Insight
Modern Slavery Statements: What Small Suppliers Need to Know
06 Oct 2026
In short
Small suppliers face growing pressure regarding modern slavery statements, even if not directly obligated. Understanding this landscape is crucial for maintaining commercial relationships and supply chain integrity.
While Australia's Modern Slavery Act 2018 (Cth) primarily mandates reporting for entities with annual consolidated revenue of $100 million or more, small suppliers should not disregard its implications. Larger entities subject to the Act are increasingly scrutinising their supply chains, meaning small businesses are likely to encounter requests for information or commitments regarding modern slavery practices.
What is Australia's Modern Slavery Act?
The Australian Modern Slavery Act requires certain entities to report annually on the risks of modern slavery in their operations and supply chains, and the actions they are taking to address those risks. Modern slavery encompasses practices such as slavery, forced labour, human trafficking, and servitude. The Act aims to drive improvements in supply chain transparency and ethical conduct.
The reporting threshold of $100 million in consolidated annual revenue means many small and medium-sized enterprises (SMEs) are not directly obligated to submit a modern slavery statement. However, their position as suppliers to larger reporting entities places them firmly within the scope of due diligence processes. Ignoring these obligations can lead to lost business opportunities.
Why Small Suppliers Are Affected
Reporting entities are required to describe how they assess and address modern slavery risks in their supply chains. This inherently means they must gather information from their suppliers, regardless of the supplier's size. Small businesses that cannot demonstrate their commitment to ethical labour practices risk being deselected or overlooked by larger clients.
Requests for information can range from simple questionnaires to requiring formal policies or audits. Proactively understanding and addressing potential modern slavery risks within your own operations and immediate supply chain positions your business as a responsible and reliable partner. This can be a competitive advantage.
Common Requests from Reporting Entities
When a large entity undertakes its modern slavery reporting, it will typically engage with its supply chain. Small suppliers can expect to receive various requests:
- Questionnaires: Often detailed surveys asking about labour practices, recruitment processes, supplier due diligence, and risk management.
- Declarations or Assurances: Requests for a signed statement confirming compliance with ethical labour standards or a supplier code of conduct.
- Evidence of Policies: Demands for copies of internal policies related to human rights, ethical sourcing, or anti-slavery.
- Contractual Clauses: New or amended contract terms requiring compliance with modern slavery provisions and allowing for audits. Refer to our insights on service agreements for more on contractual terms.
- Due Diligence Information: Specific questions about your own suppliers and how you assess their risks.
These requests are not optional for the reporting entity; they are a necessary part of their compliance. Small suppliers who are unable or unwilling to respond adequately may find their commercial relationships strained or terminated.
Practical Steps for Small Suppliers
Preparing for modern slavery inquiries does not require a full reporting regime, but it does demand a considered approach. Implementing these steps can significantly streamline future compliance and mitigate risks:
- Understand Your Own Operations: Review your hiring practices, employment contracts, and workplace conditions. Ensure compliance with Australian employment laws, particularly regarding wages, working hours, and fair treatment. The Fair Work Ombudsman website is an excellent resource.
- Assess Your Direct Supply Chain: Identify critical suppliers and consider any risks associated with their operations or geographic locations. While you may not be able to audit them, understanding potential vulnerabilities is key.
- Develop a Basic Statement or Policy: Create a short internal or external statement outlining your commitment to ethical labour practices and opposition to modern slavery. This demonstrates intent and provides a foundation for future inquiries.
- Review Contractual Terms: Be aware of any modern slavery clauses in contracts from larger clients. Understand what you are agreeing to and ensure your business can meet these obligations. For more on contract review, see our insights on unfair contract terms.
- Educate Key Personnel: Ensure relevant staff, especially those in procurement or HR, understand the concept of modern slavery and their role in identifying and mitigating risks.
- Maintain Records: Keep records of any due diligence undertaken, communications with suppliers, and internal policy documents. This provides an audit trail if required.
Building a Resilient Supply Chain
Proactive engagement with modern slavery risks strengthens your business and its relationships. It moves beyond mere compliance to genuine ethical conduct, which is increasingly valued by consumers, investors, and business partners. Adopting robust practices contributes to a more ethical global supply chain and reduces your own exposure to reputational and operational risks.
Consider the table below outlining key differences in direct obligations:
| Factor | Reporting Entity (>$100M Revenue) | Small Supplier (< $100M Revenue) |
|---|---|---|
| Direct Reporting Obligation | Yes, annual Modern Slavery Statement | No, unless part of a consolidated group |
| Supply Chain Scrutiny | Extensive, required by law | Indirect, driven by client requests |
| Risk of Lost Business | High, if non-compliant with Act | High, if unable to meet client due diligence requests |
| Recommended Action | Formal risk assessment, reporting, due diligence | Understand risks, prepare responses, maintain records |
While the administrative burden on small suppliers is lighter than for large entities, the commercial pressure to demonstrate ethical conduct is real. Embedding simple, effective processes now will save time and protect valuable client relationships in the future. For additional guidance on managing complex commercial arrangements, consider our fractional general counsel services.
Frequently asked questions
Do all Australian businesses need to submit a modern slavery statement?
No, only entities with an annual consolidated revenue of $100 million or more, or those specifically requested by the Minister, are legally required to submit a modern slavery statement under the Australian Act. Smaller businesses are often indirectly impacted through their larger clients' reporting obligations.
What happens if a small supplier doesn't respond to a client's modern slavery inquiry?
Failing to respond or providing an inadequate response could jeopardise commercial relationships. Larger clients need this information for their own mandatory reporting and due diligence. A lack of engagement may lead to the client seeking alternative suppliers who can demonstrate their commitment to ethical practices.
Can I get fined for not having a modern slavery policy as a small business?
As a small business not directly subject to the Act's reporting threshold, you cannot be fined for not submitting a modern slavery statement or having a formal policy. However, inadequate practices or a failure to cooperate with clients' due diligence could result in commercial penalties, such as loss of contracts.
Where can I find more information on modern slavery risks?
The Australian Government provides resources and guidance on modern slavery. The Modern Slavery Register website offers insights and examples of statements from reporting entities, which can help small suppliers understand expectations.
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