Overview

Modern slavery – including forced labor and human trafficking – remains a pervasive issue hidden within global supply chains. According to the International Labour Organization, over 50 million people worldwide are trapped in modern slavery​, generating illicit profits of more than $236 billion annually​. In response, governments around the world are enacting legislation to hold companies accountable for labor conditions deep in their supply networks​. One landmark example is the Modern Slavery Act, which has set new expectations for supply chain transparency and corporate responsibility in combating forced labor. This blog will explore why ethical supply chains and responsible sourcing have become business imperatives, examining the global landscape of modern slavery laws, key components of an ethical supply chain, and how companies can implement sustainable procurement practices. By understanding these elements, organizations can better comply with evolving regulations and uphold fair labor practices and safe working conditions across their operations.

Combating Forced Labor Through Transparency

The term “Modern Slavery Act” refers to laws designed to fight modern slavery by increasing corporate transparency and accountability. The pioneering example is the UK Modern Slavery Act 2015, which makes it a requirement for businesses over a certain size to report on their efforts to eliminate forced labor and trafficking. Section 54 of the UK Act (the Transparency in Supply Chains provision) obligates any company operating in the UK with annual turnover above £36 million to annually produce a modern slavery statement, disclosing what steps they are taking to prevent and address slavery in their operations and supply chains​. In practice, this means companies must publicly outline their human rights due diligence processes – from risk assessments to supplier monitoring – as a way to drive greater supply chain visibility and remediation of abuses​. The UK law was groundbreaking in introducing a market-driven disclosure approach, and although enforcement has been relatively light so far, there are ongoing efforts to strengthen it​.

The UK Act is part of a global trend. Other jurisdictions have enacted similar transparency and due diligence laws to combat forced labor:

• Australia’s Modern Slavery Act 2018 requires companies based or operating in Australia with over AUD $100 million in revenue to publish annual modern slavery statements identifying risks in their supply chains and actions to address them.
• California’s Transparency in Supply Chains Act (2010) was an early law compelling large retailers and manufacturers doing business in California to disclose their efforts to eradicate slavery and human trafficking from their direct supply chains​. Its goal is to inform consumers and encourage ethical sourcing by shining a light on supply chain practices.
• European Union initiatives are raising the bar further. The upcoming EU Corporate Sustainability Due Diligence Directive (CSDDD) will mandate robust human rights and environmental due diligence for companies operating in the EU​. Several EU member states already have laws in place (for example, France’s Duty of Vigilance Act and Germany’s Supply Chain Due Diligence Act) requiring companies to identify and prevent human rights abuses in their supply chains, with penalties for non-compliance​.
• Canada recently passed the Fighting Against Forced and Child Labour in Supply Chains Act (2023), and the United States implemented the Uyghur Forced Labor Prevention Act (2021) to block imports made with forced labor​. These developments underscore a worldwide resolve to eliminate modern slavery and uphold human rights in business operations​

Across all these regulations, the common thread is clear: companies must prioritize supply chain transparency and ethical sourcing as a legal obligation and moral duty. Laws are increasingly demanding that firms not only avoid profiting from forced labor but actively report and mitigate any risks of it in their production and sourcing. This legislative momentum is reshaping expectations for corporate conduct globally.

Legislative movements pushing for supply chain transparency reflect a growing recognition that businesses must take responsibility for ethical sourcing and labor practices. In today’s interconnected economy, a company’s supply chain can be vast, multi-tiered, and spread across numerous countries. This complexity can allow labor abuses to hide deep down the supply network. Supply chain transparency – the practice of mapping and disclosing where and how products are made – is therefore crucial to uncover and address modern slavery risks. Transparency shines a light on labor practices at each step, which is the first step toward change. Getting the relevant information and visibility of your complex global supply chain is the fundamental move forward in tackling modern slavery. Without knowing who your suppliers (and your suppliers’ suppliers) are and their working conditions, it is nearly impossible to ensure ethical supply chain practices.

From a business perspective, embracing transparency brings multiple benefits. It helps companies identify potential red flags – such as suppliers in high-risk regions or industries – so they can intervene early. It also builds trust with stakeholders: consumers, investors, and business partners increasingly demand evidence that products are sourced responsibly and workers are treated fairly. Conversely, failing to monitor and disclose labor conditions can carry heavy costs. Companies that turn a blind eye may find themselves linked to forced labor scandals, leading to damaged reputations, lost customer loyalty, and even investor divestment. On the other hand, organizations known for responsible sourcing and fair labor practices can enhance their brand value and competitiveness. In essence, supply chain transparency is not just a compliance checkbox – it is becoming a hallmark of good governance and corporate integrity in the modern era.

