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SMEs and Modern Slavery: An Overview of Modern Slavery and Why SMEs Should Care

June 9th, 2024


Modern slavery is an umbrella term that covers a wide variety of coercion into or exploitation of labour situations. Criminal practices such as human trafficking for forced labour, forced commercial sexual exploitation, forced marriage, debt bondage or indentured labour, state-imposed forced labour, prison labour for profiteering, and child labour are all types of modern slavery. The hallmark characteristics of modern slavery dynamics involve a lack of consent, with victims unable to refuse or leave because of threats, violence, coercion, deception and/or abuse of power.
The modern slavery industry reaps an estimated $150 billion USD in profits yearly, with over 50 million persons trapped in this network globally, according to the Global Slavery Index. Although signs of modern slavery are found in mostly every corner of the world, it’s estimated that around 60% of victims are in the Asia Pacific region, with women and children being disproportionately vulnerable.
When we come across news regarding modern slavery, often it is the global conglomerates in sectors such as hospitality, construction, manufacturing, and agriculture that grab the headlines. But the reality is that no enterprise, however big or small, in any sector or any country, is immune to the risks of modern slavery.


Modern Slavery in the Context of SMEs

If you are a small to medium-sized business owner or work in a small to medium-sized enterprise, you may think that your risk of exposure or proximity to modern slavery is minimal. However, according to the International Labour Organization, 86% of forced labour cases exist in the private sector, and many companies are inadvertently contributing to the modern slavery economy through their product value chain without even realising it.

Hidden Risk in Global Supply Chains

Any business establishment, regardless of size or location, is vulnerable to having modern slavery within their supply chain, which nowadays tends to be global in nature. Any company that relies on third-party vendors to provide goods or services to conduct their business operations will find themselves at risk. The supply chain involves many steps and parties, from the sourcing of raw materials and components to assembly, manufacturing, packaging, and transportation. Commercial trade goods and even operational supplies like office products or equipment could be tainted with forced labour due to the reliance on facilities which employ millions of migrant workers around the world. Within the process of goods transportation that every company relies on, maritime shipping is a particularly high risk industry for modern slavery.


Services Procured By Trafficked and Forced Labour


The existence of forced labour or human trafficking in a workplace is often hidden in plain sight. Consider even in your own office facilities where third party providers are being contracted or subcontracted for cleaning or maintenance services. Hospitality and service industry businesses that rely on human resources are at high risk of incorporating modern slavery into their operations when utilising agencies to handle their recruiting and staffing needs. Without proper due diligence activities in place, it can be difficult to determine whether or not contracted workers are subjected to debt bondage labour conditions or are victims of human trafficking.
Despite acknowledging that there may be a perceived risk for modern slavery in their business, most SMEs may choose not to take action due to a lack of information or organisational resources, or simply not seeing it as a legal or financial imperative. But the consequences for an SME being found complicit in modern slavery can be serious and far-reaching.


Why SMEs Need To Take Action Against Modern Slavery

The business case for SMEs to protect themselves against modern slavery exposure hinges on several interconnected factors.



Ethical Imperative and Business Reputation

If you were to ask any individual, they should resoundingly agree that modern slavery is a gross violation of human rights. Any business stakeholder, whether it be an executive, employee, investor, customer, or vendor, would consider an anti-slavery stance to align with their core values as a person or entity. Therefore, it is in a company’s best interest to have an active policy on modern slavery as part of their corporate social responsibility strategy. Doing so enables the company to protect or even build their reputation, which has become paramount in the consumer economy.

Building and maintaining a positive business or brand reputation requires trust and loyalty amongst consumers, workers, and business partners. With consumers increasingly aware of transparent and ethical business practices, performing due diligence on modern slavery enables a company to satisfy this increasing consumer preference. Likewise, studies show that worker retention, loyalty and even productivity are better with companies who demonstrate strong ethical culture. Business tends to be awarded to entities that have more transparency and responsible practices in place. At the very least, incorporating a human rights due diligence policy to address modern slavery should help companies avoid or minimise reputational damage from incidents that could arise.


Legal, Financial, and Operational Impact

There are an increasing number of country governments enacting legislation to hold businesses accountable for their actions in regards to modern slavery due diligence. While the scope of these laws mostly apply to larger companies, it’s reasonable to assume that smaller entities may fall into scope in the future, or be impacted by a trickle-down effect. In order to remain competitive in the landscape, it would benefit SMEs to adopt best practices in human rights due diligence ahead of any legal obligation to do so.
Another benefit of taking action against modern slavery is the overall risk mitigation from a financial and operational perspective. Modern slavery is linked to supply chain disruptions, legal investigations, and fines. Even without direct involvement, any punitive damage affecting a third-party player within an SME’s supply chain will inevitably get passed on through cost. Modern slavery also tends to involve unregulated labour practices, potentially leading to poor product quality, higher production costs, and inefficient use of resources. Eliminating modern slavery exposure can ultimately improve efficiency, reduce unnecessary costs, and ensure a smoother operational flow.


Stakeholder Relationship Management and Community Impact

Every stakeholder of an SME can benefit directly from active engagement against modern slavery exposure. Socially responsible companies will attract ethical investors who value companies committed to responsible sourcing and combating human rights abuses. SMEs promoting ethical practices are better positioned to attract and retain top talent seeking careers aligned with their values. This fosters a positive work environment, boosting employee morale and strengthening the company culture. Building ethical and transparent supply chains fosters stronger relationships with reliable suppliers, leading to increased sustainability and resilience. By tackling complex challenges like modern slavery, company leaders learn to drive innovation in ethical sourcing, traceability, and supply chain management, gaining a competitive edge.
Ultimately, active engagement in combating modern slavery provides SMEs an opportunity to contribute to a global movement driving lasting change, and the collective actions of businesses, alongside NGOs and government parties, towards the combatting of modern slavery will yield a more equitable global economy and society.


Note sure where to start? Take our free, confidential baseline assessment to learn how you benchmark against industry standards.  To get started, follow the link. 

Author: Annibelle Chatman

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