Modern Slavery in Private Markets: From statements to meeting supply chain management expectations

While many private market financial institutions and their portfolio companies produce annual modern slavery statements, are they really managing the risks and meeting the expectations of regulators and investors?

Modern slavery is an umbrella term used to describe situations of severe exploitation in which a person cannot refuse or leave their situation because of threats, violence, coercion, deception, or abuse of power. Modern slavery can include forced or compulsory labour, human trafficking, bonded or debt bondage labour, forced marriage and child labour in its worst forms [1]. The concept of modern slavery sits at the extreme end of a spectrum of labour exploitation and is now well established across private markets.

Modern Slavery risk management

Apart from a private market investor or its portfolio company choosing to address modern slavery of their own volition, there may be regulatory and/or financing requirements around managing modern slavery risks in the supply chain. In Australia, the federal Modern Slavery Act of 2018 (Cth) as amended, from a private market investor or portfolio company’s perspective, requires entities based or operating in Australia, with an annual consolidated revenue exceeding AUD100 million, to report annually on the risks of modern slavery in their operations and supply chains, with actions to address those risks. The Act also gives effect to international agreements and conventions to which Australia is a signatory.

In addition, the New South Wales Modern Slavery Act 2018 is in force. In New Zealand, the Modern Slavery Bill, introduced in early 2026, requires New Zealand entities with revenue exceeding NZD100 million to report annually on how they identify and mitigate modern slavery risks in their supply chains and aims to pass before the November 2026 election.

Financing requirements to tackle modern slavery may include adherence to international standards and guidelines, such as:

• International Labour Organisation’s (ILO) Forced Labour Convention, 1930 (No. 29), Abolition of Forced Labour Convention, 1957 (No. 105), Protocol of 2014 to the Forced Labour Convention, 1930 (P29), Minimum Age Convention, 1973 (No. 138) and the Worst Forms of Child Labour Convention, 1999 (No. 182).
• International Finance Corporation (IFC) Performance Standard 2
• United Nations Guiding Principles on Business and Human Rights (UNGPs)

In practice, private market investors and portfolio companies tend to produce supply chain, human rights, and modern slavery policies, along with regular-facing modern slavery statements, that generally tick all the compliance boxes required. However, we continue to engage with clients on the real tension of supply chain oversight, where market participants struggle to define and establish the appropriate level of oversight, balancing supply chain exposure with resource effort and cost levels. We often hear the question ‘How far down the supply chain are we expected to go? What level of effort is reasonably expected?’ This is the crux of modern slavery risk management.

The Walk Free foundation note ‘…after almost a decade, evidence shows transparency alone has not driven meaningful reduction in harm or consistent action across the private sector. Many businesses still struggle to identify specific risks, while fewer implement effective measures to prevent or address exploitation.’ – Walk Free [2].

“We have known for years that the Modern Slavery Act’s transparency measures alone have not created meaningful impact for exploited workers. Currently, reporting is mandatory but taking action is not, leaving workers exposed and responsible businesses disadvantaged,” - Australian Anti-Slavery Commissioner, Chris Evans [3].

This tension exists in the context that our fight against modern slavery is far from won, and modern slavery legislation in Australia is currently under review, with key proposed reforms, including introducing civil penalties for non-compliance and implementing mandatory due diligence.

Moving from compliance to meaningful modern slavery risk management

How does one move from high-level policy commitments and regulatory reports to practical, defendable human rights and modern slavery risk identification, oversight and action in the supply chain? We’d recommend considering the following practical steps:

Policy commitment:

No, just having a policy does not mitigate risks. However, having robust supply chain, human rights and modern slavery policy commitments do provide the governance foundation needed to implement risk mitigation processes and procedures.

Governance integration:

Modern slavery risk management process outcomes should be linked to the enterprise risk management framework of the business, with material risks being placed on the company-wide risk register, opined on by the Audit and Risk Committee (or equivalent committee). Consistent risk calibration approaches are important to ensure modern slavery risks are effectively evaluated alongside other business risks.

Management systems integration:

A private market asset manager’s environmental and social management system (ESMS), the framework that governs the integration of environmental, social and governance factors into the investment cycle, should, for each stage of the investment cycle, identify what needs to be done in terms of human rights and modern slavery risk management. While an ESMS must be tailored to the asset manager and fund, considering aspects such as fund mandate, investment asset classes, jurisdictions and Limited Partner requirements, the following are useful general considerations:

• Screening: Have an explicit task to screen for any higher-risk supply chains known for historical or current human rights/modern slavery abuses.
• Due diligence: Include in the due diligence terms of reference an explicit task to assess the target’s supply chain, human rights and modern slavery risks. This typically includes assessing the target’s supply chain and contractor management systems and capability, supplier vetting procedures and the degree of supplier monitoring [4]. It would also typically include an assessment of the target’s tier 1 and tier 2 primary suppliers (definition provided below). Note that this would not be considered a stand-alone, in-depth supply chain or human rights due diligence.
• Legal clauses: As part of the transaction, legal agreements (usually shareholder or loan agreements) include requirements for the investee company to implement adequate environmental and social management systems (including supply chain management).
• Asset management: Monitor whether portfolio companies’ own human resource and supply chain management systems are being implemented effectively, with appropriate reporting to relevant governance forums in the business, such as the Audit and Risk Committee and Board.

