Accounting for change: ESG and Modern Slavery today

The world is rapidly changing. Little is certain and, naturally, this triggers a fear of risk, meaning that sustainability efforts are not always prioritised.

There remains, however, a crucial need; the issue of modern slavery affects approximately 50 million people across the globe. As we consider how different regions across the world are responding, we identify key trends and regional distinctions, and suggest a picture moving forward.

Aspects of Modern Slavery

Forced Labour - through threat, violence or intimidation

Debt Labour - people entrapped into work by cycles of debt

Human Trafficking - unlawful transportation by force or coercion

The value of transparency

When combatting modern slavery, transparency is essential. It is crucial that companies have accurate Modern Slavery Statements, reflecting the accountability of the organisation and incorporating ethical practices throughout the supply chain. Embedding human rights into governance systems and social responsibility strategies is now recognised as a foundational corporate duty. This is especially true within the accounting sector, where firms are critical to client compliance, governance and delivery. As trusted advisors, it’s essential that accounting professionals build trust amongst stakeholders through regulatory compliance.

According to a study conducted by NatWest, companies that embedded strong ESG practices ‘have on average outperformed by 14.4% in emerging markets and 5.2% in developed markets’.

What’s more, the business case for embedding transparency into organisations is an often underappreciated fact. Companies with strong ESG credentials often vastly outperform their counterparts; there is value in transparency, creating a more attractive offering for stakeholders and investors alike. Certainly, it seems there is no turning back, as momentum continues to grow amongst stakeholders for broader ESG policy adoption.

Clear, forward-thinking ESG policies also hold value for talent. This is particularly true for future generations, who have grown up with a cultural awareness of the tangible impacts of climate change. A study from Boston Consulting Group emphasises the importance of ESG policies for talent attraction and retention. According to the study, 13% of employees across New Zealand cited ‘strong ESG commitments’ as a top reason for choosing their current employer. Meanwhile, 11% suggested that ESG policies were a consideration for staying with their current employer.

An ethically united Alliance

Across Praxity, the Alliance is doubling down on their efforts in pursuit of stronger ESG outcomes. The Praxity ESG Working Group, founded in 2021, exists as a dynamic forum to explore strategy and workshop new approaches, sharing best practice, case studies and methodologies. This collaborative approach allows firms to lean on one another, benchmarking and building out ESG service lines while supporting their client needs. Firms also support one another in preparing and verifying modern slavery statements, ensuring compliance with local legislation.

Failure to comply with modern slavery legislation can result in significant legal exposure and liability for companies. In Australia, non-compliance can lead to formalised warnings and potential penalties. In Canada, failure to comply with the Fighting Against Forced Labour and Child Labour in Supply Chains Act (Bill S-211) can lead to financial penalties. In the UK, shareholder activism can lead to potential legal action against companies that fail to address modern slavery risks. Other countries have also implemented penalties; France's Duty of Vigilance law allows affected parties to sue non-compliant companies, Germany's Act on Corporate Due Diligence in Supply Chains includes substantial fines, whilst Switzerland's Responsible Business Initiative campaign proposes non-tax-deductible fines of up to 10 million Euros. These enforcement measures highlight how seriously governments are taking the issue, underlining potential legal and reputational risks.

Now, more than ever, rigour is crucial; anti-slavery practices are now recognised as a core risk-management tool, ensuring sustained longevity through diligence and foresight.

A global challenge

Globally, modern slavery is a persistent issue, with a variety of approaches being taken by different countries and regions.

In the Asia-Pacific region, Praxity member firm Moores Rowland is globally recognised as a leader in the ESG field. Based in Indonesia, CEO James Kallman has been instrumental in building this strategy from the ground up. Under his leadership, the firm has adopted an approach that emphasises the social implications of focusing on ESG.

The origins of this strategy lie in the implementation of its Human Rights Audit Practice, an initiative that won the prestigious ‘Audit Innovation of the Year’ award from the International Accounting Bulletin in 2012. This strategy, designed to identify and prevent potential abuses of human rights within the industry, was developed to align with best practice from the United Nations, alongside Indonesia’s National Action Plan on Business and Human Rights.

James Kallman, CEO of Moores Rowland Indonesia, notes that the current emphasis on ESG shows no signs of slowing down -

“Human rights auditing has picked up steam over the last few years due to consumers wanting to know that the products they purchase and use are sustainable, and not a result of rampant human rights violations, and also from the need for investors to better know the companies they are investing in”.

Broadening the lens

Looking at ESG more broadly, there are huge variations in global adoption and regulation. Throughout Asia, for instance, awareness has been rapidly increasing, but there have been varying levels of adoption. There has been a move toward standardised reporting, and the continent is - generally speaking - beginning to be more closely aligned to global standards. For instance, the Hong Kong Exchanges and Clearing Limited (HKEX) will require mandatory client-related disclosures from 2026 onwards, bringing the regulations into line with the International Sustainability Standards Board (ISSB). Similarly, the Securities and Exchange Board of India (SEBI) is reviewing its ESG disclosure requirements, aiming to place greater emphasis on accuracy and feasibility. As discussed, Indonesia in particular is forging the way, both by mandating Human Rights Audits by 2027 and by adopting IFRS S1 and S2 standards.

African governments have adopted an entirely different approach to ESG. As an emerging region, there is less alignment on approach, with more fragmented initiatives across the continent. In response to this environment, the Pan African Federation of Accountants has founded a Centre of Excellence, designed to introduce more uniformity in the approach to ESG across the region.

The EU is widely recognised as a global leader in terms of environmental regulation. Notably, the Corporate Sustainability Reporting Directive (CSRD) requires mandatory disclosure for ESG reporting from large companies, designed to improve transparency.

On the other end of the spectrum, there is significant pushback against ESG adoption in various regions. In the United States, political and economic pressures have led to restrictions on ESG-based investment strategies. Europe is experiencing a similar recalibration of its ESG commitments, with the EU reducing reporting requirements to ease corporate burdens that have sometimes been seen as overzealous. Despite these challenges, the principles of ESG remain essential to good business practice, ensuring resilience in the face of an uncertain regulatory environment.

Across the Praxity Alliance, our member firms offer counsel to one another, sharing their expertise from across the globe. Amidst a complex and rapidly changing landscape, experts can collaborate on a global level to deliver solutions to complex client challenges. These combined efforts, with professionals working alongside NGOs and regulatory bodies, deliver world-class ESG solutions that help to move the needle.

A future-focused mindset

Long gone are the days when modern slavery compliance was seen as a ‘tick-box’ exercise; the evidence shows it’s essential that quality firms position themselves as leaders in the field. This sentiment has been echoed by Edward Olson, Partner, National Leader, ESG at MNP, who suggests that corporations take a proactive, strategic approach:

“Eventually they will have to act, which is strategically a bad move; being forward-looking is a key tenet of good corporate leadership. The topics embedded across the ESG paradigm need to be considered; a failure to do so is a failure to understand the numbers”.

Looking toward the future, firms will likely continue to build out their ESG service lines and approach to tackling modern slavery as a business imperative. These firms may continue to become increasingly specialised, responding to complex market demands.

In parallel to this, AI and technological advancements hold the potential to rapidly transform the sector. Through AI tools, large quantities of data can be processed and managed at speed, enhancing human capabilities. It is vital for firms to enhance their understanding and deployment of these tools to capture this potential, making this a key area of focus.

Praxity Alliance member firms offer their clients a wealth of global knowledge in ESG and anti-slavery, providing expert guidance at all layers of business. When navigating this space, having experts who understand their complexity is vital.

Sources:

This article is condensed from a version published in the International Accounting Bulletin, 2025.