In the global pursuit of ethical business practices, Canada has taken a significant leap forward with the enactment of the Fighting Against Forced Labour and Child Labour in Supply Chains Act (previously Bill S-211). Effective January 1, 2024, this legislative milestone positions Canada within an international context, aligning with an escalating response to business and human rights considerations.
As companies prepare for compliance, understanding the intricacies of this Act becomes paramount, not only for regulatory adherence but also for harmonizing with evolving Environmental, Social, and Corporate Governance (ESG) standards. The Act mandates reporting on forced labor and child labor in supply chains, addressing both ESG pressures and regulatory requirements. Eligible companies must report by May 31, 2024.
Who Is Covered?
The Act applies to government institutions and (private) entities that meet specific criteria, ensuring a broad scope of coverage to address forced labor and child labor risks in supply chains. Entities include corporations, trusts, partnerships, and other unincorporated organizations that meet either of the following criteria.
Listed Businesses: Entities listed on any Canadian stock exchange are subject to the Act's requirements.
Businesses with Presence in Canada: Entities with a place of business in Canada, conducting business or holding assets in the country may also be covered. To determine applicability, such entities must meet at least two of the following size requirements based on consolidated financial statements (in at least one of its two most recent financials years):
At least $20 Million in Assets
At least $40 Million in Revenue
At least 250 Employees
The size-related thresholds are global – assets, employees, and revenue are not restricted to Canadian activities. This implies that for multinational businesses, even if their Canadian operations don't independently meet the threshold, they are still subject to the Act’s requirements.
Once an entity meets the above, it must determine whether it has reporting obligations. Reporting requirements are for entities producing, selling, or distributing goods in Canada or elsewhere or importing goods produced outside Canada. From the guidance:
Production of goods: includes the manufacturing, growing, extracting and processing of goods.
Goods: refers to goods that are the subject of trade and commerce, understood in the ordinary sense of the word.
There is no prescribed threshold for the minimum value of goods that an entity must produce or import for the Act to apply, BUT very minor dealings are excluded.
Guidance is provided for corporate groups, providing for joint reports where the information in the report applies to all entities covered by the report.
Stay tuned for our next blog post, where we'll delve into the specific reporting requirements and obligations for covered entities.
Links:
Guidance - Forced Labour in Canadian Supply Chains