Modern Slavery and Supply Chains

By Matt Friedman
Chief Executive Officer at The Mekong Club

Modern slavery, which represents the recruitment, transport, receipt and harbouring of people to exploit their labour, affects almost every country in the world. Globally, it is estimated that there are over 50 million men, women, and children in modern-day slavery today, with more than half in Asia alone (55%). According to the United Nations, there are more modern slaves today than at any other time in history.

 Out of this total, 23 million are victims of forced marriage, while the remaining 27 million are involved in forced labour cases. These victims, found in sweatshops, on construction sites, on farms, and within fisheries, are forced to work for little or no pay, deprived of their freedom, and often subjected to unimaginable suffering. This also includes 6.3 million women and girls (with some men/boys) who are in forced prostitution.

 The main characteristics of modern slavery are the use of fraud or deception to trick a person into an exploitative labour situation, debt, violence, or threats to hold the person in place, and the lack of any payment in exchange for services provided. While most people believe that modern slavery mainly involves sex trafficking and forced prostitution, most victims are linked to forced labour within private sector supply chains. This starts with a grower or producer and ends with a finished product bought by consumers in the retail market.

 The international response to combating modern slavery has been insufficient for over three decades. While there have been some successful stories among NGOs, the United Nations, and governments, most victims remain unidentified. For example, the 2024 Trafficking in Persons Report (TIP Report) only documented 133,943 victims receiving assistance globally, which is approximately 0.2% of the estimated 50 million modern slavery victims. This means that less than one per cent of the victims are identified and assisted annually. During the same period, there were fewer than 7,115 convictions out of the estimated half million criminals. Shockingly, these numbers have remained largely unchanged for over twenty years.

 Why are these numbers so low? According to the International Labour Organisation (ILO), the estimated profits generated from this illegal trade exceed US$236 billion annually. So every 60 seconds, this criminal industry makes more than US$449,010. According to the United Nations, modern slavery generates proceeds representing the second most profitable multinational criminal activity after drug trafficking. Despite the significant size of the problem, annual global donor contributions amount to only around US$400 million, which represents less than one per cent of the total profits generated by the criminals. The problem’s negligible impact can be attributed to the lack of available resources.

 The limited impact of addressing this issue is also due to two additional factors. Globally, there are over 500,000 criminals involved, while the number of responders is estimated to be less than one-tenth of this. Those combatting this crime are bound by the rule of law, whereas the criminals are not. Awareness of this issue within the private sector is very low, so raising awareness is a major priority within the private sector.

Modern Slavery and Supply Chains

According to the International Labour Organisation, 86 per cent of the 27 million forced labour cases occur within the private sector, highlighting the pervasive nature of modern slavery in manufacturing.Many goods we buy go through a production, packaging, and distribution process known as a supply chain, starting with a factory and ending with consumers purchasing the finished product. Modern slavery can exist at any stage within these supply chains.

Large companies are frequently under pressure to minimise costs to remain competitive. Since labour accounts for a significant portion of production expenses, reducing these costs can be achieved by collaborating with manufacturing suppliers in areas of the world where labour is inexpensive. Unfortunately, some unethical individuals in the supply chain take advantage of workers to maximise profits in unregulated or non-existent labour-standard locations, often without the brand or retailer’s knowledge.

 Why should manufacturing companies care?

 Modern slavery within supply chains has become a significant business risk. Governments and regulators worldwide are enforcing stricter regulations, compelling companies to show their efforts to reduce modern slavery in their operations. Failing to do so could lead to condemnation, fines, loss of government contracts, and prosecution. Below is a summary of emerging trends related to this topic.

Since 2012, new transparency legislation has mandated major companies to disclose their actions addressing modern slavery. This includes laws such as the California Transparency in Supply Chain Act, the UK Modern Slavery Act, France’s Duty of Vigilance, and the Australian Modern Slavery Act. Additional factors are continuously being incorporated with each new legislation. For instance, the recently enacted Canadian and German legislation requires the establishment of grievance mechanisms in supply chains and includes fines and penalties for companies found to have modern slavery in their supply chains. These legislations require transparency but also encourage companies to take proactive measures to identify and address any instances of modern slavery within their operations.

