Understanding Canada’s Modern Slavery Act
What is the Modern Slavery Act in Canada?
Canada’s Modern Slavery Act (the Act), is legislation aimed at eradicating forced labor and child labor in Canadian corporate supply chains; became law on January 1, 2024. Designed to increase transparency, this Act mandates new reporting responsibilities, including an annual public disclosure detailing corporations’ proactive measures to detect and prevent instances of forced and child labor. Additionally, it modifies the Customs Tariff to ban the import of goods linked with these grave human rights offenses.
Tackling human rights violations, especially forced labour and child labour, is a critical element of corporate sustainability, attracting increased focus in recent years. The Modern Slavery Act in Canada has been passed with the objective of protecting consumers from inadvertently supporting slavery due to insufficient information about the ethical integrity of the supply chains behind the goods that they purchase.
This groundbreaking legislation echoes the path traced by nations like Australia, France, the UK, and Germany, each having its own version of modern slavery laws
Who has to report under the Modern Slavery Act?
The Act applies to a business (including a corporation, trust, partnership or unincorporated organization) that:
- Produces, sells or distributes goods in Canada or elsewhere;
- Imports goods into Canada; or
- Directly or indirectly controls a business that is engaged in either activity described above.
Provided the business:
- Is listed on a Canadian stock exchange; or
- Has a place of business, assets, or conducts business in Canada, provided they meet at least two of the following criteria:
- has a minimum of $20 million in assets,
- has a minimum of $40 million in annual sales or
- has at least 250 employees
This includes, for example:
- A foreign company that owns a facility in Canada (i.e. has assets in Canada).
- A Canadian company with all of its operations abroad is subject to the Act because it “produces, sells or distributes goods in Canada or elsewhere.”
- A foreign business / non-residents controlling a Canadian entity might also be subjected to the Act’s reporting requirements if they meet the thresholds described above, and depending on further regulatory instructions issued by the government.
Crucially, federal government institutions, encompassing federal government ministries, departments, and Crown corporations, are also covered by the Act. These institutions must create and present an annual report outlining their efforts to identify and minimize the risks associated with forced and child labour throughout their supply chains.
What are the reporting obligations under the Modern Slavery Act in Canada?
Under the Act, Canadian corporations are required to fulfil specific disclosure requirements. This involves presenting critical information in an annual Supply Chain Risk Report, including:
- The entity’s structure, activities, and supply chains.
- Policies, procedures and due diligence conducted to mitigates forced and child labor risk.
- Identifying any part of the business or supply chain posing risks of forced labour or child labour, and explaining actions undertaken to evaluate and alleviate such risks.
- Reporting on measures implemented to rectify instances of forced labour or child labor and actions taken to compensate affected families for any loss of income.
- Showcasing the corporation’s compliance with modern slavery awareness training for staff.
- Performing a self-assessment addressing the corporation’s effectiveness in ensuring that forced or child labor is not part of its operations.
Companies subject to the Act are also required to complete an online questionnaire in addition to submission of the formal report to government.
It’s important to note that the Supply Chain Risk Report must be approved by the organization’s governing entity, such as the Board of Directors, and delivered to the Minister of Public Safety and Emergency Preparedness by May 31 each year.
What are the corporate responsibilities under the Modern Slavery Act in Canada?
Corporations that fall under the jurisdiction of the Act must begin their preparatory activities before the deadline.
The Act imposes critical compliance obligations on both Canadian governmental bodies and the private sector. It underscores the necessity for these entities to undertake human rights risk assessment, focusing on the proactive detection of forced labor and child labor within their operational supply chains.
The reporting obligations under the Act are designed to significantly amplify the transparency and accountability of corporate supply chains. This legislation aims to shed light on instances of modern slavery, thereby subjecting Canadian businesses to an intensified scrutiny of their human rights practices by the public and other stakeholders.
Organizations need to expedite the establishment of their compliance mechanisms well before the deadline for their inaugural report. Moreover, considerations regarding the risks associated with modern slavery should be integrated into their more comprehensive sustainability strategies and reflected through their Environment, Social, and Governance (ESG) disclosures.
Embracing these regulations is not solely about statutory compliance, but is paramount for upholding ethical business practices within the Canadian context.
What are the implications for businesses not complying with the Modern Slavery Act in Canada?
The Modern Slavery Act grants broad government authority to conduct inspections and verify compliance. Offenses under the Act include failure to comply with reporting requirements, providing false or misleading statements to the Minister, non-compliance with an order issued by the Minister, failing to participate in an inspection, or obstructing an inspection.
The Act gives rise to personal penalties and poses criminal liability for corporate Directors and Officers, supporting the concept of a director’s fiduciary duty to act in good faith and uphold the reporting organization’s best interests. Organizations or individuals who fail to comply with the Act, or make false or misleading statements, are subject to summary conviction with fines up to $250,000.
Elevate Your Compliance: Master the Modern Slavery Act with Shift-Critical
In the evolving corporate landscape, adhering to the Act is a legal necessity and a cornerstone of ethical business practice. Organizations reaching the defined thresholds must urgently scrutinize their supply chain operations through a lens of human rights due diligence. Ensuring robust governance structures is vital to pinpoint and alleviate the risks associated with child labor or forced labor.
At Shift Critical, our unparalleled experience spans corporate sustainability strategy, ESG performance enhancement, and meticulous human rights due diligence. Armed with cutting-edge solutions and tools, we simplify the complexities of reporting and managing your sustainability obligations. Our approach is designed to fortify your governance strategies, enabling the effective identification, mitigation, and prevention of human rights risks across your operations and supply chain.
Here’s how Shift Critical becomes your ally in compliance and corporate responsibility:
- In-depth Human Rights Due Diligence: Our experts focus on areas within your business and supply chains prone to risks of forced labor and child labor.
- Tailored Policy Development: From Sustainability Policies to Human Rights Policies and Supplier Codes of Conduct, we ensure your network is well-informed and aligned with your commitment to eradicating forced and child labor.
- Staff, Leadership and Board Training: Equip your staff and Executive teams with the tools to meet the Act’s stringent reporting requirements, fostering a culture of compliance from the top down.
- ESG Reporting Excellence: Navigate the intricate requirements of ESG reporting and compliance with our tailored Supply Chain Risk Reports, setting a new standard in transparency and accountability.
Don’t let compliance uncertainty hold your organization back. Contact Shift Critical now for a consultation on navigating the Modern Slavery Act with confidence. Leverage our expertise to safeguard your operations, reputation, and future. Embrace the opportunity to lead with integrity and positively impact your industry and beyond.
Connect with Shift Critical for dedicated support in meeting and exceeding your Modern Slavery Act compliance obligations.
