Shift and Schroders published their joint report Modern Approaches to Modern Slavery: Addressing Risks and Impacts in Investor Portfolios (August 2026).
Human Level’s Take:
- With an estimated 27.6 million people in forced labour, and the figure rising, modern slavery increasingly brings regulatory action, supply chain disruption, litigation and reputational damage, across almost every sector.
- There is a difference between reporting on signals and reporting on outcomes. Policies, training, audits and statements show what a company intends and has in place, but say very little about whether it is identifying or addressing risk in practice. That leaves blind spots for companies and investors alike.
- And the blind spot goes deeper than data. Even a well-run process can miss the business model drivers behind exploitation. Two companies in the same sector and location can carry very different risk, because commercial choices such as a lowest-price proposition can pass cost pressure down the supply chain. When risk is built into how a business creates value, it is systemic, not episodic.
- So the question is moving from “where is the risk?” to “which business practices help create it?” Tools such as Schroders’ risk model, which shows where to look, and Shift’s Business Model Red Flags, which show why risk arises, point toward the underlying conditions: responsible purchasing practices, safe worker voice, supplier development and credible remedy.
- For business, that means looking beyond supplier audits to its own purchasing practices, use of labour providers and payment terms. Questions like “how do you know workers are not paying recruitment fees?” are already reaching boardrooms. For investors, it means engaging on root causes rather than reacting to controversies already in the headlines, and asking the business model questions that explain why risk exists and whether a company is changing the practices behind it.
Some key takeaways:
- Modern slavery has moved from a reporting issue to a business risk: An estimated 49.6 million people were living in modern slavery on any given day in 2021, including 27.6 million in forced labour, a figure that has risen since 2016. Shift and Schroders frame this through a double materiality lens. It is first a fundamental violation of human dignity, and it is increasingly relevant to enterprise value, as poorly managed forced labour risk can bring regulatory action, supply chain disruption, litigation and reputational damage. One high street retailer’s share price fell around 50% in nine days after forced labour allegations, while an apparel retailer’s was largely unaffected by allegations in 2018, partly because of confidence in its due diligence systems. One driver is regulation moving from transparency to enforcement, where import bans and tariffs can turn weak supply chain visibility into operational disruption, lost sales and remediation costs. As of mid-2025, US Customs and Border Protection had reviewed more than 16,700 shipments worth almost $3.7 billion under the Uyghur Forced Labor Prevention Act (UFLPA), detaining an average of 428 a month in 2024, up 25% on 2023. The EU’s forced labour ban, enforceable from December 2027, and proposed Australian reforms point the same way. Exposure also reaches well beyond the best-known sectors, spanning agriculture, construction, fishing, mining and logistics, so it cannot be screened away by avoiding a few industries.
- Policies and audits show that processes exist, not that they work: Three entrenched challenges explain why existing approaches fall short, for investors and companies alike. First, the signals most often sought, such as policies, training, audits and modern slavery statements, describe what a company intends and has in place but say little about whether it is identifying or addressing risk. Shift’s analysis of more than 3,000 social indicators used by ESG data providers suggests the large majority focus on process and activity inputs rather than outcomes, even though the UN Guiding Principles call for tracking the effectiveness of responses. Second, visibility fades with each supply chain tier. A garment retailer’s first-tier suppliers may be audited and compliant, while the farms, mills and logistics providers further upstream sit outside the reach of conventional due diligence. The UFLPA experience illustrates that companies which believed their supply chains were not linked discovered, when shipments were detained, that inputs such as polysilicon, cotton fibres and components containing critical minerals had passed through high-risk geographies earlier in processing. Tracing at scale takes economic modelling, supplier surveys and third-party data that most companies have not yet assembled. Third, analysis tends to stop at geography and sector, missing the business model drivers behind exploitation. Two companies in the same sector and location can carry very different risk, and a company’s own commercial choices, such as a lowest-price value proposition, can transmit cost pressure through its supply chain. Harm can then stem from strategy and not only from isolated bad actors, making risk systemic rather than episodic.
- From identifying modern slavery risks to tackling the business practices that drive them: The paper presents two complementary approaches. Schroders’ Modern Slavery Risk Model takes a top-down view, assessing prevalence risk, regulatory scrutiny and risk management across companies’ operations and multiple supply chain tiers to help investors prioritise engagement. Shift’s Business Model Red Flags takes a bottom-up approach, using 25 indicators across a company’s value proposition, value chain and revenue model to identify commercial practices that heighten risk, from lowest-cost propositions to reliance on labour providers. Its questions are written for business leaders to ask and be asked, such as how a company knows workers are not paying recruitment fees, and practitioners report that investor questions of this kind have reached board level. For companies, the paper points to mitigation that tackles underlying conditions: worker voice mechanisms free from retaliation, responsible purchasing practices that ease cost pressure on suppliers, supplier development and credible remedy. Schroders’ analysis found that companies paying suppliers faster than peers showed higher earnings growth and lower volatility, and the EU due diligence directive will require covered companies to adopt responsible purchasing practices. Because systemic risks are hard for any one company to resolve alone, the paper points to collective action, such as the Cotton Campaign.
