On 3 May 2023, Canada passed Bill S-211 to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”) and amend the Customs Tariff thereby joining a global movement of governments taking a stronger stance on forced labour and mandatory due diligence rules.
This Act requires companies that operate in Canada to provide public annual reports on their efforts to eliminate the use of forced labour in their supply chains. The Act also creates new enforcement powers, includes significant financial penalties for violations as well as criminal responsibility, and bans imports of goods produced in whole or in part with child labour.
Who is required to report?
The Act applies to entities (corporations, trusts, partnerships or other unincorporated organisations) that are:
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- listed on a Canadian stock exchange,
- or have a place of business in Canada, do business or have assets in Canada. In the latter case, the business should meet at least two of the three following size requirements based on consolidated financial statements in one of its two most recent financial years:
- has at least $20 million in assets;
- generated at least $40 million in revenue; or
- employs an average of at least 250 employees.
And which are:
- producing, selling or distributing goods in Canada or elsewhere;
- importing into Canada goods produced outside Canada; or
- controlling an entity engaged in any activity described in paragraph (a) or (b).
What must be reported?
Entities that fall into the scope of the new rules will be required to file annual reports, setting out the measures they took during the previous financial year to prevent and reduce the risk that forced labour, prison labour and child labour are used in any step of their production of goods in Canada or elsewhere or of goods imported into Canada.
The annual reports must include information on the entity’s:
- Business structure, activities, and supply chains;
- Policies and due diligence processes concerning forced and child labour;
- The parts of the supply chain which carry a risk of forced labour and any measures taken to to assess and manage that risk;
- Measures taken to remediate any forced or child labour;
- 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; and
- Compliance processes (including risk assessments, audit processes, and employee training) as well as assessment of its effectiveness in ensuring forced labour and child labour are not being used in supply chains.
Finally, the annual reports must be approved by a business’s Board or governing body and be made publicly available (in a prominent place on its website), and, for federally incorporated corporations, distributed to shareholders.
The legislation enters into force January 1, 2024, and companies will be required to submit their reports for the previous calendar year by May 31, 2024.
What are the sanctions for non-compliance ?
To ensure that companies are complying with the Act, a designated person( appointed by the Minister) may carry out an inspection if there are reasonable grounds to believe there is a breach of the obligations set out in the Act. The person may examine any document, computer system and data in the place of business.
Serious criminal sanctions exist for non-compliance with the Act including individual criminal liability of officers and directors and a fine of up to $250,000 for:
- Failure to comply with reporting obligations;
- Failure to publish the report on the company website;
- Knowingly providing false or misleading information; or
- Failure to assist with inspections.
What steps should companies take to ensure compliance with the Act?
To comply with the reporting requirements that will come into force in January 2024, companies are encouraged to:
- Conduct thorough supply chain mapping and risk assessments and regularly monitor supply chains for signs of child and forced labour;
- Develop a thorough understanding of the regions and areas at high risk of child and forced labour -the US Bureau of International Labor Affairs maintains a list of goods and their source countries which it has reason to believe are produced by child labour or forced labour in violation of international standards
- Implement proper due diligence procedures and grievance mechanisms;
- Create or update and implement policies related to forced and child labour and remediation;
- Assign responsibility to staff at all relevant levels and dedicate the resources to comply with the due diligence process;
- Develop training and education for all employees regarding forced and child labour;
- Establish stakeholder consultations with government, local communities and CSOs in areas of operation.
If you would like more information or advice contact us at bhr@globalrightscompliance.co.uk.