Legal and Business Implications

Modern slavery regulations have teeth, and non-compliance poses serious legal and business risks. Around the world, governments are stepping up enforcement to ensure companies take these laws seriously. Failure to comply with reporting requirements or due diligence obligations can result in fines and other penalties. For example, Canada’s new law allows fines up to CAD $250,000 for companies that fail to submit the required modern slavery report or who knowingly make false statements in it​. In Germany, the Supply Chain Due Diligence Act empowers authorities to levy fines up to 2% of annual turnover and even exclude offending companies from public contracts if they neglect their supply chain duties​. On the criminal side, if executives are found complicit in forced labor, some jurisdictions could pursue individual liability. Beyond direct fines, a company caught with forced labor in its supply chain may see its goods detained at the border (as has happened under the U.S. import bans), or lose access to key markets and business opportunities​. Government agencies and buyers do not want to be associated with tainted supply chains, so non-compliant businesses risk being cut off from contracts and supply agreements.

The business implications extend to less tangible but equally damaging consequences. Repeated incidents of labor abuses can shatter a company’s reputation and erode public trust​. In the age of social media and instant news, allegations of modern slavery can quickly go viral, leading to consumer boycotts and long-term brand damage. Investors, too, are keenly aware of these issues – many now evaluate companies on Environmental, Social, and Governance (ESG) criteria, which include labor practices. A poor record on human rights due diligence can trigger investor activism or divestment. Additionally, there are operational risks: supply chain disruptions may occur if a supplier is found non-compliant and needs to be replaced on short notice​. Taken together, the cost of inaction on modern slavery far outweighs the cost of compliance. As one compliance expert put it, failing to address forced labor exposes companies to significant financial, legal, and reputational harm, whereas proactive efforts to uphold human rights standards help mitigate these risks​. In short, doing nothing is not an option – businesses have a strong incentive to act decisively against modern slavery, not only to meet legal requirements but to protect their long-term viability.

Key Components of an Ethical Supply Chain

Building an ethical supply chain requires a multi-faceted approach. Companies need to implement policies and practices that ensure fair labor, respect for human rights, and safety at every level of their sourcing and production. Key components include:

• Human Rights Due Diligence: This is the foundation of ethical sourcing. Companies must actively identify and assess human rights risks in their operations and suppliers. Robust due diligence processes – as now required by many laws – help organizations evaluate suppliers for forced labor or trafficking risks​. This can involve screening suppliers against risk indices, requiring self-assessment questionnaires, and analyzing country and sector risk data. Crucially, due diligence is not a one-time exercise but an ongoing process to monitor and remediate human rights issues. By embedding human rights due diligence into procurement and compliance programs, firms can catch problems early and drive improvements on the ground.
• Supplier Audits and Monitoring: Regular supplier audits (both announced and unannounced) are a critical tool to verify conditions at supplier facilities. Engaging in on-site inspections and third-party social audits helps ensure that suppliers adhere to the company’s code of conduct and international labor standards. Effective audits go beyond paperwork – they include worker interviews and checks for subtle indicators of forced labor (such as withholding of passports or excessive recruitment fees). Industry associations have developed audit frameworks (e.g. SMETA by Sedex, or the Responsible Business Alliance code) that companies can leverage to maintain consistency​. These audits, combined with continuous monitoring (e.g. through worker hotlines or grievance mechanisms), enhance supply chain transparency and accountability​. They also send a strong message to suppliers that fair labor practices are non-negotiable.
• Fair Labor Practices: An ethical supply chain is one where every worker is treated with dignity and fairness. This means enforcing standards for fair wages, reasonable working hours, and no tolerance for discrimination or child labor. Companies should require that their suppliers comply with core International Labour Organization (ILO) conventions – such as the abolition of forced labor and the right to collective bargaining – as well as local labor laws. Providing decent work not only protects workers but also reduces the likelihood of labor disputes or production disruptions. In fact, ethical labor practices are a form of risk mitigation: supply chains built on fair treatment are less prone to strikes, turnover, and scandals. By upholding fair labor practices across all tiers of suppliers, companies foster a more stable and sustainable supply chain.
• Safe Working Conditions: Ensuring safe working conditions is a fundamental aspect of supplier responsibility. This involves making sure that factories and farms have adequate health and safety measures – from proper protective equipment and machine safeguards to emergency exit plans and reasonable working hours that prevent accidents due to fatigue. Adopting internationally recognized safety standards (such as ISO 45001 for occupational health and safety) or industry-specific programs can provide guidelines on maintaining a safe workplace​. Regular safety training for workers, risk assessments, and incident reporting systems are also important. A commitment to workplace safety not only protects employees from harm but also improves productivity and morale. Ultimately, no supply chain can be considered truly ethical if workers face hazardous conditions. Leading companies therefore treat worker safety and well-being as paramount, investing in improvements and insisting on the same from their suppliers.

