Modern Slavery and the Private Sector

Modern Slavery – the recruitment, transport, receipt and harboring of people to exploit their labor – 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. According to the United Nations, there are more 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 in forced labor. 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 in forced prostitution 6.3 million women and girls (with some men/boys).

Here’s what we see in modern slavery: fraud or deception to trick a person into an exploitative labor, debt, violence, or threats to hold the person in place, and the lack of any payment in exchange for their services. While people may believe that modern slavery mainly involves sex trafficking and forced prostitution (which in itself is tragic), in reality, most victims are linked to forced labor in private sector supply chains. This starts with a grower or producer and ends with a finished product bought by consumers.

The international effort to combat modern slavery has been insufficient for over three decades. While there are some successful stories among NGOs, the United Nations, and governments, most victims remain unidentified. For example, the 2024 Trafficking in Persons 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. Additionally, 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 Labor Organization (ILO) it is estimated that the profits generated from this illegal trade exceed US$236 billion annually. This means that every 60 seconds, this criminal industry makes more than US$449,010. According to the United Nations, modern slavery is the second most profitable multinational criminal activity after drug trafficking. Despite the significant size of the problem, annual global donor contributions to fight this add up to only around US$350 million – less than one percent of the total profits generated by the criminals. These weak results are from the lack of available resources.

This absence of progress  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. Additionally, awareness of this issue within the private sector is very low. Without knowledge of the issue, people are less likely to take action to prevent it. Therefore, raising awareness is a major priority in the private sector.

Modern Slavery and the Private Sector

 According to the International Labor Organization, 86 percent of the 27 million forced labor cases occur within the private sector, highlighting the pervasive nature of modern slavery. A prime example of this can be seen 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 or all stages in these supply chains.

Large companies face pressure to minimize costs to remain competitive. Since labor 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 labor is inexpensive. Unfortunately, some unethical individuals in the supply chain take advantage of workers to maximize profits in unregulated or non-existent labor-standard locations, often without the brand or retailer’s knowledge.

 Why should Companies Care?

Modern slavery in supply chains is now 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. This makes it a serious compliance and ethics risk for companies. 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 law that is enacted. For instance, recently enacted Canadian and German laws require the establishment of grievance mechanisms in supply chains and include fines and penalties for companies found to have modern slavery in their supply chains. These laws require transparency but also encourage companies to take proactive measures to identify and address any instances of modern slavery in their operations.

Recently, 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 in the companies’ supply chains. As a result, affected individuals and advocacy groups are pursuing these class actions to seek compensation for the victims and to hold companies accountable.  These lawsuits also serve as a wake-up call for companies to re-evaluate their supply chain practices and work towards eradicating modern slavery.

The media and NGOs consistently bring attention to modern slavery by openly criticizing 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 also been a growing emphasis on integrating modern slavery-related metrics into environmental, social, and governance (ESG) frameworks within the investment sector. This 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. Integrating modern slavery-related metrics into ESG frameworks has been increasingly crucial for companies seeking to align with responsible investment practices to attract a wider range of investors. The special shame and disgrace increasingly associated with any connection to modern slavery will likely remain and grow, even if ESG as a specific designation is not the only banner associated with this movement.

The concept of modern slavery within supply chains may still be relatively new, and as a result, many companies are only now beginning to grasp its relevance and significance. While traditional forms of labor exploitation have always been widely condemned, the starkness 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.  It is increasingly urgent for companies to comprehend their vulnerability to modern slavery.

Indicators of Modern Slavery

The ILO provides Indicators of Forced Labor, which address modern slavery vulnerability, to assist auditors, law enforcement officials, labor inspectors, trade union officers, NGO workers, and others in identifying individuals who may be trapped in forced labor and need assistance. The following indicators are the most common signs of modern slavery: 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 forced labor and is used to determine whether an individual worker is a victim of this crime. In some cases, a single indicator may signal 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 Companies Need to Do

There are a number of ways for companies to address the risk of modern slavery in their compliance and ethics programs as they relate to their supply chains, including:

• 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. The company’s chief compliance and ethics officer should include this risk area in the reports to the board and senior management.
• A designated individual or team should be a focal point for any actions and communication related to this topic. The team should include a headquarters subject matter expert (SME) schooled in the ways modern slavery and how to detect it, as part of the company’s compliance and ethics program.
• Company policies and internal controls related to modern slavery should be implemented or fine-tuned. 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. Controls can be applied to ensure that the selection of suppliers and contractors addresses this risk.
• 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.
• To protect all those in the supply chain, it is important to exercise diligence and 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 programs 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.
• Those in the company dealing with procurement should be trained on the risks of modern slavery abuse in the supply chain, including how to detect it and how to ensure that those in the supply chain also understand the risks.
• There should be a company reporting system, typically part of a company’s overall compliance and ethics program, where anyone in the company can report concerns about or indications of modern slavery in the supply chain without fear of retaliation.
• The company’s compliance and ethics program should consider modern slavery as one of the risks that need to be assessed and addressed
• Business units in high-risk areas should include a local compliance champion, who would have access to the modern slavery SME and would include this risk area in their responsibilities.
• Compliance audits and monitoring should include this risk area in their scope.
• Any indications of modern slavery in the supply chain should be investigated. Failure by managers or officers to take reasonable steps to address this risk should be subject to discipline.

Companies must confront modern slavery in their supply chains for ethical, legal, and reputational reasons. By ensuring that their suppliers treat all those working for them fairly, and that those suppliers themselves do not rely on slave labor in their supply chains, companies uphold basic human rights and contribute to ending exploitation and abuse. Moreover, as many consumers and investors prioritize ethical business practices, taking a stand against modern slavery can enhance a company’s reputation and brand value. Additionally, with increasing legal scrutiny and regulations surrounding supply chain transparency, addressing modern slavery is essential to avoid legal repercussions and maintain sustainable business operations. Moreover, being ethical and doing the right thing has value in itself.  Ultimately, addressing this offense against humanity is the right thing for all of us to do.