There has been a noticeable surge in class action lawsuits targeting major retail companies operating in the fisheries, chocolate, and palm oil sectors. These lawsuits arise when instances of modern slavery are uncovered, ultimately causing reputational damage to the entire industry. The legal actions typically focus on allegations of modern slavery and other human rights abuses within the supply chains of these companies. As a result, affected individuals and advocacy groups are pursuing these class actions to seek compensation for the victims and to hold the companies accountable for their social responsibilities. Furthermore, these lawsuits also serve as a wake-up call for the industry to re-evaluate their supply chain practices and work towards eradicating modern slavery.

The media and NGOs consistently illuminate modern slavery by openly criticising brands that do not take action against it. Investigative journalism and data collection efforts have increased the exposure of modern slavery in different industries. Some campaigns have also encouraged consumers to reach out to companies associated with modern slavery to express their dissatisfaction. Increased public awareness and pressure have pushed many companies to improve their supply chain transparency and take steps to eradicate modern slavery from their operations.

There has been growing emphasis on integrating modern slavery-related metrics into environmental, social, and governance (ESG) frameworks within the investment sector. This shift reflects a heightened awareness of the importance of ethical and socially responsible investing practices. Companies that fail to acknowledge this trend and overlook the significance of addressing modern slavery in their operations may find themselves facing limited investment opportunities and potential reputation damage. Therefore, integrating modern slavery-related metrics into ESG frameworks is becoming increasingly crucial for companies seeking to align with responsible investment practices to attract a wider range of investors.

The concept of modern slavery within supply chains is relatively new, and as a result, many companies are only now beginning to grasp its relevance and significance. While traditional forms of labour exploitation have always been widely condemned, the nuances and pervasive nature of modern slavery have only recently come under scrutiny. This lack of historical awareness has meant that some companies may not have incorporated adequate safeguards into their supply chain management systems.As these trends persist, more companies must comprehend their vulnerability to modern slavery.

 Matt FriedmanIndicators of Modern Slavery

The ILO Indicators of Forced Labour, which address modern slavery vulnerability, are meant to assist auditors, law enforcement officials, labour inspectors, trade union officers, NGO workers, and others in identifying individuals who may be trapped in forced labour situations and in need of assistance. The following indicators are the most common signs that may suggest the possible existence of a modern slavery case: abuse of vulnerability, deception, restriction of movement, isolation, physical and sexual violence, intimidation and threats, retention of identity documents, withholding of wages, debt bondage, abusive working and living conditions, and excessive overtime.

This set of eleven indicators includes the main elements of a forced labour situation and is used to determine whether an individual worker is a victim of this crime. In some cases, a single indicator may indicate the presence of modern slavery. In other cases, it may be necessary to identify multiple indicators that, when considered together, reflect a situation of modern slavery.

What Do Companies Need to Do?

There are seven essential ways manufacturing companies can address the risk of modern slavery within their supply chains:

·        Company leadership (board and C-suite) should receive periodic detailed briefings on the relevance and importance of due diligence processes and procedures related to modern slavery at all levels of their supply chains.

·        A designated individual or team should be a focal point for any actions and communication related to this topic.

·        Internal and external policies related to modern slavery should be implemented or updated. These include codes of conduct, annual compliance certifications, standard contract language, due diligence questionnaires, and supplier statements of conformity.Portions of these policies should be included in contracts and requests for proposals with suppliers down the supply chain.

·        Purchasing practices should be revised to address and understand modern slavery vulnerability by studying costing, forecasting, and suppliers’ workload management.

·        New transparency laws require major brands to fully understand their supply chain. Efforts to map the supply chain should focus on tracing products from raw materials to finished goods. This helps to assess risks and identify potential vulnerabilities to modern slavery at all levels.

·        To ensure fair working conditions in the supply chain, it is important to conduct investigative audits for both new and existing suppliers. Companies should ensure that grievance mechanisms, such as phone apps or third-party hotlines, are available to workers, allowing them to provide valuable feedback about their working conditions in a safe manner.

·        Capacity development programmes should be established to equip suppliers with the right expertise and tools to implement changes within their business operations and cascade this knowledge and responsibilities down the supply chain.

Companies must confront modern slavery in their supply chains for ethical, legal, and reputational reasons. By ensuring that their suppliers adhere to fair labour practices, companies uphold basic human rights and contribute to ending exploitation and abuse. As many consumers and investors prioritise ethical business practices, taking a stand against modern slavery can enhance a company’s reputation and brand value. With increasing legal scrutiny and regulations surrounding supply chain transparency, addressing modern slavery is essential to avoid legal repercussions and maintain sustainable business operations. Ultimately, addressing this issue is the right thing to do.

About the Author