Modern Slavery: The Intersection of Accounting and Human Rights

Updated on March 27, 2018

Although many people believe that slavery is an institution of the past, an estimated 21 million people are subjected to modern slavery across the globe. Slavery takes on many forms in our contemporary society including, but not limited to: forced labor, human trafficking, child slavery, and forced marriage. The prevalence of this issue is astounding. A study completed by the Ashridge Centre for business and Sustainability concluded that 71% of companies believe that there is a likelihood of modern slavery occurring in their supply chains (Lake et al.). In order to combat this, many countries, such as the UK, the US, France, and Australia, have taken action through the passage of legislation. With this, many corporations have chosen to turn to accountants for auditing and help complying with the complex laws. However, the structure of this legislation and the subsequent audits often leaves companies ultimately unaccountable.

What do Modern Slavery Regulations Require?

Although the specifics vary from country to country, modern slavery regulations create a reporting requirement for companies. The United Kingdom’s Modern Slavery Act of 2015 is the largest and most extensive law of this nature. In this specific law, companies with a turnover exceeding 36 million Euros are required to create a statement that details the steps their company is taking in order to ensure that their supply chain and workforce are free of slave labor. Although it is not strictly enforced, the wording of the law assumes that companies will partake in third party investigation and due diligence regarding what is included in their statement (“Governance in Brief: Modern Slavery Act 2015”). Other countries have different threshold requirements and other subtleties, but most have the same vague framework that involves companies creating and publishing a vague statement about how they combat modern slavery. PricewaterhouseCoopers analyzed early statements produced by companies in order to create a suggested framework for structuring the modern slavery statement. They recommend that companies include business organization, policies, due diligence, risk assessment, performance indicators, and training procedures regarding modern slavery in their statements (“Responsible Business: What Are Companies Doing to Respond to The Modern Slavery Act?”).

How Does Accounting Play a Role?

Accounting is a huge part of these regulations, with Deloitte even being a driving force behind passing the legislation in the United Kingdom (“Governance in Brief: Modern Slavery Act 2015”). In order to avoid additional scrutiny by the government, many companies around the globe have chosen to undergo auditing, whether it be by an internal auditor, a consultant, an NGO member, or a public accountant. A modern slavery audit goes beyond financials and examines how an organization is acting in compliance with human rights standards (Islam). The vagueness of reporting requirements makes this largely up to the company’s discretion as to whether they partake in auditing or not and how far they go with it. PWC recommends that companies focus on governance, risk assessment, due diligence, grievance and remediation, training, and monitoring and reporting when considering how to mitigate risks in complying with modern slavery acts. PWC offers their services in all of these areas in order to help companies navigate these modern slavery regulations (“Responsible Business: What Are Companies Doing to Respond to The Modern Slavery Act?”).

Are these Regulations and Audits Successful?

Despite the best efforts of these lawmakers, international modern slavery regulations are often ineffectual because of their ambiguity and lack of strict enforcement and penalties. Since companies do not have to explicitly partake in audits or due diligence regarding their supply chain, there is very little accountability. Even when companies do choose to partake in modern slavery audits, they are often ineffective as well. Companies often complete audits through the lenses of profit maximization, making them virtually useless considering the goal is to reduce human rights violations. Furthermore, there is no standard for who completes the audit, meaning that it could be conducted by someone who is incompetent or biased. Finding modern slavery violations are extremely difficult due to their hidden and informal nature, making it hard for someone who is not an exert to find them, especially in high- risk supply regions. In addition, when audits reveal non-compliance, there is no standardized procedure in effect to address it, meaning there is often no follow up on the company’s part (Islam). Until a proper international structure is created for addressing modern slavery violations, the ambiguity and problems surrounding it will likely continue.

Works Cited

Governance in Brief: Modern Slavery Act 2015. Deloitte, 2016, Governance in Brief: Modern Slavery Act 2015, www2.deloitte.com/content/dam/Deloitte/uk/Documents/audit/deloitte-uk-governance-in-brief-modern-slavery-act.pdf.

Islam, Muhammad Azizul. “Tackling Modern Slavery: What Role Can Accountants Play?” IFAC, International Federation of Accountants, 12 Feb. 2018, www.ifac.org/global-knowledge-gateway/audit-assurance/discussion/tackling-modern-slavery-what-role-can.

Lake, Quintin, et al. Corporate Approaches to Addressing Modern Slavery in Supply Chains: A Snapshot of Current Practice. Ethical Trading Initiative, 2015, 1.amazonaws.com/www.ethicaltrade.org.files/shared_resources/corporate_approaches_to_addressing_modern_slavery.pdf.

Responsible Business: What Are Companies Doing to Respond to The Modern Slavery Act? PricewaterhouseCoopers, 2016, www.pwc.co.uk/sustainability-climate-change/assets/pwc-modern-slavery-act-business-insights.pdf.

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