Modern Slavery Due Diligence: Why It’s Essential for Australian Organisations

In today’s global economy, buyers have unprecedented visibility into an organisation’s operations and values. They often choose to buy from ethical companies that source their products sustainably and engage in environmentally responsible practices.

This is also pertinent in Australia, where over 49 thousand people¹ live in conditions of modern slavery, with only one in five cases reported. An association with human rights violations can irreparably damage a brand’s reputation. Therefore, third-party validation of ethical practices can enhance an organisation’s image and foster customer loyalty.

The Importance of Modern Slavery Due Diligence

According to a Behind the Brands² campaign, consumers wield significant influence over how companies operate, especially in industries like food production. By proactively identifying and mitigating modern slavery risks within supply chains, businesses can ensure compliance with legal requirements while building trust with customers and stakeholders. This transparency and accountability can lead to increased consumer loyalty, a positive brand perception, and a stronger market position. Additionally, businesses that prioritise ethical practices are often viewed as industry leaders, setting benchmarks for others to follow and reinforcing their reputation as socially responsible entities.

The Scope of Modern Slavery in Supply Chains

Many pressing environmental and social challenges linked to business activities occur within the supply chain rather than direct operations. According to OECD research, between 28-43% of estimated child labour in exported goods occurs indirectly, at earlier stages of the supply chain, such as raw material extraction or agriculture³. This highlights the complexity of addressing child labour, as it often occurs deep within the supply chain, making due diligence, visibility, and traceability challenging for companies. By conducting due diligence, companies can identify and address critical issues related to labour rights, human rights, environmental impacts, bribery, and consumer interests across their operations, supply chains, and business relationships.

The Cost of Ignoring Modern Slavery

A company’s brand and reputation are among its most valuable assets, determining its future viability. There is a clear link between how a business operates and the tone of consumer, partner, investor and employee sentiment. Consumers demand more visibility over company supply chains before spending, business partners need to protect their reputation, investors want to invest in organisations that demonstrate a consumer appetite for their products thereby longevity and employees want to work for ethical organisations. For example, between 2018 and 2021, an Australian company specialising in natural health products faced several allegations of human rights violations, including sourcing ingredients from regions with poor labour standards. Although no severe legal penalties were imposed, the company faced substantial public and media scrutiny.

What is Modern Slavery Due Diligence?

Modern slavery due diligence involves identifying, preventing, mitigating, and accounting for how companies address their adverse human rights impacts. This involves assessing the potential for forced labour, human trafficking, and other forms of modern slavery within your business and suppliers, implementing policies and controls to mitigate these risks, and ensuring transparency through reporting and accountability. It is an ongoing, proactive exercise that ensures businesses are continuing in their approach to upholding high standards of ethics and transparency.

Guiding Principles for Organisations

Embedding human rights into supply chain due diligence goes beyond mere box-ticking and risk shifting through contractual obligations; it fosters sustainable and ethical business practices beneficial to all stakeholders. This approach ensures compliance with laws like the Australian Modern Slavery Act while enhancing a company’s resilience and reputation. Established frameworks such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises provide comprehensive guidelines for businesses to follow. These frameworks emphasise the importance of conducting thorough risk assessments, implementing proactive measures, and engaging with stakeholders to mitigate human rights risks.

ISO Standards and Development

ISO/AWI 37200 is a standard in development that specifically addresses modern slavery. It is currently in the preparatory stage of development by the International Organisation for Standardisation (ISO) and the Association for the Advancement of Industrial Design (AWI)⁴. This standard aims to create a comprehensive framework that provides guidance on preventing, identifying, and responding to human trafficking, forced labour, and modern slavery. The ongoing development supports organisations in establishing robust ethical practices and ensuring the well-being and dignity of all individuals involved in their operations.

Why Embedding Modern Slavery Due Diligence is Crucial

Embedding modern slavery due diligence into your supply chain isn’t a one-time task; it’s a continuous commitment woven into your organisation’s processes.

Here’s why it matters:

• Risk Management

Effective due diligence helps identify and mitigate risks associated with modern slavery, ensuring your organisation complies with legal requirements and avoids potential fines and sanctions.

• Reputation

Maintaining high ethical standards enhances your brand image and builds trust with customers, stakeholders, and employees. A strong reputation for ethical practices can be a significant competitive advantage.

• Compliance

Adhering to international guidelines and national laws, such as the Australian Modern Slavery Act⁵, is crucial for operating legally and ethically in today’s global market.

• Moral and Ethical Responsibility

Beyond legal and business considerations, there is a fundamental moral imperative to protect human rights and prevent exploitation. Embedding due diligence reflects a company’s commitment to upholding these values and contributing to the global fight against modern slavery.

Embedding Modern Slavery Due Diligence Processes into Your Organisation