Modern Slavery Supply Chain Risk Management – Beyond Audit

In today’s globalised world, understanding and managing the complexities of modern slavery in supply chains is not just a recommended practice—it’s essential. Based on the latest Global Estimates of Modern Slavery report, published by the International Labour Organization, International Organization for Migration and international human rights group Walk Free, the numbers are staggering.

Approximately 50 million people are trapped in modern slavery globally. Of these, 56% are in forced labour, with vulnerable groups such as women and children disproportionately affected. In Australia alone, 3.8% of imports, valued at over $20 billion, carry a risk of modern slavery. These figures underscore the imperative for robust supply chain risk management that goes beyond traditional audits.

Global Standards and Frameworks

Corporate human rights due diligence has become essential across industries. Governments are increasingly passing mandatory regulations like the Australian Modern Slavery Act, which requires large entities to report annually on their efforts to combat modern slavery. Frameworks such as the UN’s Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises provide crucial guidance for developing ethical supply chains. These frameworks encourage proactive measures to identify, assess and mitigate adverse human rights impacts, ensuring businesses don’t merely react to issues as they arise.

Conducting Effective Risk Assessments

Effective risk assessments are vital for identifying and mitigating human rights abuses like forced and child labour. The Australian Modern Slavery Act mandates that businesses assess risks not only within their direct operations but throughout their extended supply chains. A risk-based approach allows businesses to prioritise high-risk areas and protect vulnerable individuals.

1. Identifying Risks: Analyse your operations and supply chain to pinpoint potential modern slavery risks. Use tools like the International Labour Organisation’s indicators to spot red flags, such as unpaid wages or excessive working hours.
2. Implementing Due Diligence Processes: Establish processes to monitor and address identified risks, including remediation actions when issues arise.
3. Assessing Effectiveness: Regularly evaluate the effectiveness of your actions, adjusting strategies as needed to reduce risk and improve human rights outcomes.
4. Communicate: During risk assessments, engage in meaningful stakeholder engagement. This involves consulting with potentially affected groups and other relevant parties to gain insights into potential adverse impacts. Such engagement facilitates the identification of risks that might not be apparent through internal assessments alone.

Leveraging External Expertise and Technology

Engaging external auditors, consultants, or specialists helps manage modern slavery risks more effectively. External expertise ensures risk assessments are conducted with specialised knowledge and independent objectivity, providing a comprehensive understanding of risks.

Technology also plays a pivotal role in managing risks. Automated processes enhance efficiency, reducing the time spent on manual tasks and allowing teams to focus on critical issues. Transparency and traceability are improved through digital audit trails, ensuring suppliers meet necessary standards.

Building a Comprehensive Supply Chain Map

Mapping your supply chain beyond tier one suppliers is crucial for gaining visibility into risks. Using platforms like Intertek Inlight™ to streamline this process accurately and efficiently helps you to understand relationships from tier one to tier three. This visibility is key to delivering proactive strategies to address risks throughout your supply chain.

Intertek SAI Global’s eight-step risk assessment process helps clients manage modern slavery risks effectively:

1. Gather Data: Collect essential supplier information, including site locations and sector categories.
2. Map Suppliers: Identify tier one and tier two relationships to understand supply chain structures.
3. Assess Risks: Evaluate how your business might be connected to modern slavery risks.
4. Consult Expertise: Determine when to involve external support for enhanced risk management.
5. Identify and Categorise Risks: Segment suppliers by risk level to focus priorities.
6. Develop Action Plans: Create plans to address identified risks with clear timelines and responsibilities.
7. Monitor and Review: Set up regular monitoring to ensure strategies remain effective.
8. Engage Suppliers and stakeholders: Foster transparent and trusted relationships with suppliers and stakeholders through clear communication and capacity-building initiatives.

The Role of Compliance and Monitoring

Aligning with international frameworks like the UN Guiding Principles and the OECD Guidelines, along with local laws such as the Australian Modern Slavery Act, reduces the risk of penalties and reputational damage. Transparency practices build trust with stakeholders and consumers, showcasing a commitment to ethical practices.

Regular monitoring and review ensure continuous improvement and effective risk management. Evaluate supplier responsiveness, conduct trend analyses, and develop capacity-building initiatives to support suppliers in improving compliance.

Insights and Best Practices

1. Focus on High-Risk Industries and Regions: Apparel, agriculture, and electronics are high-risk industries, often relying on unskilled or migrant workers vulnerable to exploitation. Assess these sectors thoroughly.
2. Understand Geographic Risk Factors: Countries with high poverty, corruption, or weak labour laws pose significant risks. Take extra care in conducting due diligence when sourcing from these areas.
3. Understand your leverage: Consider your influence with your suppliers and what leverage this provides you in gaining cooperation in risk assessment and monitoring activities. Focus on where you have the most leverage to affect change.
4. Integrate People, Processes, and Technology: Combine skilled teams, structured processes, and data-driven technology to create a sustainable compliance program.

Leading the Way in Ethical Business Practices

Modern slavery risk management requires a proactive and holistic approach that goes beyond audits, addressing labour practices and systemic issues across wage management and working conditions. Businesses can enhance transparency and accountability across their supply chains by aligning with global standards, conducting comprehensive risk assessments, leveraging external expertise, and integrating advanced technology. This commitment ensures compliance and reinforces your organisation’s ethical standing in the eyes of consumers, investors, and partners.

For those beginning or looking to enhance their practices, Intertek SAI Global offers end-to-end support to guide you through building and maturing your approach to managing modern slavery risks. Our expert teams, structured processes, and advanced technology, including the Inlight™ platform, ensure you have the resources and insights needed to maintain compliance and lead ethical practices in your industry.