Understanding Your Role in Complying with Canada’s Forced and Child Labour in Supply Chains Act

• Applies to businesses who produce, sell, or distribute goods in Canada, import into Canada, has any direct or indirect control of a business engaged in either previously mentioned activity.
• Report will be due annually and must be submitted on or before May 31st of each year.
• This report is PUBLIC and as such could disclose details about your supply chain that could be accessible to competitors, customers, and investors.

Canada’s new legislation on fighting against Forced and Child Labour in Supply Chains Act (“the Act”) formerly known as Bill S-211, was first introduced in November 2021; It received Royal Assent in May of this year. Concisely, this Act forces government institutions, crown corporations, and private sector entities to have a look at their entire supply chain and prove they have done their due diligence in ensuring there is no forced labour along the line. It introduces new reporting requirements for certain Canadian and foreign businesses to prevent and reduce the risks of modern slavery in their supply chain. To be clear, the Act does not prescribe specific measures that a company must take to remediate forced labour or child labour in its supply chains; however, the hope behind this Act is that over time, the increased compliance attention will discourage upstream suppliers from engaging in forced labour practices if they want to continue supplying goods to the Canadian market.

Now that you have a little background on the Act and its purpose, lets have a look at who could be subject to this act, what your obligations might be, and how you can prepare.

This Act applies to businesses who produce, sell or distribute goods in Canada, import into Canada, has any direct or indirect control of a business engaged in either previously mentioned activity IF the business is listed on a stock exchange in Canada and meets certain size thresholds (i.e.: employs an average of 250+ employees and has at least $20 million in assets). It also applies to any federal government institution that produces, purchases, or distributes goods in Canada or elsewhere. The Act sets certain reporting requirements for these businesses such as an annual reporting requirement outlining steps taken to prevent and reduce the risk that there is forced labour or child labour used in their supply chain.

This report will be due annually and must be submitted on or before May 31st of each year.

There are specific reporting obligations, which focus on disclosure and transparency, that businesses need to be aware of if they meet the reporting threshold. The information required to satisfy these reporting obligations are as follows:

a. the entity’s structure, activities, and supply chains

b. the entity’s policies and due diligence processes in relation to forced labour and child labour

c. the parts of its business and supply chains that carry a risk of forced labour and child labour and the steps it takes to assess and manage that risk

d. measures taken to remediate forced labour and child labour

e. measures taken to remediate the loss of income to the most vulnerable families that results from the measure taken to eliminate the use of forced labour and child labour

f. training provided to employees on forced labour and child labour

g. how the entity assesses its effectiveness in ensuring that forced labour and child labour is not being used in its business and supply chains.

The report must be attested and signed by one or more members of the governing body of the business (i.e.: Board of Directors) before it can be filed with the Minister of Public Safety and Emergency Preparedness on or before May 31st each year.

There are legal risks to be aware of; if a business fails to meet their annual reporting obligations, fail to comply with an order from the Minister to meet those obligations, or provide false or misleading statements it is an offence punishable upon summary conviction, carrying a fine of up to $250,000. There also some operating risks to pay attention to. The report could provide the CBSA (Canada Border Services Agency) reasonable grounds to believe your goods could be involved in child or forced labour and as such, those goods could be seized at the border. Remember, this report is PUBLIC and as such could disclose details about your supply chain that will the become accessible to competitors, customers, investors, etc. So, if I were you, I would start looking at how you can prepare for these new rules and start really looking at how to improve your supply chain. Fortunately, the next section helps you with just that.

There have been a number of steps recommended for businesses to take in preparation of the Acts coming into force date. It has been recommended that a business should do a risk assessment and supply chain mapping that could identify any potential presence of forced and or child labour. The risk assessment should include a number of factors including the geographical area (has that area been flagged as high risk). Maybe have a look at you company policies to see if they need revising. Does your Supplier Code of Conduct or supplier contract terms need updating to ensure due diligence? Training would also be an integral part for your employees, especially those who source your business materials. Let them know what to look for and what to do if they suspect a sourced company is using child or forced labour. Consider adjusting your company KPI’s to include how you are constantly assessing your supply chain over the year to ensure there is no child or forced labour being used. It will be an adjustment and a lot of work initially, but the result is a clear mind and conscience that your company does not support forced labour.

FOR MORE INFORMATION ON THIS PAPER AND THE DETAILS ON THE FORCED & CHILD LABOUR IN SUPPLY CHAINS ACT, PLEASE CONTACT TAMARA ANGELIS.