Certain apparel companies and other businesses across Canada are now required to report on the measures they are taking to guard against modern slavery in their supply chains through The Modern Slavery Act (also known as The Fighting Against Forced Labour and Child Labour in Supply Chains Act and formerly known as Bill S-211). The Act is designed to increase transparency and accountability in Canadian companies and ensure they are not contributing to forced labour and child labour practices worldwide. This move aligns with similar legislation enacted in other countries such as France, Australia and the UK, which have already implemented modern slavery laws years ago. Recently, the bill went through a third reading in the House of Commons in March, and has since been passed – marking a step forward in the fight against modern slavery in the apparel industry and other sectors in Canada.
Who will this apply to and what are the requirements?
The Modern Slavery Act applies to Canadian-linked companies involved in the production, sale, or distribution of goods anywhere in the world, importing goods into Canada, or controlling a company engaged in any of these activities.
The Bill encompasses companies that are listed on the Canadian stock exchange, have a place of business in Canada, do business in Canada or have assets in Canada, and meets at least two of the following three conditions for at least one of its two most recent financial years:
- Has at least $20 million in assets;
- Has generated at least $40 million in revenue; or
- Employs an average of at least 250 employees
Unfortunately, under this Bill, reporting requirements would not apply to most small and medium-sized enterprises (SMEs), which goes against international frameworks such as the OECD Due Diligence Guidance on Responsible Business Conduct (RBC). The OECD Due Diligence Guidance on RBC emphasizes that all companies, regardless of their size, ownership structure, or sector, should integrate responsible business conduct into their core business operations, supply chains, and business relationships.
How can companies prepare?
Companies and government institutions subject to the Modern Slavery Act are required to prepare and submit an annual report outlining their efforts to reduce the risk of forced labour or child labour in their supply chains.
The report must include information on:
- the entity’s structure,
- policies and due diligence processes,
- the steps taken to assess and manage risks,
- measures taken to remediate forced labour or child labour,
- employee training,
- and effectiveness assessments
These annual reports must be approved by the organization’s governing body and submitted to the Minister of Public Safety and Emergency Preparedness by May 31 of each year, with the first annual report due on May 31, 2024. Reports must also be publicly available, including on their website, and eventually, the Minister will establish a centralized public registry for these reports.
To prepare for the reporting requirements, companies should start with a supply chain review and risk assessment to understand which stakeholders (e.g. manufacturers, suppliers, distributors) in their supply chain are at risk of child labour or forced labour or if remediation needs to occur. These risks and issues should also be considered as part of a broader ESG strategy, even if the organization is not currently subject to the Act.
Going Beyond Compliance: Strategies for Addressing Modern Slavery
If you’re an SME or would like to go beyond simply complying with the Modern Slavery Act. Consider implementing the following strategies for addressing modern slavery.
- Be prepared and proactive! Don’t be reactive or have a zero-tolerance policy. Evaluate risks and work collectively with your suppliers to mitigate against forced labour and child labour. Having a zero-tolerance policy may just encourage suppliers to hide the problem rather than address it properly.
- Have strong long-term relationships with suppliers: create engagement and good relations to support worker wellness.
- Ask the right questions and have conversations that shift a supplier relationship from policing to partnership.
- Build out your Human Rights Due Diligence (HRDD) – truly understand the challenges your company faces around forced labour and child labour and what specific actions you are taking to address it while communicating the findings and practices to the public.
If you’re interested in learning more strategies or recommendations on addressing child labour in the supply chains for Canadian garment companies, we’d recommend the following:
- the Canadian Ombudsperson for Responsible Enterprise (CORE) study on HRDD and the Risk of Child Labour in the Global Operations of Canadian Garment Companies
- the online presentation and panel discussion with the Danish Institute for Human Rights, The Centre for Child Rights and Business, Fashion Takes Action and the CORE where they discussed the results of the CORE’s study, other opportunities and best practices.