Modern Slavery: From Reporting to Due Diligence in Your Supply Chain
For most of the time Australia's Modern Slavery Act has been in force, corporate compliance with it has been, in honest terms, a paperwork exercise. Large businesses prepared an annual statement, described their policies and intentions, tabled it, and moved on. The Act asked entities to report on the risks of modern slavery in their operations and supply chains and the steps they were taking, but it carried no penalties and no obligation to actually do anything beyond disclose. The result, as the government's own review concluded, was a regime that had not produced meaningful change for the people it was meant to protect.
That era is ending. Reform of the Modern Slavery Act is live in 2026, the government has appointed Australia's first federal Anti-Slavery Commissioner, and the clear direction of travel is from a disclosure framework to an action framework: mandatory, risk-based due diligence, backed by penalties and oversight. For supply chain and procurement leaders, this is not a compliance footnote. Modern slavery risk lives in the supply chain, overwhelmingly in its deeper tiers, and finding and addressing it is fundamentally a supply chain and procurement task. The reforms turn that task from optional to obligatory.
This article is for procurement, supply chain, and operations leaders who need to understand where the law is heading, why it is a supply chain problem rather than a legal one, and what a genuine due diligence response looks like. It is general information, not legal advice; the interpretation of obligations and the modern slavery statement itself sit with your legal advisers, but the operational work of finding and addressing risk sits with you. And it is worth holding onto the point of all of it: the purpose is to protect vulnerable workers from exploitation, not merely to manage corporate risk.
Where the law stands and where it is going
The Modern Slavery Act 2018 requires entities with consolidated annual revenue of $100 million or more, operating in Australia, to report annually on modern slavery risks in their operations and supply chains and the steps taken to address them. As designed, it was a transparency mechanism: report, and let public and market scrutiny do the rest. It included no mandatory due diligence requirement and no penalties for inadequate effort.
The statutory independent review of the Act, completed in 2023, found that this disclosure-only approach had not driven meaningful change for affected people, and made 30 recommendations to strengthen it. The government has agreed, or agreed in principle, to the large majority of them. The most consequential are these: introducing a mandatory, risk-based due diligence obligation; lowering the reporting threshold from $100 million to $50 million in consolidated revenue, which would pull a substantial number of additional mid-sized businesses into scope; and introducing civil penalties for non-compliance. A federal Anti-Slavery Commissioner has been established to oversee the regime.
In early 2026, the Commissioner released an initial position paper sharpening two reforms in particular: a mandatory risk-based due diligence obligation for reporting entities, and a mechanism for the Commissioner to formally declare that a particular product, service, or industry carries a high risk of modern slavery, which entities would then have to take into account in their own due diligence and reporting. The Attorney-General's Department has commenced consultation on the reforms through 2026, which means the decisions being made this year will shape the framework for years to come. While the amendments are not yet law, the consistent signal from government, the Commissioner, and the review is that this is a matter of when, not if.
The headline for supply chain leaders is the shift in what is being asked. The old question was, in effect, "what can you tell us about your modern slavery risk?" The new question is becoming "what are you actually doing to find it and address it?" That is a profoundly different obligation, and it cannot be met with a better-written statement.
Why this is a supply chain problem
Modern slavery risk does not sit in a company's head office. It sits in its supply chain, and almost always in the deeper tiers, in the raw material extraction, the component manufacturing, and the labour-intensive production that happens several steps removed from the Australian buyer, often in higher-risk regions and sectors. A business can have impeccable employment practices in its own operations and still have significant exposure embedded in what it buys.
This is what makes due diligence a supply chain and procurement capability rather than a legal one. Meeting a due diligence obligation means actually mapping the supply chain to locate where the risk is, assessing and prioritising it, taking reasonable and proportionate action to prevent and address it, and monitoring on an ongoing basis. None of that is achievable from the legal department alone. It requires the visibility, the supplier relationships, and the procurement processes that supply chain functions own.
