What is modern slavery?

Modern slavery is a crime involving the exploitation of individuals through practices that deprive them of their freedom, and subject them to control for personal or commercial gain.

Modern slavery can occur in various forms, including forced labor, debt bondage, and human trafficking. It can exist within an organisations’ own operations, customer base, and in particular the supply chain.

What is the modern slavery supply chain risk?

Modern slavery poses significant ethical, legal, and reputational risks for organisations, requiring risk professionals to actively manage and mitigate these threats.

The risk is heightened for organisations with global footprints, particularly with complex global supply chains where there may be challenges with oversight and compliance.

Many jurisdications have implemented legislation to address modern slavery risks. In the UK, the Modern Slavery Act 2015 requires organisations to establish systems and processes to mitigate these risks, which includes the publication of transparency statements.

Where modern slavery is identified, it can often correlate with other criminal activities including money laundering and drug trafficking, further increasing the risk to the organisation.

What questions should the Board be asking?

As a member of the board or associated audit or risk committee, there are number of questions you can ask around Modern Slavery risk and your supply chain:

  1. Does your organisation have a clear modern slavery policy that has been communicated to all employees?
  2. How does your organisation currently identify and assess modern slavery risk in its operations and supply chains?
  3. What due diligence procedures does your organisation have in place for appointing new suppliers and assessing the risk they bring?
  4. Do all your current contracts include clauses prohibiting modern slavery?
  5. Do your employees know what do if they suspect a case of modern slavery in the wider supplier or customer base?
  6. Do you have a whistleblowing hotline and does it know how to handle calls about suspected modern slavery cases?
  7. How are you monitoring your supply chain to identify and address potential modern slavery risks?
  8. What would you do if you found modern slavery in your supply chain or own operations?
  9. Do you publicly report on your efforts to identify and address modern slavery risks? If so, what information do you include in your reports, and how do you measure the effectiveness of your efforts?

What controls should an organisation implement to address the modern slavery risk?

Organisations have both a duty of care and legal obligations to address modern slavery risks. They must implement robust systems and controls to mitigate these risks in their own operations as well as across third-party supply chains.

Key controls for modern slavery risk include:

  1. Conduct due diligence on customers and suppliers.

    • Conduct thorough background checks and assessments to identify potential risks of modern slavery with business relationships.

  2. Train staff on modern slavery risks.

    • Provide training to build awareness and help employees understand their obligations.
    • Train employees to ensure they are familiar with the organisation’s systems and controls implemented to address modern slavery risk.
    • Incorporate scenario-based training to allow employees to practice identifying where modern slavery may be occurring, and to practice the response.

  3. Enhance supplier and procurement policies

    • Establish clear policies for engaging with new and existing suppliers, including due diligence requirements.
    • Implement supplier codes of conduct to set clear expectations and obligations for ethical behaviour with suppliers.
    • Promote transparency and accountability within supply chains to build confidence in supplier relationships.

  4. Monitor subcontracting and fourth-party risk

    • Understand where suppliers are using their own suppliers that impact your organisation, in particular where there is significant 4th party activity in the extended supply chain.

  5. Enhance due diligence for higher-risk suppliers

    • Implement an enhanced checking process that would cover, for example, suppliers that operate in higher risk regions or industries.
    • Pay particular attention where suppliers may be giving particular concern or issues have been previously reported.

  6. Establish confidential reporting channels.

    • Establish whistleblowing mechanisms, such as hotlines, that allow employees and suppliers to report concerns.
    • Update any Suspicious Activity Report (SAR) / Unusual Activity Report (UAR) to include the reporting of potential modern slavery issues.

  7. Audit supply chains

    • Conduct periodic audits of high-risk components in the organisation’s supply chain, to assess compliance with modern slavery policies and identify gaps.

Further reading