The International Labour Organisation (ILO) defines modern slavery as work exacted under the threat of penalty and for which the person has not offered themself voluntarily. According to the ILO, 50 million people were living in modern slavery in 2021: 28 million in forced labour and 22 million working under duress through forced marriages.
Around the world, regulations on modern slavery are strengthening. The US’s Uyghur Forced Labor Prevention Act of 2021, for instance, requires companies to prove that their goods are not made with components produced by Uyghur forced labour in China.
‘We need mandatory reporting along with third-party audits and adequate penalty provisions’
Last December the Public Safety Canada ministry updated guidance on corporate modern slavery reporting under the 2023 Fighting Against Forced Labour and Child Labour in Supply Chains Act, clarifying how companies must assess and demonstrate slavery is not associated with their goods produced in Canada; goods they import; or with another entity that produces or imports goods for these companies.
Germany’s Supply Chain Due Diligence Act of 2023, meanwhile, insists that companies must prove that they have properly applied due diligence to demonstrate slavery is not associated with their goods and services.
Established instruments
At the EU level, modern slavery is not specifically addressed in the European Financial Reporting Advisory Group’s (EFRAG) new draft simplified European Sustainability Reporting Standards (ESRS), but the document requires companies to disclose information on human rights policies and incidents. Compliant companies can use established instruments, such as the UN International Bill of Human Rights, as a blueprint to implement policies and practices, and then ultimately report them for ESRS purposes.
‘It is important to note that ESRS focus on disclosing material information, which relies on the double materiality assessment,’ says a spokesperson for Accountancy Europe. ‘Therefore, it will depend on a company’s particular situation whether specific disclosures on modern slavery would be provided in the ESRS.’
Companies also need to be aware of their exposure to EU controls under the Forced Labour Regulation of 2024, which bans EU sales of products and services made with forced labour.
Improve training
Despite these advances, Muhammad Azizul Islam, professor in sustainability accounting and transparency at the University of Aberdeen Business School, says that stronger modern slavery reporting regulations are essential.
‘While it may be more apparent in industries such as global retail and mining, financial institutions often play a role in funding and investing in these industries. We need mandatory reporting with detailed information, along with third-party audits and adequate penalty provisions,’ he argues, stressing the need for detailed, clear and uniform reporting guidelines, and adding that independent audit reports highlighting data on corporate slavery grievance and remediation should be published.
‘Auditors must listen to victims’ voices and communicate their findings clearly’
Islam goes on to say that external accounting firms should generate disclosures for their own operations and assurance and social audits to clients, while internal accountants and auditors should offer both internal and external compliance audits on slavery reporting. This will require extensive training in ethics and human rights issues, with collaboration with NGOs potentially enhancing audit effectiveness.
‘Ultimately, auditors must listen to victims’ voices and communicate their findings clearly,’ he says. ‘In the long run, accounting professional bodies should consider how to produce modern-slavery-free income statements and balance sheets. Each business transaction processed by accountants can be verified and assessed to determine whether it is free from forced labour.’
Better governance
Accountancy Europe believes that companies should strengthen governance and internal processes, such as active oversight and accountability at senior levels, with leaders ensuring that reporting is accurate and coordinated across functions. In addition, internal controls should ensure that data is systematically collected, validated and reviewed. Teams need training, guidance and cultural alignment to understand reporting expectations, applying consistent methodologies, transparency and integrity.
Mette Møller Hansen, senior manager at EY Denmark’s Climate Change and Sustainability Services department, notes that while many companies are still driven by compliance and regulation, more are assessing supply chains from a business perspective to mitigate risk and avoid disruptions linked to human rights and environment.
‘There is still a knowledge gap, particularly around methodology and implementation’
‘There is still a knowledge gap, particularly around methodology and practical implementation for global organisations,’ she says, adding that many underestimate their impact and accountability beyond immediate suppliers ‘and rarely look past Tier 1 or Tier 2. Transparency remains limited deeper in the value chain. Many companies just don’t consider that they should be held accountable for their entire supply chain and often underestimate how their business may be impacted.’
Understanding expectations
EY is helping organisations by clarifying regulatory expectations and advising on how to embed due diligence processes in global operations, and report on these matters, in a compliant and meaningful way. ‘Our role is to make compliance actionable and integrated into business operations, not just a tick-box exercise,’ Hansen says.
A big challenge is lack of content, she adds. ‘Most modern slavery requirements merely require transparency, not actual action. And many companies simply don’t have anything to report, because they don’t address the topic sufficiently,’ she says, praising the 2022 Norwegian Transparency Act, which requires due diligence on human rights.
‘Working with peers enables collective and shared efforts to identify and manage the risk’
Hansen also advises that companies should improve grievance mechanisms, giving the example of Denmark, where ’too often’ channels are limited to Danish or English, ’leaving workers in high-risk regions, such as factory workers in the supply chain or migrant workers, without a practical way to raise concerns, due to language barriers’. Mechanisms should be ‘multilingual, culturally appropriate and available through channels workers can actually access. And they need to know that it exists.’
Furthermore, organisations need effective remediation, addressing root causes and documenting corrective actions transparently.
Organisations also benefit from understanding their business end-to-end by working with value-chain partners, including suppliers of suppliers, to understand key resources across value chains.
‘Working with peers, especially when there are common resources in the value chain, enables collective and shared efforts to identify and manage the risk of modern slavery and to gather information for reporting – for example, when developing relevant metrics, measurement methodologies, reporting templates, data collection processes and controls,’ says Aaron Saw, head of corporate reporting insights – financial at ACCA. ‘The social agenda is broad and complex, and its constituents are often difficult to measure.’