By focusing on these key components – due diligence, audits, fair labor, and safety – companies create a supply chain that respects human rights at every step. These practices protect workers, build trust with stakeholders, and help businesses stay ahead of regulatory requirements. Notably, they also demonstrate that profitability can go hand in hand with principles: an ethical supply chain can be efficient and resilient, while also being socially responsible.

Achieving the above goals is not just a compliance task; it also requires rethinking procurement strategies. Sustainable procurement is defined as “procurement that has the most positive environmental, social, and economic impacts on a whole life basis” by ISO 20400 standard. In the context of modern slavery, this means procurement teams must factor in labor conditions and human rights when choosing suppliers – not simply cost and quality. In fact, procurement is uniquely well-positioned to increase visibility, prevent modern slavery, and drive ethical practices throughout the supply chain​. By making responsible sourcing a core procurement priority, companies can significantly reduce the risk of forced labor in their supply base.

How can businesses implement sustainable procurement to combat modern slavery? First, they should establish a Supplier Code of Conduct that clearly outlines expected labor standards (no forced or child labor, freedom of movement, fair wages, etc.) and require all suppliers to commit to it. This sets the baseline for ethical performance. Next, incorporate human rights criteria into supplier selection and onboarding. As part of a sustainable procurement program, companies might use supplier ESG assessments or ratings that include labor metrics, ensuring they partner with suppliers who share their values. Due diligence shouldn’t stop at tier-1 suppliers either – leading firms are beginning to trace deeper into the supply chain (tier-2, tier-3 suppliers) to evaluate subcontractors and raw material sources for risks. Tools like supply chain mapping software and databases of high-risk regions can assist buyers in this deep visibility​.

Another key strategy is to build long-term, collaborative relationships with suppliers rather than focusing on the lowest-cost bidder each time. When buyers work closely with suppliers, they can provide training and capacity-building to improve labor practices. For example, a company can help a factory implement a better working-hours policy or support a farm in attaining fair trade certification. Fostering trust is crucial – suppliers are more likely to be transparent about their own challenges (and even about their downstream suppliers) if they see the partnership as a supportive one​. Sustainable procurement also involves aligning internal incentives: procurement staff should be evaluated not only on cost savings but also on achieving ethical sourcing objectives. This alignment ensures that procurement professionals are accountable for upholding the company’s human rights commitments.

Practically, companies can take steps such as:

• Embedding human rights clauses in contracts – making compliance with labor standards a condition of doing business.
• Conducting joint audits or improvement programs with suppliers, so that any issues found are followed by remediation plans (rather than immediate termination, which might disincentivize honesty).
• Prioritizing sourcing from certified or verified supply chains (for instance, materials certified by Fairtrade or the Responsible Business Alliance) which indicate adherence to higher labor standards.
• Implementing technology for traceability – for example, using blockchain or traceability systems to track commodities from origin, which can increase transparency about each supplier in the chain.

By adopting these sustainable procurement practices, businesses mitigate risks and create a culture of continuous improvement in their supply network​. Responsible sourcing is thus both a risk management strategy and a driver of social impact. It ensures that a company’s purchasing power is leveraged to support ethical supply chain outcomes, aligning procurement processes with the overarching goal of eliminating modern slavery from the production of goods and services.

Trends in Global Supply Chain Regulation

The regulatory landscape around supply chain transparency and modern slavery is rapidly evolving. Companies can expect even more stringent regulations and stakeholder expectations in the coming years. For instance, the European Union’s proposed due diligence directive will likely require thousands of companies (including non-EU firms with significant EU operations) to actively assess and address human rights and environmental impacts in their entire value chains​. This could effectively make what is currently “best practice” – comprehensive supply chain audits and risk mitigation – a legal duty for many corporations. We may also see more countries following the lead of the UK and Australia in mandating annual modern slavery statements, possibly with stronger enforcement mechanisms (such as fines for non-reporting, which the UK is considering adding). Additionally, enforcement of import bans on products made with forced labor is expected to intensify. U.S. Customs, for example, has already detained over $1.7 billion worth of shipments under the Uyghur Forced Labor Prevention Act​, and other nations are exploring similar trade measures.

