It is estimated that Canada imports $20 billion worth of products at risk of modern slavery annually.

Around the world, supply chain due diligence regulations are being proposed or enacted to force large companies and organizations to address supply chain issues. Increasingly, mandatory environmental, social and corporate governance (ESG) reporting regulations require specific information regarding due diligence around ethical supply chains. This due diligence addresses risks such as forced labour and child labour, environmental degradation and deforestation.

In Canada, the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the Modern Slavery Act) came into force on January 1, 2024 with the first reports due to be filed with May 31, 2024. The Modern Slavery Act requires annual reporting by certain government organizations and large entities on due diligence activities related to the prevention of forced and child labour in supply chains.

The Modern Slavery Act aims to "increase industry awareness and transparency and drive businesses to improve practices." If you would like to know more about whether your company is captured by the Act and your reporting obligations, we discuss these in our blog Guidance Released on Modern Slavery Act Reporting.

The risk of modern slavery is potentially present in the supply chains of industries such as agriculture, fashion and electronics, or any manufactured or consumer good made outside of Canada. Proactively advancing supply chain due diligence and disclosure is essential for satisfying Modern Slavery Act reporting requirements in Canada.

To prepare for reporting, it is critical for companies to identify and mitigate the associated legal risks, including regulatory enforcement, commercial litigation and seizure of goods with a focus on the standards, duties and obligations set out in the Modern Slavery Act. As legal requirements for supply chain due diligence evolve, so do the sources and velocity of legal risk.

By conducting due diligence processes, companies are better able to identify risk and make decisions that to limit purchasing products potentially made through forced labour or child labour.

What is supply chain due diligence?

Supply chain due diligence is a process by which a business seeks to identify, mitigate, manage and prevent related adverse impacts and risks from their operations. If applicable, organizations disclose these risks and mitigation efforts under listed entities continuous disclosure obligations.

What actions should a corporation take now?

Action Area Objects & Goals Action Items & Next Steps
Policies & Processes Must have corporate policies and processes that prevent and reduce the risk of forced labour or child labour
  • Develop policies and processes right-sized for your organization including those related to commercial contracts, employee and supplier conduct and grievance mechanisms
  • Review and refine existing policies and processes to address Modern Slavery Act requirements
Mapping & Risk Develop clear understanding of the parts of the business and supply chains that carry a risk of forced labour or child labour
  • Review supply chain mapping
  • Conduct or facilitate assessments to identify areas of risk related to sector, products, and jurisdictions
Training Ensure training for employees and suppliers related to forced labour and child labour: legal requirements, risks, policies and processes
  • Create or facilitate training for all levels of employees, from board members to front-line supply chain personnel responsible regarding Modern Slavery Act requirements and corporate supply chain due diligence
  • Evaluate employee and supplier training programs and provide recommendations for risk mitigation
Verification Approach to verification of corporate due diligence activities to ensure forced labour and child labour are not being used in its business and supply chains
  • Conduct assessments and benchmarking of the supply chain due diligence program to identify and incorporate leading practices
  • Obtain legal advice relating to internal audits to inform the audit program, interviews, process reviews, and recommendations
Reporting Annual public reporting on supply chain due diligence activities to satisfy legal requirements
  • Prepare or review annual Modern Slavery Report and related disclosures
  • Assist in managing responses to stakeholder questions and concerns
  • Update Annual Information Form, if applicable, to address Modern Slavery Act Policies
  • Update and File on SEDAR+ Supplier Code of Conduct, if applicable

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.