A step towards ending modern slavery: Fighting Against Forced Labour and Child Labour in Supply Chains Act

With 160 million children engaged in child labour and nearly 27.6 million victims of forced labour worldwide, Canada has taken an important step towards eliminating the use of child and forced labour in the production of goods by assenting to Bill S-211, An act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff.

This act came into force on January 1, 2024, and forms part of Canada’s international commitment to contribute to the fight against modern slavery by imposing reporting obligations on certain entities and government institutions.

Do the Reporting Obligations Apply to Your Business?

The act applies to “government institutions” and “entities.”

A government institution refers to any department or ministry of state of the Government of Canada; any body or office listed in Schedule 1 to the Access to Information Act; and Crown corporations and their wholly owned subsidiaries. The reporting obligations of a government institution can be found in section 5-8 of the act.

An entity is defined as a corporation, or a trust, partnership, or other unincorporated organization that:

• is listed on a stock exchange in Canada;
• has a place of business in Canada, does business in Canada or has assets in Canada and that, based on its consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent financial years: it has at least $20 million in assets; it has generated at least $40 million in revenue; and it employs an average of at least 250 employees; or
• is prescribed by regulations.

The reporting obligations apply to entities that are:

•  producing (i.e. manufacturing, growing, extracting and processing goods), selling, or distributing goods in Canada or elsewhere;
• importing into Canada goods produced outside Canada; or
• controlling an entity (directly or indirectly in any manner) engaged in any activity described in paragraph (a) or (b).

What are the Reporting Obligations?

Every entity that meets the criteria listed above must report to the Minister of Public Safety and Emergency Preparedness  on or before May 31 of each year:

• the steps the entity has taken during its previous financial year to prevent and reduce the risk that forced labour and child labour is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity; and
• information on the entity’s:
  • structure, activities and supply chains;
  • policies and due diligence processes in relation to forced labour and child labour;
  • the parts of its business and supply chains that carry a risk of forced labour or child labour being used and the steps it has taken to assess and manage that risk;
  • any measures taken to remediate forced labour or child labour;
  • any measures taken to remediate the loss of income to the most vulnerable families that results from any measure taken to eliminate the use of forced labour or child labour in its activities and supply chains;
  • the training provided to employees on forced labour and child labour; and
  • how the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.

The governing body of every entity must approve the report and make it available to the public, including by publishing it in a prominent place on its website. Federal corporations must also provide the report to each shareholder, along with its annual financial statements.

As part of filing the report, each entity must also complete an online questionnaire, which includes a series of closed-ended questions followed by open-ended questions that address each of the requirements under the Act. Although not all the questions are required to be answered, the instructions strongly encourage providing more information by filling out the open-ended questions. It is implied that by providing more in-depth answers, entities can demonstrate leadership, responsibility, and transparency. This information can also be used as a basis on which the report can be drafted upon.

The first report will be due on May 31, 2024 which shall include reporting on activities undertaken from January 1, 2023 to December 31, 2023.

Enforcement and Offences

Every person or entity is guilty of an offence punishable on summary conviction and liable to a fine of not more than $250,000 that:

• fails to comply with reporting and accessibility obligations (section 11 or 13);
• fails to assist a person designated by the Minister to verify the entity’s compliance (section 15(4));
• obstructs or hinders the designated person exercising their powers or performing duties or functions related to verifying compliance, such as obstructing entry into any place or hindering the examination of any document (section 17);
• fails to comply with an order of the Minister to ensure compliance (section 18);
• knowingly makes any false or misleading statements or knowingly provides false or misleading information to the Minister or a designated person.

Any director, officer, agent, or mandatary of the person or entity who directed, authorized, assented to, acquiesced in, or participated in its commission is also a party to and guilty of the offence and liable on conviction to the punishment, whether or not the person or entity has been prosecuted or convicted.

