Canada's new legislation: Fighting Against Forced Labour and Child Labour in Supply Chains

Canada's introduction of the Fighting Against Forced Labour and Child Labour in Supply Chains Act on 1 January 2024 marks a pivotal moment in global efforts to combat exploitative labour practices. This legislation sets stringent requirements for businesses operating within Canada or engaging in commerce that touches Canadian markets. Its reach extends beyond Canadian borders, impacting a wide array of international companies operating within or selling goods into Canada.

Key provisions and scope of the Act

The Act mandates rigorous reporting obligations aimed at increasing transparency and accountability in supply chains. It applies to a diverse range of entities, including large corporations, manufacturers, retailers, importers, distributors and even government institutions involved in procurement. These entities must submit annual reports detailing their efforts to identify, mitigate and prevent forced and child labour within their operations and supply chains.

According to the Act, companies must:

• conduct thorough assessments to identify risks of forced and child labour across their supply chains, considering factors such as geographic location, sectors and types of goods involved
• implement robust strategies to address identified risks, including supplier codes of conduct, audits and ongoing monitoring programmes
• actively engage with workers' organisations, civil society groups and other stakeholders to understand and address labour issues within supply chains
• develop training initiatives to educate employees about identifying and reporting indicators of forced labour and child labour.

Building compliance programmes

Effective compliance programmes are crucial for businesses to meet the Act's requirements and uphold ethical standards.

Key components of a comprehensive compliance programme include:

• establishing a comprehensive compliance framework aligned with international standards (e.g. ISO 37301) to guide risk assessment, mitigation strategies and reporting
• building strong relationships with suppliers through collaborative efforts, including workshops, training sessions and ongoing communication on ethical sourcing practices
• implementing rigorous multi-tiered verification processes, such as on-site audits and third-party assessments, to validate supplier compliance with labour standards
• creating accessible channels for workers to report concerns anonymously, supported by whistleblower protection policies in accordance with ISO 37002 guidelines.

Implications for Canadian businesses

Compliance with the Act represents both a challenge and an opportunity for Canadian businesses. While established companies may already have robust compliance frameworks, others must adapt by investing in supply chain mapping technologies, risk assessment tools and employee training programmes. Compliance ensures legal adherence and enhances corporate reputation and credibility among consumers and investors who are increasingly concerned about ethical sourcing practices.

Canadian companies should:

• invest in technology, including advanced technologies such as supply chain mapping software and data analytics to trace and monitor supply chain activities
• strengthen due diligence processes to ensure suppliers comply with ethical labour standards and conduct regular audits
• engage transparently with stakeholders to build trust and demonstrate commitment to ethical sourcing practices.

Impact on non-Canadian companies

Non-Canadian entities with ties to Canada face unique challenges under the Act's extraterritorial jurisdiction. Whether through direct sales, imports or control over Canadian subsidiaries, these companies must navigate complex reporting requirements. Critical steps include mapping global supply chains, conducting thorough risk assessments and developing tailored compliance strategies. Despite challenges like varying regulatory environments and resource limitations, proactive adherence to the Act can bolster reputation and market access in Canada and beyond.

Non-Canadian entities with supply chains that may touch Canada should:

• navigate extraterritoriality to understand how international operations and subsidiaries impact compliance obligations under Canadian law
• collaborate closely with Canadian suppliers and subsidiaries to align practices and reporting standards
• integrate Canadian legal requirements into global corporate governance and compliance strategies.

Global context and collaboration

Canada's legislation reflects a broader international trend towards corporate accountability in human rights and supply chain management. Similar laws in jurisdictions like California and France illustrate global momentum towards ethical sourcing practices. The Act positions Canada as a leader in setting standards for responsible business conduct, encouraging collaboration among international stakeholders to develop unified approaches to combat forced and child labour worldwide.

The Act promotes:

• global dialogue and cooperation on ethical supply chain management through partnerships with international organisations and governments
• sharing insights and best practices with global counterparts to enhance supply chain transparency and accountability
• influencing international trade practices by setting a precedent for ethical sourcing and corporate responsibility.

Challenges and considerations

Implementing the Act poses significant challenges, particularly for multinational corporations with intricate supply chains spanning multiple jurisdictions. Issues such as verifying compliance across complex networks, ensuring supplier adherence and allocating sufficient resources for monitoring and auditing are paramount. Moreover, balancing regulatory compliance with operational efficiency remains a constant concern.

Companies will need to:

• manage the complexities of global supply chains, including subcontracting and multi-tiered supplier networks
• invest in human and financial resources to support compliance efforts, including training and building capacity
• adapt to evolving legal requirements and regulatory frameworks across different jurisdictions.

Future directions and conclusion

Canada's Fighting Against Forced Labour and Child Labour in Supply Chains Act represents more than a legislative mandate; it signifies a global commitment to fostering ethical business practices. As companies adapt and innovate to meet these new standards, opportunities emerge to strengthen supply chain resilience, enhance brand reputation and contribute positively to sustainable development goals. By championing transparency, accountability and collaboration, Canada sets a precedent for responsible corporate citizenship in the 21st century.

In conclusion, the Act serves as a catalyst for change, driving a global movement towards fair and equitable business practices. As governments, businesses and civil society unite to eliminate forced and child labour, Canada's leadership underscores the imperative of collective action in creating a just and sustainable global marketplace.