There is a direct parallel here to the Scope 3 emissions challenge now arriving through mandatory climate reporting. In both cases, the risk and the data sit with suppliers and below the first tier, and in both cases the obligation is shifting from "report what you happen to know" to "go and find out, and act on what you find." Organisations that have built the supply chain visibility and procurement discipline to handle one are well placed to handle the other, because the underlying capability, knowing and managing what happens deep in your supply chain, is the same.
The scale of Australia's exposure
The reason this matters so much is the sheer size of the exposure, and how little of it is currently managed. Analysis by Walk Free and Fair Supply estimates that close to $100 billion worth of Australia's imports sit at heightened risk of modern slavery, around one dollar in every five spent on imported goods. Electronics, machinery, and appliances carry the largest high-risk spend, in the order of $13 billion. Close to 90 percent of apparel and clothing imports come from countries with forced labour risks. Everyday goods, phones, computers, footwear, vehicle parts, are all implicated.
Against that exposure, most companies are still not identifying the specific risks within their supply chains, and even fewer are taking concrete steps to address them. That gap between the scale of the risk and the depth of the response is precisely what the reforms are designed to close, and it is why a disclosure framework was judged inadequate. When the obligation becomes mandatory due diligence with penalties, that gap becomes a direct liability.
The cascade and the market-access dimension
Two further dynamics make this unavoidable even for organisations that imagine themselves out of scope.
The first is the same cascade that runs through emissions reporting and supplier requirements generally. Lowering the threshold to $50 million directly captures many more entities. And beyond the directly captured, larger reporting entities conducting genuine due diligence will require modern slavery information and assurances from their suppliers, pushing the obligation down the chain to businesses that are not themselves reporting entities. Being below the threshold will not keep the requirement away if your customers are above it.
The second is international market access. Major trading partners are tightening forced labour import controls and introducing mandatory due diligence regimes of their own, across the United States, the European Union, and parts of Asia. Australian businesses supplying into those markets, or working with global customers subject to those laws, will have to demonstrate clean sourcing regardless of where Australian law lands. Building the capability now is therefore commercially sensible, not merely regulatory compliance, because the alternative is restricted market access and competitive disadvantage. And the proposed high-risk declaration mechanism means the Commissioner could formally flag specific products, regions, or industries as high-risk, obliging entities to factor those declarations into their due diligence in a consistent, evidence-led way.
There is also a level-playing-field effect worth naming. For businesses already responding meaningfully to modern slavery risk, a due diligence obligation is unlikely to require dramatic change. The real change falls on those who have been cutting corners, who will now face the same obligations as everyone else. Organisations that have invested in genuine capability stand to benefit from that levelling.
Why the old approach will not survive
A well-crafted annual statement describing policies and aspirations is not due diligence, and the reforms make that distinction concrete. Mandatory risk-based due diligence requires mapping the supply chain to find where modern slavery risk actually sits, prioritising it by severity, taking proportionate action to prevent and address it, providing or enabling remediation where harm is found, and monitoring continuously. It is an ongoing operational practice, not an annual document.
Under a penalty regime, with a Commissioner empowered to oversee, declare high-risk areas, and hold non-compliant entities to account, the paperwork approach becomes a liability rather than a defence. The organisations that have treated their modern slavery statement as a communications exercise will find that it does not constitute the due diligence the reformed Act will require.
What good looks like
A genuine due diligence response follows a clear and, importantly, proportionate shape. The Commissioner has been explicit that due diligence should be risk-based and proportionate, focused on the most severe risks rather than spread thinly across everything, and oriented toward better outcomes for workers rather than box-ticking.