Guidelines and Resources for Compliance

The act also amends the existing federal offence under the Customs Act which makes it a criminal offence to possess, exchange, acquire, sell or dispose of goods that are prohibited for import under the Customs Tariff  Act — which now includes the importation of goods that are produced, wholly or in part, by forced labour or child labour.

The government has set out general guidance on what they may expect to see in the reports (Prepare a report – Entities (publicsafety.gc.ca). This guidance appears to follow recommendations from the United Nations and the Organisation for Economic Co-operation and Development. There are several reports and information provided by the OECD, the government of Canada, and the Canadian Ombudsperson for Responsible Enterprise (CORE) which may help provide entities a framework for the practical application of supply chain due diligence. For example, the report cited in the guidance for the Act provides some guidance in implementing the framework in response to the requirement under the act to report on polices and due diligence processes in relation to forced labour and child labour:

Step 1: Embed responsible business conduct into policies & management systems

Structure internal management to support supply chain due diligence and express commitment to respect for human rights in a policy that is:

• is approved at the most senior level of the enterprise;
• is informed by relevant internal and/or external expertise;
• stipulates the enterprise’s human rights expectations of personnel, business partners, and other parties directly linked to its operations, products, or services;
• is publicly available and communicated internally and externally to all personnel, business partners, and other relevant parties;
• is reflected in operational policies and procedures necessary to embed it throughout the enterprise.

This step may involve incorporating due diligence provisions into supplier contracts or written agreements. 

Step 2: Identify & assess adverse impacts in operations, supply chains & business relationships

This step involves identifying and assessing both potential human rights impacts that have yet to materialize and actual adverse impacts that have already occurred.

This step requires social dialogue and meaningful engagement with stakeholders. Tools such as a Human Rights Impact Assessment (HRIA) or Child Rights Impact Assessment (CRIA) may be more effective tools than an audit to identify and assess risks.

Any additions or changes made to the entity’s supply chain should be assessed for exposure to increased risk of forced labour or child labour.

Step 3: Cease, prevent, or mitigate adverse impacts

Implementing sustainable business practices may assist in this step. Some examples of this include: pricing products fairly; paying workers a living wage; providing decent working conditions for working parents, caregivers, young workers, and women; implementing sustainable purchasing practices (e.g. sufficient lead time and deadlines); designing products with possible child labour and other human rights risks in mind; providing maternity leave, providing daycare facilities; providing long-term contracts to suppliers; and eliminating recruitment fees.

Using the entity’s leverage to make some of these changes may be required for lower levels in the supply chain. See Using Leverage in Business Relationships to Reduce Human Rights Risks - Shift (shiftproject.org).

Step 4: Track implementation and results

Report annually on supply chain due diligence as required by the act.

Step 5 & 6: Communicate how impacts are addressed and provide for or cooperate in remediation when appropriate

Establish remediation processes for any adverse human rights impacts caused or contributed to by the entity. Such processes should be based on dialogue and engagement with a view to seeking agreed solutions and meeting the criteria of legitimacy, accessibility, predictability, equitability, transparency, and compatibility with the OECD Guidelines.

CORE provides some examples of the best practices for child labour remediation, including:

• implementing well-defined prevention and remediation policies, systems and requirements, which are communicated throughout the supply chain; 
• implementing site-level grievance mechanisms;
• seeking visibility in lower levels of the supply chain;
• specific remediation budgets to support victims of child labour; and
• engagement with third parties to ensure the child is protected.

However, the guidelines require that entities provide honest responses that describe the concrete actions that they have take to address risks of forced labour and child labour rather than purely aspirational statements. Entities should exert caution when reporting on long-term plans, and should focus on the concrete actions that have taken place during the reporting year.

Conclusion

This article provides a high-level overview of some actions that an entity may take to proactively assist in the reduction of forced labour and child labour. If you have further questions about the act and how your organization can comply with the reporting obligations, our team is here to help.

This article was last updated on January 20, 2024.