Risks in 2025: Forced labor in supply chains

Forced labor is a hidden but pervasive issue within global supply chains, affecting millions of workers across industries such as agriculture, manufacturing, electronics, and textiles. These abuses frequently occur deep within supply networks, where companies may unknowingly source goods from suppliers that rely on forced labor.  

For organizations, the risks of forced labor present both ethical and business concerns. Legal and regulatory frameworks, such as the US’s Uyghur Forced Labor Prevention Act (UFLPA), the UK’s Modern Slavery Act, and Canada’s Modern Slavery Act, are becoming increasingly common, as governments attempt to do their part in preventing the use of forced and child labor in global supply chains. These regulations impose strict compliance requirements, with significant penalties for companies found complicit.   

Figure 1: Global breakdown on legislation to combat forced labor in supply chains 

Furthermore, reputational damage can lead to consumer backlash, loss of investor confidence, and long-term brand harm. If forced labor is discovered within a supply chain, a company can face serious operational and financial risks and they work to stabilize their supply chain.  

Understanding how forced labor infiltrates supply chains is key to implementing proactive risk mitigation strategies, protecting your business from ethical and business dangers.  

Understanding forced labor  

The term “forced labor” encompasses situations where workers are coerced through threats, violence, debt bondage, or the withholding of wages and identification documents. The International Labor Organization (ILO) estimates that over 27 million people worldwide (https://www.ilo.org/topics/forced-labour-modern-slavery-and-trafficking-persons/data-and-research-forced-labour) are trapped in forced labor, many of whom are hidden within complex global supply chains.  

Clearly, forced labor is a longstanding issue and risk. Businesses must play their part in ceasing their involvement with forced labor. Certain industries are particularly vulnerable to forced labor, due to their reliance on low-cost labor and extensive subcontracting networks. Textiles and apparel, for example, have been scrutinized for exploitative working conditions in factories, while agriculture and fishing industries can involve migrant workers subjected to debt bondage and poor living conditions. Electronics and mining supply chains also face significant risks, as the demand for raw materials has driven labor exploitation in regions with poor regulations.   

Figure 2: 2024 Forced labor risk by industry: recorded labor violations 

Even if your business isn’t necessarily high-risk, forced labor can still exist within your supply chain. For example, construction and hospitality are two other industries that can hide forced labor within their supply chains. No industry is 100% safe from the risk of forced labor.  

Forced labor is more ubiquitous than we might think. Therefore, it’s going to take commitment and work from businesses around the world to ensure that their participation in the forced labor marketplace ends. Companies must take a proactive approach to ensure transparency, accountability, and ethical labor practices across their supply networks.  

Risks and challenges

From a purely business-oriented standpoint, forced labor in supply chains presents significant legal, reputational, operational, and financial risks for businesses.  

One of the most pressing concerns is legal and regulatory compliance. Regulations and legislations such as the US’s UFLPA, UK’s Modern Slavery Act, Canada’s Modern Slavery Act, and the EU’s Corporate Sustainability Due Diligence Directive (CS3D) are all examples of powerful regulatory acts to lessen forced labor. These laws require businesses to ensure that their supply chains are free from forced labor, placing the burden of investigation and discovery on the company itself. Companies that fail to comply face severe consequences, including the seizure of goods and exclusion from major markets.  

Beyond legal repercussions, reputational damage can also be devastating. Increased consumer awareness has led to a demand for ethical sourcing from customers, consumers, and fellow businesses. Brands associated with forced labor often face public backlash and declining customer trust, as well as lawsuits, contract cancellations, and the loss of partnerships with retailers and manufacturers. This can create long-term financial suffering for a business.  

Finally, forced labor can cause operational disruptions. If a company is found to be sourcing from suppliers that use forced labor, governments may block imports, forcing businesses to completely restructure their supply chains at short notice, resulting in delays, shortages, and increased costs.  

The business risks associated with forced labor are incredibly clear. However, identifying forced labor within supply chains remains incredibly challenging, mainly due to lack of transparency, supplier non-cooperation, auditing limitations, and geopolitical barriers.  

Without visibility into their own supply chain, businesses can’t possibly understand the true complexity and risks associated with their value networks. Any global supply chain sources materials and products from multiple tiers of suppliers, often relying on outsourcing and subcontracting. This complexity makes it difficult to trace where and how goods are produced, allowing forced labor to remain hidden in the lower tiers of supply chains.  

Additionally, many suppliers deliberately conceal unethical practices. Even when businesses conduct traditional audits and inspections they can face data limitations, as these scheduled visits may only capture surface-level conditions. Certain regions may also actively restrict access to independent investigators, leading to untrustworthy reporting.   

Overcoming these challenges requires a multi-faceted approach, including enhanced due diligence, technology-driven monitoring, and stronger partnerships with NGOs and regulatory bodies to ensure ethical labor practices throughout the supply chain.  

Next steps

Combating forced labor in supply chains takes commitment to a proactive and multi-layered approach. The following strategies can help enhance transparency, accountability, and ethical sourcing, mitigating forced labor risks.   

1. Supply chain mapping. The first step in reducing forced labor risks is understanding where vulnerabilities exist. Companies should conduct thorough supply chain mapping to identify high-risk suppliers, subcontractors, and regions prone to labor exploitation. 
2. Due diligence and continuous monitoring. This is a vital combination. Regular independent audits and supplier assessments are still essential tools for identifying labor practices. However, audits alone are not foolproof, so businesses should also implement continuous monitoring using advanced analytics and data tracking, and follow up with investigations when red flags arise.
3. Leverage advanced technologies. Technological tools such as artificial intelligence (AI), satellite imaging, and advanced analytics offer innovative and efficient ways to monitor supply chains. For example, Everstream Discover can help detect labor violations by evaluating an enormous wealth of data drawn from various sources. Having the right tools at your disposal can give you early warning signs of forced labor, allowing you to make the necessary changes quickly and effectively. 
4. Build strong relationships. Creating strong relationships with suppliers, industry partners, NGOs, governments, and more can lessen risks overall. Establishing long-term, ethical supplier relationships can incentivize fair labor practices. Meanwhile, collaborating with other external stakeholders can provide valuable resources, advocacy, and enforcement mechanisms to strengthen labor protections.

Forced labor remains a widespread issue that poses legal, financial, and reputational risks to businesses while violating fundamental human rights. To address this challenge companies must prioritize transparency, accountability, and ethical sourcing across their supply chains. Taking a proactive approach is not just an ethical obligation – it’s essential for long-term sustainability and success in a global marketplace demanding greater corporate responsibility.