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What is Modern Slavery? Know the Risks and the Requirements

Modern slavery is an important issue, with real-world potential social, brand and reputational impacts, that need modern slavery advice, processes, policies and know-how to combat.

What is Modern Slavery?

The Australian Government defines modern slavery as a term used to describe ‘serious exploitation’, and: “situations where offenders use coercion, threats or deception to exploit victims and undermine their freedom” and, that practices that constitute modern slavery can include:

  • human trafficking
  • slavery
  • servitude
  • forced labour
  • debt bondage
  • forced marriage, and
  • the worst forms of child labour

While modern slavery is illegal in some countries, many of the elements of modern slavery listed above are legal in many countries and jurisdictions.

How can the Modern Slavery Act impact my organisation?

The Australian Government’s Modern Slavery Act 2018 was adopted in 2018, came into effect in 2019, and sets out the Government approach and expectations for organisations in Australia.

The Act includes reporting requirements for organisations that encourage Australian businesses to identify and address their modern slavery risks and maintain responsible and transparent supply chains.

The reporting requirements apply to large businesses and entities that operate in Australia with annual consolidated revenue of at least AUD$100 million. These reports are published annually and available to the public. Other organisations which do not meet the threshold for mandatory reporting can submit reports voluntarily.

Modern slavery obligations for investors

While Australia’s Modern Slavery Act 2018 is like those around the world, Australia’s act requires more of investors than any other.

The Australian Act requires investors to penetrate their portfolio to assess risks of modern slavery in the companies and assets they own.

This creates a complex situation for portfolio holders, as there are many layers between the asset owner and the operation of the asset itself.

Many portfolio holders and asset owners engage modern slavery advisors to help them identify and understand the risks in their portfolio (to answer questions like ‘what is modern slavery?’ and ‘how can I ensure I’m not facilitating it?’ etc). It’s because of this reach that organisations not meeting the revenue threshold may still need to be aware of their modern slavery risks – because an owner requires it.

Identifying and understanding the risks

Seven Advisory has a four-pronged approach for helping any business to consider the prospect of modern slavery in their operations or supply chain: understand, uncover, address, and avoid.

Understand the risk: For many organisations, identifying the risk of modern slavery can be daunting. It’s important to understand where the risk factors might be more prevalent and take an approach that assesses factors such as the company type, product produced, and countries or regions of operation. Don’t be trapped by the temptation of using financial materiality as the lens – make sure the approach you take matches the actual risk.

Uncover the practice: Modern slavery will not present itself easily. Companies need to penetrate their supply chains and operations to find indicators of practices that might lead to modern slavery, such as the sustained use of unskilled, temporary or seasonal labour.

Address the issues: Instances of modern slavery or issues with supply chain partners are serious and even organisations with the best of intentions can struggle to navigate a solution. How a company responds can depend on its level of influence, the criticality of the good or service and the contractual arrangements. Importantly, companies that have uncovered modern slavery also have an opportunity to improve outcomes for the people affected through how they approach the issue.Avoid in the future: There are a range of tools at hand for organisations to protect themselves and everyone in their supply chain in the future, including training, policies, procedures and codes of conduct.

What you can safely say in your Modern Slavery Statement or Policy

Transparency and authenticity are the key features to any Seven Advisory approach. The hurdle to comply with the Modern Slavery Act is relatively low but civil society will expect more of your business than base compliance.

Understand how much you want labour relations to be a part of your business strategy and be honest about the timeline and approach you will take with your stakeholders. Modern Slavery Statements are statements of the Board, so always consider verification to guard against the possibility of misleading conduct.

Now what?

So, whether you are obligated to report your modern slavery activity and monitoring or not – it’s important to understand and tackle the risk of modern slavery in your operations and supply chain.

Seven Advisory provides unique ESG advisory services to companies, investors and entrepreneurs developing their social license to deliver long-term value. If you’re still wondering ‘what is modern slavery?’, Seven Advisory can advise you or your organisation on how to approach and identify it in your operations or supply chain – get in touch today.

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