Another trend is the rise of investor and consumer activism pushing for corporate accountability. Investors are increasingly using tools like shareholder resolutions and ESG screenings to demand that companies clean up their supply chains. Consumers, too, are paying closer attention to where products come from – a dynamic especially notable in sectors like fashion, electronics, and food. This public pressure complements formal regulations, effectively raising the bar for what is considered acceptable corporate behavior. In the near future, having opaque supply chains or issuing vague statements will no longer suffice. Stakeholders will expect tangible proof of action: measurable improvements in working conditions, transparent reporting of findings (both successes and challenges), and engagement with impacted workers and communities.

On a positive note, the growing consensus against modern slavery is spurring greater collaboration and innovation. Industry coalitions and multi-stakeholder initiatives are forming to share data on high-risk suppliers and to harmonize auditing standards, reducing “audit fatigue” and improving effectiveness​. Technological advances are also being harnessed – from blockchain for traceability to AI tools that scan news for supplier labor violations – giving companies new ways to monitor their supply chains in real-time. Over time, we can expect that supply chain transparency will be boosted by these technologies, making it harder for abusive practices to go undetected.

In conclusion, companies that proactively embrace transparency and ethical supply chain management will be well-positioned in this future landscape. Those who lag behind or treat modern slavery compliance as a mere formality will face increasing legal risks and reputational peril. The direction is clear: global supply chains are moving toward greater accountability. By acting now – strengthening due diligence, investing in sustainable procurement, and fostering a culture of responsibility – businesses can not only meet these emerging requirements but also demonstrate leadership in the fight against modern slavery. Doing so is not just about avoiding penalties; it is about being on the right side of history, contributing to the eradication of a grave injustice and ensuring that dignity and freedom are upheld for all workers who make our global economy possible.

Why Work with ASUENE USA Inc.?

As the U.S. entity of Asuene Inc., a sustainability-focused startup based in Japan, ASUENE USA is dedicated to helping companies navigate the complex challenges of supply chain transparency and sustainability compliance. We understand that keeping track of myriad suppliers, collecting reliable ESG data, and meeting evolving regulations (from carbon reporting to modern slavery due diligence) can be daunting. That’s where our expertise and technology come in. ASUENE USA offers comprehensive solutions – including our enterprise climate cloud platform and ESG data management tools – that enable businesses like yours to measure, monitor, and improve sustainability performance across the supply chain.

Our platform can assist in centralizing all your relevant supply chain information, from carbon footprint metrics to supplier labor practices, in one place. This not only streamlines reporting (for frameworks like GRI or regulatory statements) but also helps identify risk hotspots in your supply chain. Coupled with our consulting services, we guide companies in implementing responsible sourcing strategies and human rights due diligence processes effectively. In short, we act as your partner in building an ethical, transparent supply chain that meets regulatory standards and aligns with your corporate values.

How we can assist:

• ESG Data Management: Leverage our software to collect and manage data on supplier environmental and social performance. Track key indicators – from greenhouse gas emissions to labor conditions – and generate reports that satisfy Modern Slavery Act requirements or other sustainability disclosures with ease.
• Supply Chain Risk Analysis: Identify high-risk suppliers or materials using our analytics. Our tools incorporate global risk databases and can help flag potential issues (such as suppliers in regions with known forced labor concerns), enabling you to prioritize audits or improvements.
• Sustainability Consulting: Receive tailored guidance from our experts on improving supply chain practices. Whether it’s developing a robust supplier code of conduct, training your procurement team on sustainable procurement best practices, or devising corrective action plans for suppliers, we provide hands-on support to elevate your supply chain standards.
• Carbon and Climate Solutions: While working toward social sustainability, don’t overlook environmental impact – and we’ve got you covered there too. Our core carbon accounting capabilities allow you to measure Scope 1, 2, and 3 emissions (including those arising from your supply chain) and identify reduction opportunities, ensuring you approach sustainability holistically.

By partnering with ASUENE USA Inc., you can streamline your journey toward full supply chain transparency and sustainability. We help you stay ahead of regulatory changes – whether it’s new modern slavery reporting mandates or climate disclosure rules – and turn compliance efforts into opportunities for operational improvement. With our one-stop solution and dedicated support, your company can build trust with stakeholders, protect its brand, and make a positive impact on people and the planet. Together, let’s achieve a supply chain that is not only efficient and profitable, but also ethical and sustainable.

Talk to Us

For any inquiries regarding our products or services, or to learn more about how ASUENE USA can support your supply chain transparency and sustainability goals, please feel free to reach out. Connect with our team today and begin your journey toward a more transparent, responsible, and sustainable supply chain. We look forward to partnering with you in driving positive change and ensuring your business meets the highest standards of corporate accountability.