What is modern slavery in supply chains?
Modern slavery occurs in all tiers of the supply chain, from raw material extraction to service delivery. Of the estimated 40 million victims of modern slavery worldwide, approximately 40% are in forced labour in the private economy. Companies exploit workers to lower their operating costs and increase their profit margin.
How do you monitor and manage modern slavery risk?
Monitoring modern slavery risk involves ongoing assessment of risk within your organisation and supply chain. For reporting entities in Australia this will involve, at a minimum, an annual assessment of risk as mandated by the Modern Slavery Act 2018 (Cth). Monitoring risk can be conducted on an ongoing basis through:
- Monthly or quarterly risk reports
- Periodic assessment of suppliers (such as desktop reviews or unannounced audits)
- Monitoring and responding to grievance reports
- Staying up to date with relevant news, regulatory changes, or industry reports
- Communicating regularly with suppliers
Three effective ways of managing modern slavery risk are:
- Building strong relationships with suppliers
- Reducing exposure to risk by assessing suppliers prior to engagement
- Incorporating modern slavery risk into the organisation's standard risk management practices and reporting standards
Ultimately, the best way to manage modern slavery risk is to prioritise ethical and responsible business practices and use this lens to inform decision making. Modern slavery assessment should not be treated as a 'tick box' exercise that stands outside of regular business activities.
How to conduct modern slavery due diligence?
There are four main steps to conduct due diligence for modern slavery:
- Identifying and assessing actual and potential human rights impacts (for example, screening new suppliers for modern slavery risks)
- Integrating findings across an entity and taking appropriate action to address impacts (for example, introducing internal training on modern slavery and processes for incident reporting)
- Tracking entity performance to check whether impacts are being addressed (for example, internal audits of supplier screening)
- Publicly communicating what is being done to identify and address risk (for example, by publishing a Modern Slavery Statement or publicly responding to allegations against a supplier)
What is a modern slavery risk assessment?
A modern slavery risk assessment involves identifying where the risks lie in your supply chain, determining the level of risk, and whether your entity has the potential to cause, contribute, or is directly linked to the risks. Modern slavery risks are not certain occurrences of slavery, but the potential for slavery. These risks can be both internal (in your entity's operations) or external (in your supply chain).
Why conduct a modern slavery risk assessment?
Identifying modern slavery risks in your supply chain and describing how your entity has assessed and addressed these risks is a mandatory component of a Modern Slavery Statement. Conducting a modern slavery risk assessment allows you to meet these requirements and shows that your entity is taking the necessary due diligence measures. In addition to supporting legal compliance, a modern slavery risk assessment provides your entity with valuable information that can help to reduce risk and inform strategic planning.
How do you conduct a modern slavery risk assessment?
Assessing the risk of modern slavery in your operations and supply chain can be a complex process. Before assessing any risks, you first need to have a clear understanding of who your suppliers are, how much you spend with them, what goods or services they provide you with, and where they are located. Most entities only have visibility over their direct suppliers: Tier 1. However, you can also be exposed to risk through indirect suppliers in deeper tiers. Gaining a deeper level of visibility can be incredibly challenging, particularly when dealing with a large number of suppliers who offer little transparency. Fair Supply can solve this problem for you by tracing your supply chain risks to Tier 10. Mapping your supply chain can help you to determine the severity and types of risk you are exposed to. Factors such as industry, product or service, and geography are indicators of risk. For example, sourcing bricks from a kiln in India is high risk because of the high prevalence of exploitation in the brick industry and limited enforcement of labour laws in India. You can also use these indicators to assess the level of risk in your own operations. The Global Slavery Index provides information on the prevalence of modern slavery in each country.
Diving Deeper
You may wish to conduct further due diligence on higher risk suppliers. This can involve conducting a desktop audit, contacting suppliers directly, or engaging an external auditor or advisory. Fair Supply offers deep dive reports on individual suppliers, in depth assessments of supply chain risk, and custom supplier questionnaires.
Operational Risk
Operational modern slavery risk can be assessed by applying the same risk indicators of industry, geography, and product/service to your operations, and evaluating how your organisation mitigates and responds to these risks. An internal risk assessment benefits from having full access to company policies, procedures, employment contracts, recruitment practices, and other information that you would typically not have access to when assessing a supplier. You also have the opportunity to receive staff feedback, either through interviews, surveys, or anonymous submissions. Note that if staff are experiencing exploitation, they may not feel comfortable speaking about this to their employer. This is where an external auditor or consultant can be of benefit.
What needs to be included in a modern slavery risk assessment?
Assessing the risk of modern slavery requires a thorough understanding of your supply chain and operations in order to identify the hotspots of risk. A modern slavery risk assessment should include:
- Identifying of all direct suppliers
- Mapping supplier's location, how much you spend with them, and the products/services they provide you
- Risk factors including industry, product/service, geography, and entity risk
- Assessing the severity/likelihood of risk
- Your relationship to this risk (causing, contributing, or directly linked to)
- Further information on higher risk suppliers
- Assessment of your policies and procedures
The MSA reporting requirements do not require you to disclose a list of suppliers, or details specific details about the risks in your supply chain. For the purpose of meeting the reporting criteria, describing your risk assessment methodology and providing a summary of the results is sufficient. Don't know where to start? Our experts at Fair Supply can work with you to analyse the risk of modern slavery in your supply chain.
