How new modern slavery reporting requirements affect Canadian companies

How well do you know your supply chain?

Some 27.6 million people, including 3.3 million children, are trapped in forced labour around the world^[1]. Canadian companies need to know who and what they’re using to create their products and supplies—especially since the risks facing even the most well-intentioned organizations are rising.

The federal government’s new Fighting Against Forced Labour and Child Labour in Supply Chains Act (Supply Chains Act) imposes disclosure requirements for government institutions and many companies with connections to Canada. The consequences for non-compliance are serious: financial penalties, criminal prosecution and the possibility of being named and shamed by non-governmental organizations. Despite these risks, most entities are unprepared to meet these new requirements.

It’s critical for organizations to start acting now. But it’s also important to remember that forced labour is just one issue in the broader human rights agenda. Creating a plan to comply with the Modern Slavery Act can be an opportunity to take action across these wider issues and strengthen the “S” in your environmental, social and governance (ESG) story.

What’s required under Canada’s Modern Slavery Act

How do you know if your company is covered by the new rules?

Broadly speaking, the Supply Chains Act applies to Canadian-linked entities that produce, sell or distribute goods in Canada or elsewhere. It also applies to organizations that import into Canada goods produced outside Canada, or control another entity engaged in such production, sale, distribution or importation. Are you a Canadian-linked entity that met at least two of these conditions in at least one of your two most recent financial years?

Had at least $20 million in assets

Generated at least $40 million in revenue or

Employed an average of at least 250 employees

Under the new rules, affected entities must publish a report each financial year that discloses the steps they’ve taken to prevent and reduce the risk that forced labour or child labour is used in their operations and supply chains. This report must be approved by your board and published prominently on your website. Additionally, a governing body member with authority to bind the entity must include an attestation in the report that confirms the information in the report is reviewed, and to the best of their knowledge and after reasonable diligence, is true, accurate and complete.

Further to the report, each entity must complete a questionnaire and submit their reports to Public Safety Canada, which will make these reports available to the public in a searchable repository on its website.

Does your organization have the necessary processes and resources to meet these requirements?

Obligated entities must file their reporting by May 31, 2024. Those that don’t—or can’t—comply risk reputational damage and substantial financial penalties of $250,000 per offence. Importantly, individual C-suite executives, directors and employees could face the same financial penalties and criminal prosecution.

What should obligated entities do now?

Here are five no-regrets moves to protect your business:

Analyze the risk

Analyze the risk of modern slavery and human rights violations across the multiple tiers of your organization’s supply chains. If you source raw materials from relatively low-risk countries, don't stop there. Look for modern slavery risks deeper in your supply chain. Focusing on imported raw or finished goods in particular helps to systematically manage risks in operations, supply chains and relationships.

Identify gaps

Identify the human resources gaps in your systems and processes, and then educate and train all stakeholders, including directors, customers, employees, suppliers and investors. This helps avoid perceptions—and the associated reputational risk—that you’re only doing the bare minimum.

Share commitments

Strengthen the “S” in your ESG story by sharing your commitments, the actions you’ve already taken and what you plan to do next to improve human rights in your supply chain. Your disclosures should outline how you’ll meet the general requirements and the seven supplementary reporting requirements.

Develop policies

Develop new policies specific to modern slavery or enhance existing policies to reduce management risk and reflect your entity’s values. This includes procurement and supplier selection policies, practices, monitoring and systems.

Worst-case scenarios

Develop worst-case scenarios and identify areas of improvement to mitigate that risk.

These steps can be a powerful starting point on a journey of continuous learning and improvement that helps sustain your ability to identify, address and mitigate risks. Connecting your compliance activities with your organization’s respect for human rights isn’t just the right thing to do—it's an opportunity to demonstrate that your business delivers not only economic returns, but also benefits to broader society. This builds trust with stakeholders and helps transform compliance into a source of long-term value

For a more in-depth look at the regulatory and legal impacts of Canada’s Modern Slavery Act, review our legal insights article.

Reach out to discuss an exposure assessment, where human rights and modern slavery fit in your ESG efforts, your operating model, your policies for suppliers, supply chain and human rights and supply chain transformation and resilience opportunities.

_{1 “Global Estimates of Modern Slavery: Forced Labour and Forced Marriage,” International Labour Organization, published September 2022}

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