Managing the Risk of Modern Slavery in Your Third-Party Ecosystem

Editor’s Note: Hanne McBlain is senior director at technology research and advisory firm ISG.

The United Nations and international labor organizations estimate that more than 40 million people worldwide are subject to modern slavery, including forced labor, debt bondage, forced marriage, slavery and slavery-like practices and human trafficking. The probability of finding slavery deep in enterprise supplier tiers could be as high as 70 percent. Every enterprise has a legal and ethical obligation to ensure that its supply chain does not contribute to human exploitation.

Legislation in countries around the world is addressing the topic of modern slavery. Germany, Norway, Australia, France, Netherlands, California, and the U.K. have all passed laws that mandate private sector companies to eradicate human exploitation. Very soon, we should expect the rest of the European Union, Canada and Hong Kong to follow.

These new laws require businesses to annually report on how they audit their suppliers for slavery risks, as well as the specific policies, procedures and training they have put in place to verify the integrity of their supply chains, and the latest legislation puts financial penalties behind a failure to do so. As the enterprise supply chain has become more and more complex, knowing what every player in your provider ecosystem is doing has become a challenge.

Many organizations have thousands or even tens of thousands of suppliers—far too many to contemplate mapping and monitoring by hand. Still, they are being held accountable. This is why supplier management that is thorough enough to ensure modern slavery compliance cannot be done without technology. For many companies, this is part of a larger conversation about environment, social and corporate governance (ESG).

Frequently Asked Questions

How can enterprises prepare for modern slavery legislation?

To comply with the proper reporting and meet the necessary requirements for your government mandate, companies must lay a foundation and then build on it. As with other legislative issues, there must be a mindset of continuous improvement. So just because you get it right once doesn’t mean you don’t need to keep improving on it. First, create a project team to understand the modern slavery legislation. This is not a one-person job. This team should include legal, finance, risk and representatives from the business. Then you need to develop a modern slavery framework and the appropriate procedures and policies to address the requirements inside the overall risk management framework.

The graphic below shows the five core pillars for effective modern slavery and risk management.

What can we do to mitigate the risk of modern slavery in our supplier environment?
There are four main steps to follow: