The effects of modern slavery remain embedded in the global economy – a 2024 report by the International Labour Organization estimates that illegal profits from forced labor amount to a staggering $236 billion annually, up 37% from 2014 figures.
According to insights from Moody’s proprietary risk database, human trafficking risk events rose 22% from 2022 to 2023 globally. In Australia alone, human trafficking risk events rose 46%.
With increasing global scrutiny on human rights violations, Australian firms are now required to assess their supply chains for vulnerabilities related to modern slavery.
Australia’s Modern Slavery Act requires that organizations based in or operating in Australia with an annual consolidated revenue over AU$100 million must produce an annual report on the risks of modern slavery in their operations and supply chains. The Act is meant to ensure transparency, accountability, and protection for victims, reinforcing the fight against exploitation and forced labor.
The Modern Slavery Amendment (Australian Anti-Slavery Commissioner) Bill 2023, which passed both Houses of Parliament on 28 May 2024 and received Royal Assent on 11 June 2024, establishes the role of the inaugural Australian Anti-Slavery Commissioner (Commissioner). The Commissioner’s role is meant to support victims of modern slavery and help businesses with addressing modern slavery risks in their supply chains.
While the latest amendments are based on the establishment of the Commissioner’s role, they have significant implications for Australian firms and suppliers.
In August 2022, the Australian government also sought public consultation on a review of the Modern Slavery Act 2018, and published a report of the review that was tabled in Parliament in 2023. Let’s break down the key impacts of the review:
Expanded reporting requirements: The review covered a potential change to business reporting requirements. Currently, larger companies with a consolidated revenue above AU$100 million are required to publish annual statements outlining their efforts to combat modern slavery. However, revisions to the Act that are being debated include lowering the consolidated revenue threshold to AU$50 million, which would impact smaller businesses. This move aims to increase transparency across the board and ensure that organizations of all sizes play an active role in eradicating modern slavery.
Supplier due diligence and compliance burden: Australian firms must enhance their due diligence processes to identify and address modern slavery risks within their supply chains. This includes assessing suppliers’ practices, conducting risk assessments, and ensuring compliance with the Modern Slavery Act. The burden of due diligence will extend to suppliers, who may face increased scrutiny and reporting requirements – being able to proactively address these risks will contribute to the overall resilience of the supply chain.
Risk mitigation measures: Suppliers and reporting entities must adopt risk mitigation measures to prevent and address modern slavery. These could involve implementing stronger contractual provisions, conducting audits, and collaborating with Australian firms to improve transparency. Supplier non-compliance could result in reputational damage and potential legal consequences.
Public scrutiny and reputational risk: With heightened awareness and public scrutiny, companies face reputational risks. Consumers, investors, and advocacy groups will have to closely monitor corporate behavior. Non-compliance with the Act can lead to severe reputational damage, affecting brand trust and investor confidence. Organizations must proactively demonstrate their commitment to ethical practices.
Collaboration and transparency: Australian firms and their suppliers must collaborate closely to combat modern slavery effectively. Transparent communication, sharing information, and working together to implement best practices will be crucial. Suppliers must align their practices with the firm’s commitment to eradicating modern slavery.
Financial and legal implications: Failure to comply with the updated requirements may lead to penalties and legal repercussions. Suppliers could face financial losses if their contracts with Australian firms are terminated due to non-compliance. Conversely, suppliers that demonstrate robust anti-slavery efforts may gain a competitive advantage. Non-compliance can also lead to reputational damage, loss of business opportunities, and potential legal action.
Global harmonization: As modern slavery transcends borders, harmonizing legislation globally becomes crucial. The Act aligns with international efforts, emphasizing cooperation with other countries and promoting consistent standards. This global effort ensures that businesses operating internationally must navigate varying legal frameworks while maintaining their commitment to human rights.
Moody’s multifaceted approach to supplier risk management includes holistic assessments, proactive monitoring, and technology-driven insights. Our services range from out-of-the-box risk assessment capabilities to automated reporting, all designed to help businesses comply with the Modern Slavery Act and create efficiencies within your operations.
Our tailored modern slavery screening solution combines external research with aggregated analysis of risk events reported by global regulatory lists and adverse media. The solution provides early-stage events, broad coverage of lower level or predicate crimes, and a critical alert view, including coverage for events related to the following risk codes: Human Trafficking, Human Rights, Obscenity, Sex Offenses, Kidnapping, Illegal Prostitution, Business Crimes, and Misconduct. The information extracted from our data helps our clients understand where the risk is coming from, and how to proactively mitigate it.
Our specialized supplier risk identification and mitigation processes leverage curated data for precise decision making, supporting clients throughout onboarding, monitoring, and periodic supply chain evaluations.
The latest changes to the Modern Slavery Act signal a collective commitment to eradicating modern slavery. As businesses adapt to evolving requirements, they should continue approaching due diligence with transparency, responsibility, and vigilance.
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