Updated guidance on business reporting obligations under Canada’s supply chain transparency legislation

By Christine Pound, ICD.D., Twila Reid, ICD.D., Sarah Dever Letson, CIPP/C, Hilary Newman and Daniel Roth

Introduction

As we reported on November 30, 2023, the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”) came into force on January 1, 2024, with the first reporting deadline on May 31, 2024. The Act creates a legal obligation on certain organizations to publicly report on the risk of forced labour and child labour in their supply chains. Public Safety Canada has now published updated guidance for reporting entities on how to prepare and submit their reports.

Who needs to report

The Act applies to corporations, trusts, partnerships and other unincorporated organizations that either:

1. are listed on a stock exchange in Canada; or
2. have a place of business in Canada, do business in Canada, or have assets in Canada, and that meet at least two of the following conditions for at least one of their two most recent financial years based on their consolidated financial statements:

• 1. $20 million in global assets;
  2. $40 million in global revenue; or
  3. employs a global average of at least 250 employees;

and that are:

1. producing, selling or distributing goods in Canada or elsewhere;
2. importing goods into Canada; or
3. controlling an entity engaged in any of these activities.

Requirements of the report and questionnaire

Public Safety Canada has clarified that reporting entities must prepare a report for publication on the entity’s website and also complete an online questionnaire. The report will also be published in a publicly accessible government database. Each reporting entity must report the steps they took during the prior financial year to prevent and reduce the risk that forced or child labour was used at any stage of the production of goods in Canada, or of goods imported into Canada, including:

1. the entity’s structure, activities, and supply chains;
2. the entity’s policies and due diligence procedures related to forced and child labour;
3. the parts of the entity’s business and supply chains that carry a risk of forced or child labour being used and the steps taken to assess and manage that risk;
4. any measures taken to remediate any forced or child labour;
5. any measures taken to remediate the loss of income to the most vulnerable families due to any measure taken to eliminate the use of forced or child labour in the entity’s activities and supply chains;
6. the training provided to the entity’s employees on forced and child labour; and
7. how the entity assesses its effectiveness in ensuring that forced and child labour are not being used in its business and supply chains.

The recent Public Safety guidance discusses minimum standards, joint reporting requirements, official language requirements, page limits, and approval and attestation requirements, including specific wording for the attestation itself. Entities should use discretion in determining the appropriate level of detail to include in their report proportionate to their size and risk profile. All reports must reference the activities undertaken during the entity’s previous financial year.

The online questionnaire has mandatory closed-ended questions and optional open-ended questions which address the Act’s requirements.

Given the extensive requirements of the report and questionnaire and the pending deadline of May 31, 2024, it is recommended that businesses begin the process of developing their report as soon as possible.  Failure to comply with reporting obligations or remedial measures under the Act may result in summary conviction and fines of up to $250,000.

This client update is provided for general information only and does not constitute legal advice. For more information please contact the authors, or a member of our Corporate Governance group.

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