in whole or in part by forced labour. Additionally, the proposed Fighting Against Forced Labour and Child Labour in Supply Chains Act requires detailed reporting on supply chain risks for qualifying entities. This proactive approach signals a global shift towards stricter regulations against modern slavery. In Australia, the proposed reduced reporting threshold would provide specific guidance for small and medium-sized enterprises to meet reporting requirements. Given the international focus on ethical supply chains, such measures are likely to be enacted soon in Australia, prompting businesses to adapt their practices accordingly. This guidance would also be beneficial for businesses voluntarily reporting, offering them clearer insights into expectations. The future of compliance may also see the introduction of an independent commissioner with investigative and prosecutorial powers to improve the standard of modern slavery reporting. This role would identify regions, industries, products, and suppliers with significant modern slavery risks. The declaration would mandate entities to report specifically on these identified risks in their modern slavery statements. Businesses should prepare for how such provisions might impact their practices and supply chains.

Turning regulations into meaningful actions

Compliance with the Modern Slavery Act should not be viewed as a tick-box exercise. It’s about doing right by people. It may be called out under the moniker of ‘modern slavery’, but it’s important to remember this is still slavery. This is about humans subjugated into forced labour, debt bondage, forced marriage, slavery-like practices, and human trafficking. It can be hard for those of us in richer countries to consider that slavery is still present in the world, and indeed still happening right here in Australia.

Boards and executives are urged to take up the fight against modern slavery by actively managing these risks by embedding human rights principles into business strategies. These efforts ensure that business practices neither support nor benefit from exploitation. Companies also have the opportunity to drive significant change and business value. Here’s how your company can take proactive steps to make a real impact: 

  • Assume modern slavery exists and look hard to find it

Modern slavery can exist in any business or supply chain, regardless of industry or location. It’s vital not to assume your operations are free from slavery. Instead, proactive investigation is non-negotiable. This means diligently examining every aspect of your supply chain, including direct suppliers (Tier 1) and their suppliers (from Tiers 2 to Tiers 5-6 including importers, exporters and trading companies). By assuming that risks exist, you can adopt a more thorough and vigilant approach to combating modern slavery.

  • Educate everyone

Education is vital to prevent modern slavery. Boards, executives, employees, and suppliers all need to be well-informed about signs of modern slavery and the steps required to address them. Comprehensive training programs should be implemented to ensure that everyone in the organisation understands the importance of this issue and knows how to recognise and respond to potential cases of slavery. For example, Lion, a leading beverage company, has implemented robust, human-centric frameworks and education programs for its board members, employees, and suppliers, as outlined in their 2022 Modern Slavery Statement. This proactive approach ensures that everyone is mindful and properly trained to spot red flags.

  • Look for red flags

Signs can include restricted movement, lack-of or falsified personal identification, few personal belongings, wearing the same clothes for work, and visible fear or reluctance to engage with others. Make sure your staff receives regular training to recognise these red flags and establish clear protocols for reporting and responding to them.

  • Implement reporting systems

Accessible and confidential reporting systems ensure individuals feel safe and supported when raising concerns. Effective reporting mechanisms can help identify issues early and allow for timely remediation. These systems should be easy to use and ensure that all reports are taken seriously and investigated promptly. It’s also important to have processes that allow for any reports of modern slavery to reach the exec team so that substantive business changes can be made to address these issues.

  • Develop a compliance checklist 

A compliance checklist based on the Modern Slavery Act requirements can help your team conduct a risk assessment and gap analysis, adapt existing company procedures to address new legislation, enhance supplier onboarding processes, gather relevant modern slavery information, and prepare the annual modern slavery statement. This checklist also ensures thorough compliance and helps maintain focus on continuous improvement.

  • Map your supply chain

A thorough understanding of your supply chain involves mapping out every link in the chain, including hidden and informal parts that might not be immediately obvious. By identifying all suppliers, their locations, and the goods and services they provide, you can pinpoint areas of potential risk and focus your efforts where they are most needed.