It begins with mapping the supply chain beyond the first tier to locate where risk concentrates, by geography, by sector, and by material or product, because the risk is almost always upstream of where the buying decision is made. It then risk-assesses and prioritises by severity, putting effort where the potential for serious harm is greatest. It embeds modern slavery into procurement, through supplier onboarding, contractual requirements, codes of conduct, supplier assessment and audit, and tender criteria, so that responsible sourcing is built into how the organisation buys rather than bolted on afterward. It engages suppliers and builds their capability rather than simply issuing demands, because the deeper-tier suppliers where risk sits often need support to identify and address it. It establishes remediation pathways, so that when harm is found the response helps affected workers rather than simply cutting the supplier and moving the problem elsewhere. And it builds governance, ownership, and continuous monitoring, including the ability to respond to any high-risk declarations the Commissioner issues.
This is recognisably the same discipline that underpins responsible and sustainable supply chain management more broadly, applied to the specific and serious risk of forced labour and exploitation.
The Australian context
Australia's regime has a federal and a state dimension. Alongside the Commonwealth Act, New South Wales operates its own Modern Slavery Act with its own Anti-Slavery Commissioner, with a particular focus on removing modern slavery from public procurement through oversight, codes of practice, and a public register. That public procurement emphasis aligns with the broader direction of government buying, where ethical conduct, including labour and human rights practices, has become an explicit consideration in value-for-money assessments under the reformed Commonwealth Procurement Rules. For organisations selling to government, demonstrable modern slavery due diligence is increasingly part of being a credible supplier.
The proposed drop in the federal threshold to $50 million, combined with Australia's import-exposure profile and the cascade of requirements down supply chains, means a far wider set of Australian businesses will need real capability than the current $100 million threshold suggests. And with consultations live through 2026, this is the window in which the obligations are being shaped and in which sensible organisations are getting ahead of them.
How Trace Consultants can help
At Trace Consultants, we work on the supply chain and procurement side of modern slavery due diligence, the operational practice of finding, prioritising, and addressing risk in the supply chain. The legal interpretation and the modern slavery statement sit with your legal advisers; the visibility, the supplier engagement, and the embedding into procurement sit with the supply chain, and that is where we work.
We map your supply chain to locate the risk. We build the visibility, beyond the first tier, that reveals where modern slavery risk actually concentrates, by geography, sector, and product, so due diligence is targeted at real exposure rather than spread blindly.
We risk-assess and prioritise. We help you assess and prioritise risk by severity, in the proportionate, risk-based way the reforms call for, so effort and resources go to the most serious risks first.
We embed it into procurement. Through our procurement practice, we build modern slavery into supplier onboarding, contracts, codes of conduct, assessment, and tender criteria, and into supplier engagement that helps deeper-tier suppliers improve rather than simply demanding assurances.
We build the governance and monitoring. We help establish the ownership, ongoing monitoring, and response processes, including responding to high-risk declarations, that turn due diligence into a sustained practice rather than a one-off exercise, connected to your broader supply chain strategy and visibility.
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Where to begin
If your organisation reports under the Modern Slavery Act, or will be drawn in by the lower threshold, the most valuable first step is to map your supply chain deeply enough to see where modern slavery risk actually sits, then assess and prioritise it by severity. That visibility is the foundation for genuine due diligence and the thing most organisations currently lack.
If you are not directly captured, do not assume the reforms pass you by. Your larger customers will increasingly require evidence of clean sourcing, and overseas markets already do, so the capability is becoming a condition of doing business regardless of the threshold. Build it now, while the consultations are still shaping the detail and ahead of the obligation becoming binding.
Either way, the work is the same in substance: know your supply chain, find the risk, prioritise the most severe, act proportionately to prevent and address it, and keep at it. Australia's modern slavery regime is moving from reporting to responsibility, from describing the problem to doing something about it. The organisations that treat that as a supply chain capability to build, rather than a statement to polish, will be the ones that meet the obligation and, more importantly, actually reduce the exploitation it exists to address.
This article is general information and does not constitute legal advice. Entities should confirm their specific obligations under the Modern Slavery Act, and any reforms to it, with their legal advisers.
Related reading: Procurement · Sustainable Supply Chain Management · Strategy & Network Design
