The essential guide to modern slavery risk assessment

Every company should be conducting modern slavery risk assessments of their supply chains. In this guide we show you how.

You already know you need to assess your company’s supply chain for modern slavery risk, but you probably don’t know how. It’s hard enough working out who your suppliers are. Identifying the highest risk ones may seem impossible, but it’s not. But don’t worry, we have put this guide together to explain what a modern slavery risk assessment is and how to undertake one. Risk assessment is part of the wider modern slavery due diligence process.

As well as risk assessments, you should train your staff to help them spot the warning signs of modern slavery. You are welcome to use our free modern slavery training course to do this.

What is a modern slavery risk assessment?

Modern slavery risk assessment is the evaluation of the likelihood that a good or service your company buys is made fully, or in part, by slave labour.¹  Once you have assessed your supply chain, you should address issues that you have identified and continue to monitor for new risks.

It’s important to note that you are not expected² to know everything that’s going on in your supply chain. In most cases, that’s impossible. Rather, you should employ a risk-to-people based approach to identify the highest risks areas of your supply chain.

How to make the case for conducting a modern slavery risk assessment

You will need backing from leadership and support from colleagues to conduct a slavery risk assessment. The best way to win this support is by making a good pitch. Our clients tell us that they do this by combining ethical reasons with business ones to make a compelling case. Here’s how:

The ethical case:

It’s simple really. There are 17 million victims of modern slavery being exploited in business supply chains today.  The risk that it’s present in your company’s supply chain is a real one. To end this abuse, companies like yours need to act. Your colleagues are humans. Once you make them aware of these facts, they will likely want to take action. If you don't already do it, try to get your company to implement modern slavery training, it will increase awareness of slavery and support for tackling it.

The business case:

You need to support the ethical case with the business one. There are lots of reasons why tackling slavery makes good business sense, including:

• Countries such as Canada and the USA ban the import of goods made by forced labour (a form of modern slavery). They even ban the import of goods containing materials farmed, mined or made by forced labour. The US will impound suspect goods and name, shame, and fine companies.
• Association with labour abuse can hit your share price and (potentially) senior managements’ bonuses. Boohoo’s share price nearly halved after a newspaper claimed to have identified widespread labour exploitation at its suppliers’ factories. Two years later, it still hasn’t recovered.
• Many companies are legally obliged to report on modern slavery in their supply chains by laws such as the Australian and UK Modern Slavery Acts. Similar laws are coming into force in the EU. These laws have extraterritorial reach.
• Modern slavery can cause serious supply chain disruption. And after Covid, your company has probably had enough of disrupted supply chains…

What are the risk indicators I need to know?

To conduct a modern slavery risk assessment of your supply chain, you need to identify appropriate risk indicators. Create a modern slavery risk assessment template and use it to capture the risk indicators and outcomes of the assessment (more below on that).

There is no prescriptive list of risk indicators. Rather you should select those that you think are most relevant to you supply chain and viable to assess. In making that selection, remember that the objective is to assess risk to people, not to your company. Where you can, enhance your indicators with qualified third-party expert data sources.

As an example, RightsDDact, our modern slavery due diligence tool, uses the following risk indicators:

• Geographic: identifies modern slavery risk arising from the geographical location of supplier, its factories and business operations, and/ or the source of its raw materials. We enhance our geographic risk scoring with data including the percentage of the population of a given area in modern slavery and other risk factors such as the capacity of the country to tackle slavery.
• Product and service: identifies risks associated with specific products and services, either because of the raw materials used, the known worker risks or historical instances where modern slavery has been identified previously. We maintain a database of over 8,000 products and services, each scored for modern slavery risk. It’s unlikely that you want to build such a large database yourself! However, you can profile the risk of the things you buy.
• Consider what type of work is required to make a product or deliver a service. A product made by highly skilled labour is typically lower risk than one made by unskilled workers, for example. The US Government publishes lists of goods made by child and forced labour which are useful (note however that they are by no means exhaustive and plenty of products not listed are still high risk).
• Employment mode risk: identifies risks linked to employment practices within industries and product service areas. Engage with your suppliers to understand their recruitment and employment practices. Its sometimes the case that a supplier engages in practices that create risk of exploitation. You can help them understand why this is problematic and encourage them to stop.
• Industry: identifies modern slavery risk linked to specific industries. Organisations such as the ILO provide lists of higher risk industries. Industry categorisations are typically very broad and cover lots of activities (retail for example ranges from low poorly paid factory workers to highly paid marketeers). For this reason, we treat industry risk as a useful but lower weighted indicator.
• Bad actors. You should use adverse media screening to check all suppliers as they may have been linked to modern slavery in the past.
• Governance: Finally, consider what risk mitigation factors suppliers have in place. These include employment and human rights policies.

Assessment

Once you have identified the relevant risk indicators for your organization, you need to capture relevant supply chain data and create a risk assessment matrix consisting of your suppliers and selected risk indicators.

Consider giving a higher weighting to more important indicators. For example, product and service risk should provide a more precise indicator than a industry risk indicator and should be weighted accordingly.

Document the process, the rationale for any potentially controversial aspects of it, and its outcomes. You may be required to justify why you took certain decisions months or years after you have conducted your modern slavery risk assessment. If that happens, you will be thankful for the documentation you have made.

Act

This is a quick overview of how to address your identified risks.

Typically risks fall into three categories:

1. Practices that are abusive. These are situations where you identify modern slavery, or a high risk of modern slavery occurring.
2. Policies that are abusive. For example, a policy that requires workers to work hours above the nationally prescribed maximum amount.
3. Policies and practices that create the potential for modern slavery. An example of this is the withholding of workers’ passports, which limits the capacity of individuals to freely leave a job.

Clearly, risks that fall into the first category should be a priority. But every category of risk should be addressed.

The United Nations Guiding Principles on Business & Human Rights advise that companies should try to work with suppliers to address identified issues and improve workers’ conditions. This may not be viable in some situations however, in which case you may have to stop buying from a given supplier.

Monitor

Supply chains are constantly changing. Your company will gain new suppliers and lose old ones. Ideally you should put a process in place to assess all prospective suppliers before you buy from them.

Likewise, the risk profile of your supply chain will shift over time. Your risk assessment process should therefore monitor, and respond to, new developments. For example, our analysis indicates that many electronics shipped via, or processed in, Malaysia contain materials ultimately sourced from Xinjiang, China. They therefore have a high-risk of being tainted by forced labour. This relationship was identified in 2023 and materially changed the risk profile of Malaysian sourced electronics.

Communicate

You should engage with relevant stakeholders, including suppliers, during the risk assessment.

Once you have completed the assessment phase, you can communicate the results to your colleagues. If your company is subject to the reporting requirements of the Australian and/ or UK Modern Slavery Acts, you should include an overview of your assessment process and its outcomes in your modern slavery statement. Even if your company is not legally obliged to report, it may be advantageous to communicate what you have done, and plan to do, externally. Be transparent about what you have done and its limitations. By doing so, you will better position the company in the eventuality that one of your suppliers is linked to modern slavery by the press.

Finally, avoid claiming that your supply chain is free of slavery. In over a decade working with companies on human rights risk, I’ve never advised a company to make this claim.

Consider developing an incident response plan to deal with modern slavery issues that may arise in the future. RightsDD can assist if required.

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¹ In this article we focus on assessing supply chains for modern slavery, but its important to note that you should also ensure that there is no modern slavery in your own company’s operations as well.

2 As confirmed in the United Nations Guiding Principles on Business & Human Rights.

³ Global Estimates of Modern Slavery: The International Labour Office and The ILO Indicators of Forced Labour