  • Invest in resources

Combating modern slavery requires a commitment of resources, including time and personnel. This involves investing in training programs, technology, and regular audits to monitor compliance and identify risks. 

  • Align with values

Integrating anti-slavery measures with your company’s core values and ESG strategies underscores the importance of the issue. This alignment ensures that the fight against modern slavery is prioritised throughout the organisation, reinforcing your company’s dedication to ethical practices.

How addressing modern slavery enhances business value

Many businesses initially view compliance with the Modern Slavery Act as an additional expense or a burden. However, reframing compliance as a strategic investment rather than a cost can drive long-term value for the organisation and unlock numerous benefits, such as: 

  • Long-term cost savings

Proactively addressing modern slavery risks leads to substantial cost savings over time. By avoiding costly legal fees, fines, and settlements from non-compliance, businesses protect their financial health. Additionally, implementing robust compliance programs enhances operational efficiencies, such as streamlined supply chains and improved vendor management, further contributing to significant savings.

  • Reduced reputational risk and increased customer trust

Companies that fail to act risk negative publicity and potential boycotts if modern slavery is discovered in their operations or supply chains. By taking preventive measures, you safeguard your company’s image and build trust with consumers and stakeholders. Stakeholder activism is a real and growing concern for businesses, and the risk of it is best managed by being proactive rather than reactive. If you wait to respond to concerns, then it’s too late, reputational damage will be done.

  • Talent attraction and retention

Today’s workforce increasingly values employers that prioritise ethical practices and social responsibility. By viewing compliance as an investment, your company will attract and retain top talent motivated by a sense of purpose and alignment with company values. Employees who believe in the mission of their employer are more engaged, productive, and loyal, reducing turnover costs and fostering a positive workplace culture.

  • Improved operational efficiencies

Addressing modern slavery risks leads to stronger and more resilient supply chains. By streamlining operations and partnering with trusted, compliant suppliers, you can enhance efficiency, ensure more reliable delivery schedules, and reduce the risk of disruptions caused by unethical practices.

  • Positive impact

By actively working to eradicate modern slavery, your company can contribute to a fairer, more just world for all. This not only benefits those directly affected by exploitation but also strengthens the global economy and improves societal well-being.

  • Competitive advantage

By setting high standards and demonstrating a commitment to fighting modern slavery, your company can stand out from competitors. You can then leverage this differentiation as a powerful tool in marketing, branding, and customer engagement efforts.

Conclusion

Modern slavery is a pressing global issue that persists even within our own borders. Businesses hold the power to make a significant difference by eradicating modern slavery from their operations and supply chains. It’s not just about ticking boxes for compliance–it’s about creating meaningful, sustainable practices that truly make an impact.

Imagine a world where every purchase supports freedom and dignity. Your company can lead this change. By embedding robust anti-slavery measures into your core values and business operations, you not only uphold human rights but also build a stronger, more resilient brand that resonates with conscious consumers and stakeholders.

Ready to be a force for good? Contact us today. Our team of experts can help your organisation not only comply with the Modern Slavery Act but also stay ahead of legislative changes. We can develop a comprehensive checklist and provide your company with a Modern Slavery Statement that reflects your commitment to doing right by people. 

 

Sources:

  1. United Nations, International Day for the Abolition of Slavery, 2 December: Modern slavery is on the rise
  2. Walk Free Foundation, Global Survey Index: Modern Slavery in Australia
  3. Walk Free Foundation, Global Estimates of Modern Slavery: Forced Labour and Forced Marriage
  4. Australian Government, Attorney-General’s Department: Modern Slavery Act 2018
  5. Australian Human Rights Commission, What businesses need to know about the Modern Slavery Review
  6. Australian Government, Review of Australia’s Modern Slavery Act 2018: Issues Paper, page 18
  7. Walk Free Foundation, Tackling Modern Slavery in Supply Chains: A Guide, page 18
  8.  LION, 2022 Modern Slavery Statement