The guide to modern slavery due diligence of supply chains

July 27, 2023

The guide to modern slavery due diligence of supply chains

Why you need to implement modern slavery due diligence.

There are strong commercial, legal and ethical reasons to implement modern slavery due diligence.

Slavery presents a risk to your company. It’s also a horrific and widescale abuse of human rights; there are 17 million victims of it being exploited in global supply chains today. Governments increasingly recognise that companies need to take action to tackle slavery, and new laws are entering into force around the world that require them to do so.

Tackling slavery in your supply chain can seem intimidating.  But it need not be if you follow the structured approach outlined in this guide. Remember, you are not expected to know everything that is happening in your supply chain!

What is modern slavery due diligence?

Modern slavery due diligence is a structured and ongoing process to identify and address risks. It should focus on risk to people, as opposed to risk to your company. However, in our experience we often find that the two are correlated. Put another way, modern slavery due diligence can help lower corporate risk.

The process we outline below is based on the internationally endorsed United Nations Guiding Principles on Business & Human Rights but is focused on risk to workers in supply chains. It also draws upon RightsDD’s practical experience supporting clients around the world to manage human rights risk.

Stage 1. Assess your supply chain.

First you need to assess the likelihood that the goods and services your company buys are made, fully or in part, by slave labour.

Some companies may only be able or willing to assess one part of their supply chain to begin with. If this is the case for your company it is preferable to determine which part of your supply chain to assess (‘set the scope’) based on an initial assessment of modern slavery risk.

If there is limited backing for conducting due diligence within the company, its best to work with the parts of the business where you have support. Working with allies within the company provides the best way to demonstrate the value of modern slavery due diligence and win wider support.  Early wins should help you expand your programme more widely.

Once the scope has been set, you need to identify the relevant suppliers. This information can often best be found in your company’s accounts system.

Next, identify and gather data on, relevant risk indicators. There is no prescriptive list of risk indicators. Rather you should select those that you think are most relevant to you supply chain. As an example, RightsDDact, our modern slavery due diligence technology, uses the following risk indicators:

• Geographic

• Product and service

• Nature of work

• Employment modes

• Industry

• Bad actors

• Governance

Gather data on these risk indicators from your own organisation and suppliers and other credible third party sources. RightsDDact can do this for you, so contact us if you would like to learn more about how we can help.

Once you have identified the relevant risk indicators and gathered the data, you need to conduct the assessment itself. We typically build a risk assessment matrix with each risk indicator appropriately weighted and prioritised.

For further information on the risk assessment process, see our Essential Guide to Modern Slavery Risk Assessment.

Stage 2. Act to address risk.

Once you have identified your supply chain risks, you will need to determine which ones to address first. We advise firstly splitting the issues into actual and potential impacts.

Actual impacts are incidents where your business activity is resulting in people being forced into modern slavery. Clearly, addressing any identified actual impacts should be prioritised.

Potential impacts result from policies or practices that create the opportunity for people to be forced into slavery. For example, finding out that a supplier is withholding workers identification documents, while not illegal in many jurisdictions, will increase the risk that a worker may fall victim to slavery.

Where an actual impact has occurred or is ongoing, you should use what leverage you have over the supplier to try to end the abuse. It may also be appropriate to provide remediation to the affected workers. Seek advice from human rights experts if you are unsure about the appropriate mitigation measures to take.

In cases of potential impact, you should adjust the policies or practices that have given rise to the risk. The changes should be integrated into your company’s operations. Where it is a supplier or another third party’s activities that are creating the potential impact, you may try to alter their policies and practices by explaining the issue to them, implementing a supplier code of conduct, and changing contractual terms to address the issue.

You should try to work with suppliers to address risks, as this is the best way to actually protect workers from modern slavery. This may not be viable in some situations, however. If you can’t affect change, you will have to stop buying from them.

The Guiding Principles on Business & Human Rights encourage companies to make a policy commitment to respect human rights. We further recommend that companies maintain a modern slavery risk management policy, that identifies likely risks and appropriate mitigations. This need not cover all potential risks and mitigations but will provide valuable guidance if an issue emerges.

Stage 3. Monitor suppliers.

Supply chains are in a constant state of flux, with most companies taking on new suppliers and expanding the range of goods they buy from existing ones on a regular basis. You should assess new suppliers and goods as they are onboarded.

Likewise, the risk landscape of your supply chain evolves over time. Its important to monitor your existing suppliers and address new risks as they emerge. There is lots of valuable information publicly available to do this.

By employing a proper adverse media monitoring process, you may avoid ethical and reputational damage (our RightsDDact technology monitors supplier human rights risk, contact us if you would like further information). For example, in December 2020 we identified that garments and personal protective equipment made in a Chinese factory employing North Korean forced labour was likely being sold by five companies in the US and Canada. In November 2021 Canadian national broadcaster CBC aired a TV report which identified a Canadian retailer selling the goods in question.

Stage 4. Communicate with key stakeholders and report.

Engage with relevant stakeholders throughout the process. This will help you assess risk better and determine risk mitigation actions sooner.

Include an overview in any sustainability report that you publish; ideally try to get your company to include an overview of your due diligence in your annual report as well. This will help third parties, including investors, understand what you are doing to reduce the risk within your organization. ESG ratings agencies and NGO initiatives such as KnowTheChain reward transparency.

If your company is subject to the reporting requirements contained in the Australian and/or UK Modern Slavery Acts you should incorporate an overview of the assessment process and outcomes in your modern slavery statement.

Refrain from exaggerating your efforts, or understating the risk profile of your supply chain. Only assert that your supply chain is 'low risk' if your analysis genuinely supports this conclusion.

Additionally, it's prudent to develop an incident response plan to effectively address any potential human rights issues that may arise in the future.

In summary.

Modern slavery due diligence will protect workers in your supply chain. It will also allow your company to comply with the growing raft of human rights reporting and import regulations. In practice, it is likely to also help protect the company from legal, reputational and operational risk.

If you have limited resources or support, start with a small part of your supply chain to begin with and then expand the scope over time. Using a structure approach, and documenting key decisions, will pay off in the long-term. Consider training your team on modern slavery risk in supply chains, it will build their knowledge and confidence.

About the author
Oliver Oliver Cushing is the CEO of RightsDD and is a business and human rights expert.
RightsDD are the modern slavery specialists. Our RightsDDact technology enables companies to assess and monitor their supply chains for modern slavery risk. We also provide training and consultancy to companies around the world. Contact us to learn more.