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This article was originally published by The Lawyer’s Daily, part of LexisNexis Canada Inc.
Modern slavery is not just an international issue, it’s a Canadian one as well. Over 1,200 companies operating in Canada could be importing products made by children or forced labourers according to a 2016 World Vision report. That represents over $34 billion in everyday goods like clothing, food and smartphones. Having transparent supply chains is now a focus for the federal government.
Following in the footsteps of the UK, Australia, France and California, a bill was introduced in the Canadian Parliament just before the holidays looking at bringing modern slavery legislation to Canada.
Although its status is unclear, particularly as Canada enters a federal election year, the bill marks the latest in a series of developments that suggest Canada is following the global trend of legislative measures aimed at eliminating forced labour, child labour, human trafficking and other forms of exploitation.
The introduction of the bill follows the publication in October 2018 of a report into child labour in supply chains by the House of Commons Standing Committee on Foreign Affairs and International Development (SCFAID). The report highlighted the fact that child labour remains widespread globally, with one in 10 children engaged in child labour often at the lowest tiers of global supply chains.
If passed, the bill would come into force on Jan.1, 2020, and be the third Modern Slavery Act worldwide. The U.K. government passed legislation in 2015 and Australia followed in 2018. France and California also have legislation which targets supply chain disclosure on human rights more broadly. Canada would then be adding to a growing global patchwork of legislative measures aimed at requiring businesses to assess and report on human rights risks throughout their supply chains.
Focus on large businesses and import
Similar to its global counterparts, the bill is essentially a disclosure regime and targets larger and publicly traded companies. As drafted, it applies to certain “entities” which are either listed on a Canadian stock exchange or have a place of business, do business or have assets in Canada and meet certain asset/revenue/employee thresholds. Such entities would be required to submit a public annual report to the government, setting out information on their structure, business, as well as policies, training and procedures for tackling forced and child labour across their supply chains, as well as any remediation measures undertaken.
Interestingly, the bill also contemplates an import ban, allowing the minister to prohibit the importation of goods produced wholly or in part using forced or child labour. Enforcement authorities are provided with broad investigative powers, and the bill includes sanctions for non-compliance, including monetary fines as well as director and officer liability, and authority is provided to the minister to make orders requiring corrective measures.
Although it is unclear whether or not the bill will have governmental support, as we are still awaiting an official response to the SCFAID report, this first step will undoubtedly increase the pressure on the Canadian government to regulate modern slavery.
The framework proposed in the bill mimics in many ways the Extractive Sector Transparency Measures Act, which was passed to implement Canada’s international commitments to fight corruption in the extractive industries, and also follows the creation of an Ombudsperson in Canada for responsible business conduct abroad in early 2018.
Taken together with the legislative developments in other jurisdictions, there is clearly a global push for increased transparency around modern slavery and other human rights issues faced by Canadian companies operating in Canada and abroad. It goes hand in hand with the continued development and market acceptance of global standards such as the UN Guiding Principles on Business and Human Rights. This and other similar multi-stakeholder initiatives are increasingly seen as fundamental by institutional investors and regulators alike in assessing the human rights exposure of companies.
Canadian companies need to start preparing now.
A proactive, early review of risk management systems or investigation of operations for human rights concerns can serve to rapidly identify any risks, prepare for regulation and implement mitigating measures. Such a process might begin with human rights due diligence on the various elements of the supply chain, but an effective risk management system goes beyond policies.
Involving legal counsel in the process can serve to reduce and manage legal and reputational risks both internally and throughout the supply chain, and assist in complying with disclosure obligations. Likewise, lawyers advising companies in this area need to be fully up-to-date with the complex and multilevel terrain of international business and human rights regulation and best practices developed in the context of the other legislative regimes wherever possible.