For portfolio companies, the environmental, health and safety, social, human resource and procurement management systems should also be fit-for-purpose to the nature and scale of the business. This principle should be applied to supply chain management. Some key implementable tools as part of the portfolio company ESMS include:

Supply Chain Management Plan:

A plan that outlines the roles, responsibilities, and processes necessary for avoiding or minimising environmental, social and human rights risks within supply chains. It’s important to note that, if appropriate, a separate Contractor Management Plan may be needed. Key aspects of the Supply Chain Management Plan from a human rights and modern slavery perspective include:

• Supplier vetting procedure: Linked to the procurement process, have a clear supplier vetting procedure that screens and evaluates suppliers, including human rights and modern slavery aspects. Practically, this may include a questionnaire and documentation review.
• Supplier mapping: Have an up-to-date supplier mapping, which can be a simple list of suppliers, preferably broken down into tiers, identifying primary suppliers.
• Risk assessment: Undertake a risk assessment of your supply chain identifying the salient [5] human rights and modern slavery risks. Material risks should be captured in the enterprise risk management framework as mentioned above.
  • Supplier monitoring: For your identified higher-risk suppliers, implement a monitoring plan. The appropriate type of monitoring can vary widely depending on geographic distance and the degree of control dynamics. However, one could request annual attestations from suppliers that they have met requirements and evidence of no major findings in audits undertaken.
  • Supplier Code of Conduct: Develop a clear code of conduct that all suppliers should contractually agree to uphold.
  • External grievance mechanism: Implement a mechanism that external parties can engage with and lodge grievances. Allow for anonymous reporting, track grievance management and closure, and be able to manage gender-based violence and harassment (GBVH) grievances.
  • Whistleblower policy and mechanism: Implement a whistleblower process, which, like the grievance mechanism, allows for anonymous reporting, tracking reporting and closure, and is able to handle GBVH reports.
  • Modern Slavery training: Provide meaningful modern slavery training to staff, in particular addressing the challenge of identifying modern slavery in its various forms, who is most at risk, and which situations and roles are most at risk.

How far down the supply chain should companies assess the risks?

Australia’s Modern Slavery Act 2018 (Cth) does not define a specific number of tiers or a defined ‘depth’ to which a reporting entity must examine its supply chain. Rather, the Act adopts a risk‑based, principles‑driven approach requiring companies to describe how they identify and assess modern slavery risks across their operations and supply chains, without limiting this obligation to any particular tier.

The UNGPs likewise do not specify a particular depth of supply chain to be addressed. The UNGPs require companies to conduct human rights due diligence to identify, prevent, mitigate, and account for adverse human rights impacts in their operations and business relationships, including supply chains. The UNGPs emphasise that due diligence should be risk‑based, meaning companies should prioritise where the most severe human rights risks are likely to occur, regardless of how far down the supply chain those risks occur.

The IFC Performance Standards state that the standards apply to the project/company’s primary suppliers in the supply chain.

The IFC defines a primary supplier as ‘a supplier who on an ongoing basis forms part of the supply chain of goods or materials essential for the core business processes of the project. A primary supplier may supply its goods or materials directly to the project (a Tier I primary supplier), to the Tier I primary supplier (a Tier II primary supplier) or may be at a deeper tier of the primary supply chain.’ Further, the IFC provides guidance that ‘Generally, where the client can reasonably exercise control, the client/[project/company] should collaborate with its primary suppliers to propose mitigation measures proportionate to identified risks on a case-by-case basis, while recognizing that assessing and addressing supply chain implications beyond the first or the second tier suppliers may not be practical or meaningful to the client or the supplier.’ [6]

From the above, a reasonable expectation would be that companies assess and monitor risks with their primary suppliers (starting with tier I and II) and on identified high-risk supply chains, additionally establishing a view of reasonable exercise of control for each of the identified suppliers, recognising where a lack of control and influence exists.

Supporting actions

Prioritise efforts:

Most modern slavery frameworks advocate a prioritisation approach, where efforts are focused on the higher risk suppliers and supply chains (and remedial actions are considered where there is a reasonable degree of control).

Look for traceability:

More products are increasing their traceability across value chains. Traceability involves capturing, verifying and connecting data about the product’s movement and transformation across suppliers including extraction, processors, manufacturers and distributors.

Obtain attestations:

Many well-established suppliers are aware of human rights risks and requirements and often already have documentation addressing modern slavery risks (e.g., audits and certificates). Look to obtain attestations from suppliers from credible independent verifiers.

Connect with credible supply chain oversight organisations:

Some known historically higher-risk supply chains have civil society organisations that act as facilitators of modern slavery oversight. Look to engage with credible organisations/initiatives that may provide additional information on risk exposure and leverage collective efforts to address systemic modern slavery issues.

‘An estimated 27.6 million people, including children, are living and working in forced labour globally, including 3.9 million in state-imposed forced labour. More than half of the world’s forced labour is in the Asia-Pacific region, where many Australian business supply chains are located…Estimates indicate that Australia imports approximately US$17.4 billion worth of products each year that are at risk of being made with forced labour…No sector or country is immune.’ – Australian Anti-Slavery Commissioner [7].

Modern slavery will not be effectively prevented by isolated efforts, it will require all market participants to implement appropriate supply chain risk management where they have an opportunity to do so. Contact us to learn more about how you can start or improve your modern slavery risk management.