Evolving modern slavery risk poses mounting supply chain challenges

Modern slavery and human trafficking is on the rise and evolving, creating new and challenging supply chain risks, according to financial crime intelligence provider Themis. The United Nations estimates that 50 million people were living in conditions of modern slavery in 2021, ten million more than in 2016. Around 28 million were in forced labour, and more than half in upper-middle-income or high-income countries. The sheer scale of modern slavery and human trafficking is one of the biggest challenges for companies and their supply chains, said Olivia Dakeyne, modern slavery and human trafficking lead at Themis, on a webinar. “There is just so much modern slavery and human trafficking out there. There are an estimated 50 million people worldwide living in those conditions at the moment, and an estimated 86% are in the private sector. At a global scale, that means there are so many different entities and potential links to modern slavery that you might be working with, and increasingly companies have so many entities in their supply chain with so much outsourcing,” she said. Criminal groups involved with modern slavery and human trafficking are now larger, more sophisticated and operate cross border, according to Dakeyne. Seventy percent of these organised gangs have transnational membership, enabling them to penetrate new markets more easily and operate at scale, she said. “One of the main factors underpinning the changes [in modern slavery] we are seeing is a shift in who the traffickers are and how they are operating. Previously we saw a lot of small family gangs and lone operators undertaking human trafficking, but there is now a definite shift to larger sprawling organised crime gangs operating at a transnational level,” said Dakeyne. Criminal gangs are running human trafficking operations along the lines of a strategic business model, motivated by financial gain and profits, explained Dakeyne. Forced labour alone generates an estimated $150bn in illicit funds per year. Criminals are exploiting forced labour to reduce costs or generate revenues in their legitimate or criminal operations, such as illicit drugs and arms trafficking, sex work, cargo theft, organised retail crime, fraud and crime. “The involvement of organised crime gangs operating transnationally impacts the types of activities we see more of. Human trafficking victims are used to undertake a huge range of financial crimes and illegal activities on behalf of these criminal gangs, which are effectively de-risking these activities, enabling them to operate at a greater scale and scope, and allowing them to diversify their trade across multiple income streams,” said Dakeyne. In the private sector, agriculture, food processing and construction activities are particularly high-risk industries for modern slavery, human trafficking and forced labour, according to Themis. Workers are typically forced to work excessively long hours for little or no pay, with no benefits and under poor or unsafe working conditions. Victims accrue debts to the traffickers for recruitment fees, transport and accommodation, and have these costs deducted from any wages. Geopolitical risks and climate change are exacerbating the problem of modern slavery, displacing people and making them more vulnerable to human traffickers, said Themis. For example, forced labour is used to carry out illegal deforestation, mining, fishing and waste crime. Some 40% of deforestation worldwide is carried out by enslaved workers. If modern slave labour was a country, it would be the third-largest global emitter of carbon dioxide, after China and the US, according to Dakeyne. “That challenges global supply chains in many ways, logistically but also by increasing the incidence of human trafficking, and consequently increasing the specific risk of forced labour making its way into your supply chains,” she said. In addition to ethical drivers, there are also good business reasons for addressing modern slavery and human trafficking supply chain risks. “Companies’ approaches to human rights and modern slavery are definitely something that businesses and individuals are looking at when deciding on business relationships and where to put their money,” said Dakeyne. “There are lots of statistics around how clients and consumers vote with their feet and wallets around modern slavery. A recent study found that 60% of consumers said they would switch products if they knew human trafficking or forced labour was used to create it. The public are making more informed and ethical choices about where they put their money, and there is a lot of research to support that,” Dakeyne said. The global scale of human trafficking activities, and the evolving criminal landscape, requires a “whole system approach” that shares intelligence and expertise, according to Themis’ head of insight Nadia O’Shaughnessy. She also highlighted the need for collaboration in response to the rise in modern slavery and human trafficking. “I can’t over emphasise the importance of working together collaboratively to share data, intelligence and expertise, so new methods of working and modus operandi are all shared in as real time as we can possibly manage,” said Dakeyne. When carrying out a risk assessment, companies should not assume that suppliers or business partners have carried out due diligence, she warned. “We have seen with companies like Sony, BMW and Apple – really big companies – they have all used suppliers and factories that made use of forced labour. So, you can’t assume that others have better knowledge than you, or have any more ethical processes than you do,” she said. Local differences in regulation, culture and values is another challenge for managing modern slavery and human trafficking risks in supply chains, according to Dakeyne. “We all have very different value systems that are shaped by our culture and the societies and context we live in. When you are dealing with entities around the world, you need to take that into account. Not everyone will ascribe to the same value judgements as you or think the same things are wrong or right,” she said. Companies can use several tools and resources to help assess financial crime risks, including modern slavery and human trafficking. Themis, for example, offers a financial crime risk assessment tool, which helps firms assess third parties, such as suppliers, and carry out enhanced due diligence. Technology can also help identify, screen and monitor suppliers, clients and investors. There are a number of industry groups that can support companies with training and information on modern slavery and human trafficking. Last year, the UK’s Independent Anti-Slavery Commissioner launched a free anti-slavery digital learning tool for the financial services industry. In addition, Finance Against Slavery and Trafficking provides businesses with tools to understand and address modern slavery and human trafficking risks in business operations and value chains, as well as promote financial inclusion among victims.

Evolving modern slavery risk poses mounting supply chain challenges

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