Canada Implements Mandatory Supply Chain Transparency ESG Reporting: Is Your Organization Ready ?
September 28, 2023
On May 3, 2023, the Canadian Parliament approved Bill S-211, also known as the “Fighting Against Forced Labour and Child Labour in Supply Chains Act.” Its primary objective is to protect vulnerable populations from human rights violations and exploitation.
Key Changes and Impact:
This legislation introduces increased scrutiny and regulatory measures that will compel Canadian businesses to prioritize ESG considerations as a core part of their strategies. Your organization must demonstrate a strong commitment to social responsibility and implement rigorous due diligence processes to identify and monitor the risk of labor practices like forced labor and child labor throughout your supply chain.
Starting January 1, 2023, the law will incorporate the “social” aspect of ESG into business strategies. To reduce the risk of child or forced labor in Canadian supply chains, it includes specific measures and mandates mandatory reporting by May 31, 2024.
Canadian businesses are urged to examine the stipulations outlined in the Act to ascertain whether they will be obligated to furnish this compulsory report. They should also delve into the particulars of what the mandatory report must encompass and consider how the Act can potentially expedite the integration of ESG planning within their respective organizations.
Who Will Be Affected?
Bill S-211 offers explicit guidance on which entities, whether corporate or unincorporated organizations like trusts or partnerships, will be obligated to furnish this obligatory reporting. It is essential to take note of this information if your entity is involved in any of the following activities:
Manufacturing, selling, or distributing goods within Canada or abroad.
Importing goods into Canada that were manufactured outside of Canada.
Exercising control over an entity engaged in either of the aforementioned activities.
To be eligible, the entities mentioned above must satisfy one of the following two conditions:
Be listed on a Canadian stock exchange, or meet at least two out of the following three criteria, based on their consolidated financial statements:
Total assets of $20 million or more.
Revenue of at least $40 million.
An average workforce of no fewer than 250 individuals.
Furthermore, the Act extends its applicability to government institutions, encompassing federal government ministries, departments, and Crown corporations. It’s important to note that additional entities may be subject to the Act in the future, as they can be included through regulatory updates.
All entities that meet the outlined criteria are mandated to submit reports to the Minister no later than May 31 each year.
The report that affected organizations are required to submit must encompass the following components:
Efforts to Prevent and Reduce Risk: Detailed documentation of all actions taken during the preceding financial year to prevent and mitigate the risk of forced labor or child labor at any stage within the organization’s business and supply chain operations. This includes a focus on child labor and forced labor occurrences both within Canada’s borders and abroad.
Information on Entities Subject to the Report: For each entity falling under the reporting requirement, the report should provide information regarding its:
Organizational structure, activities, and supply chains.
Policies and due diligence processes related to preventing forced labor and child labor.
Identification of segments within its business and supply chains that present a risk of forced labor or child labor, along with the steps taken to evaluate and manage this risk.
Measures undertaken to rectify instances of forced labor or child labor.
Actions taken to address income loss among the most vulnerable families that may result from efforts to eliminate the use of forced labor or child labor in its operations and supply chains.
Overview of the training provided to employees concerning forced labor and child labor.
Assessment of the entity’s effectiveness in ensuring the absence of forced labor and child labor in its business and supply chain operations.
This comprehensive reporting requirement aims to provide transparency and accountability in the efforts to combat forced labor and child labor within an organization’s sphere of influence.
Is Your Organization Prepared for Bill S-211 Compliance?
Bill S-211 introduces stringent regulations aimed at preventing human rights violations by addressing forced labor and child labor risks in supply chains. It will also drive the integration of ESG strategies within your business, urging you to conduct due diligence throughout your supply chain tiers to ensure alignment with your values.
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