Canada’s Modern Slavery Act Now in Force

On January 1st, 2024, the Government of Canada ushered in its new Modern Slavery Legislation—the Fighting Against Forced and Child Labour in Supply Chains Act (formerly Bill S-211).

If this is news to you, you’re not alone. This is a first-of-its-kind for the many Canadian organizations that fall under the legislation—as most companies haven’t yet had to disclose this type of information publicly.

This important piece of legislation signifies that Canada is serious about tackling forced and child labour risks globally, catching up to other jurisdictions like the UK, EU, and Australia.

The Act outlines obligations for Canadian companies, or those doing business in Canada (formally called in-scope entities) to report on the steps they’ve taken during the previous financial year (FY) to prevent and reduce the risk of child and/or forced labour being used in their supply chains.

The first reports are due to be submitted to the federal government no later than May 31st, 2024, but certain federally incorporated entities will have to deliver their reports to shareholders before that date.

How do I know if I need to report?

To meet the reporting obligations, you must meet the government’s definitions of an entity, as well as the criteria under Section 9 of the Act.

The Act defines an ‘entity’ as a corporation, trust, partnership, or other unincorporated organization that:

A. Is listed on a stock exchange in Canada; OR

B. Has a place of business in Canada, does business in Canada, or has assets in Canada, and (based on consolidated financial statements) meets a minimum of two of the following criteria for at least one of the last two financial years:

• Has at least $20 million in assets
• Has generated at least $40 million in revenue
• Employs an average of at least 250 employees

Just because you meet the definition of an entity doesn’t mean you are required to submit a report. To be considered an ‘in-scope’ entity that is required to fulfil these reporting obligations you must:

• Produce, sell, or distribute goods in Canada or elsewhere;
• Import goods into Canada that are produced internationally; or
• Control an entity that engaged in the above activities.

The definition of control includes both direct and indirect control and extends down the organizational chain. For example, if a reporting entity controls a business that controls another business, both organizations are captured by this definition.

What do I need to include in the report?

In a nutshell, the inaugural report to the federal government must include and meet all of the following requirements:

• Organizational structure, activities, supply chain information, due diligence processes regarding forced and child labour
• Parts of your business and supply chain that carry a risk of forced or child labour and the steps you’re taking to manage that risk
• The steps the organization has taken in the previous year to prevent and reduce the risk of forced and child labour in its supply chain
• Measures taken to remediate any forced or child labour
• Any training that has been provided to employees on forced or child labour

How you organize the report is up to you, but it needs to be submitted in PDF format and can’t exceed ten pages and 100MB in file size.

Once the report’s been approved by your governing body (whether it’s a board of directors or senior leadership—whichever has the primary responsibility for the governance of the organization), you must fill out and submit an online questionnaire. The purpose of the questionnaire is to collect general information about the reporting organization, along with information needed to comply with the act’s reporting requirements. You can also use the questionnaire as a basis for structuring your report.

Reporting guidance

The Government of Canada has published guidance in preparing the inaugural report required under the Act. This guidance goes over the key reporting requirements and steps you must take if you fall within the scope of the Act.

Your next steps

If you think this Act may apply to your organization, here are some actionable next steps you can take to make sure you meet the May 31st deadline:

• Confirm that you qualify as an ‘in-scope’ entity under the Act. Consult your management and legal team (if possible).
• If you haven’t done so already, conduct an initial risk assessment of your supply chain. This will identify potential forced and child labour risks while considering the industry sector, types of products or services, or countries that are involved.
• Start speaking with your suppliers about their own policies and due diligence processes related to forced and child labour.
• Review, update, or develop and implement procurement and supply chain policies and practices related to forced or child labour.
• Develop and implement training and education for employees on forced and child labour.

While the May 31st deadline isn’t that far away, there’s still plenty of time to prepare your first report under the Act.