It might have an excessively long name, but Canada’s new Fighting Against Forced Labour and Child Labour in Supply Chains Act (the Act) should be taken seriously. Not least because companies have less than six months to submit their first compliance reports to the Government.
The Act requires subject entities to report on the steps they have taken to prevent forced labour and child labour in both their own operations and their supply chains. It applies to both government institutions and companies; in this article we focus on the latter group.
Subject companies must submit a report and questionnaire to the government, in which they explain the steps taken to prevent forced labour and child labour in their operations and supply chains. The deadline for first submissions is May 31st 2024.
Does my company need to report under the Fighting Against Forced Labour and Child Labour in Supply Chains Act?
This is determined by whether the company is a classified as an entity, as defined in the Act. In the Act, an entity is a company that is either (1.) listed on a Canadian stock exchange, or (2.) has a place of business or does business, in Canada. Companies that fall into the second category must also meet at least two of the following three financial conditions, in any single year, within the past two financial years:
i. Have at least $20 million in assets;
ii. Generate at least $40 million in revenue; and,
iii. Employ an average of at least 250 employees.
Any company that meets the entity test should then determine whether they are also a reporting entity. Reporting entities are companies that produce, sell or distribute goods anywhere in the world, or import goods into Canada. Companies that control an entity engaged in either of the two activities are also considered to be reporting entities.
All entities are subject to the Forced and Child Labour Act, but only reporting entities must report.
What must my company report on?
Companies must submit a report detailing the steps taken to “prevent and reduce the risk that forced labour or 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” in the previous financial year. The report must include information on:
(a) the company’s structure, activities and supply chains;
(b) the company’s policies and its due diligence processes in relation to forced labour and child labour;
(c) the parts of the company’s 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;
(d) any measures taken to remediate any forced labour or child labour;
(e) 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;
(f) training provided to employees on forced labour and child labour; and
(g) how the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.
Who must approve the report?
The report must be approved by the company’s governing body. In the case of joint reports, which cover multiple related companies, the report must be approved by either the governing body of each entity or the governing body of the parent company.
The report must contain a statement that it has been approved and be signed by one or more members of the governing entity.
How does the Fighting Against Forced Labour and Child Labour in Supply Chains Act compare to the Australian and UK Modern Slavery Acts?
The Canadian law imposes more extensive reporting requirements than the Australian and UK Modern Slavery Acts, in that it obliges companies to look at both their own operations and supply chain. The Act also mandates a substantially more extensive set of topics to be covered, when compared to the UK law in particular. Furthermore, Canada will oblige companies to submit an extensive questionnaire, in addition to the report.
One significant weakness of the Canadian law is that it is only concerned with goods. Unlike the Australian and British laws, reporting on services is not mandated. This omission risks leaving commonly used services with well documented forced labour problems, such as cleaning and private security, unscrutinised.
Modern slavery is an umbrella term for a set of human rights abuses, and therefore the scope of abuse covered by the Australian and British laws is more extensive than its Canadian equivalent. This being said, the most common forms of modern slavery in business supply chains are child and forced labour.
While it is possible that a company might be able to report under all three laws with the same document, in most cases companies will have to produce separate reports.
As a prerequisite to reporting under any of the laws, we recommend that companies conduct due diligence of their supply chains and train their staff on modern slavery.
When must my company report?
Companies must submit the report and questionnaire on an annual basis, no later than May 31st of each year. The first reports are due in 2024.
How must my company report?
Companies need to complete the questionnaire on the Public Safety Canada website. The questionnaire includes a field for uploading the report.
RightsDD provide technology, training and consultancy to help companies meet their human rights obligations, please contact us if you require support or further guidance.
