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On January 1, 2023, Canada’s Fighting Against Forced Labor and Child Labor in Supply Chains Act (the Act) went into effect, creating supply chain reporting requirements for companies that are importing goods into Canada. Below is a summary of the Act and its implications. The Act represents one of many pieces of regulation rolling out across the globe to encourage stronger compliance around sustainability and labor practices.
What You Need to Know (Understanding the Act)
The Fighting Against Forced Labor and Child Labor in Supply Chains Act was passed on May 3, 2023, and is part of Canada’s ongoing efforts to broadly strengthen human rights protections, which include labor rights within supply chains.
The Act sets out to combat child labor and forced labor within supply chains. It defines child labor as any labor or services provided by individuals under the age of 18 that occur under circumstances contrary to Canadian laws or pose mental, physical, social, or moral dangers. This includes instances that interfere with education or fall under the worst forms of child laboras defined by international conventions.
In alignment with international standards outlined in the Forced Labor Convention of 1930, the Act also tackles forced labor, describing it as “any labor or service provided under circumstances that could reasonably threaten an individual's safety or the safety of someone they know.”
Who It Impacts (Scope of the Act)
Crucially, the Act applies to entities involved in the production, sale, or distribution of goods in Canada or internationally. This includes those importing goods into Canada and entities controlling organizations engaged in these activities. The Act outlines specific criteria for entities, ensuring its applicability to organizations with significant assets, revenue, and employment figures, reinforcing its impact on larger corporations.
A pivotal aspect of the Fighting Against Forced Labor and Child Labor in Supply Chains Act is the obligation it places on entities to actively prevent and reduce the risk of forced labor or child labor within their supply chains. The Act mandates that every entity engaged in the production, sale, or distribution of goods in Canada or internationally, or involved in importing goods into Canada, must submit an annual report each year.
What You Need to Do (Reporting Guidelines and Deadlines)
Due by the end of May 2024, the report should outline the steps the entity has taken during its previous financial year to prevent and mitigate the risk of forced labor or child labor within its operations and supply chains. Interestingly, the Act provides some flexibility in compliance. An entity can either submit an individual report or participate in a joint report with other entities.
The report is expected to be comprehensive, covering key aspects such as the entity's structure, activities, and supply chains. Specifically, it should detail the entity's policies and due diligence processes related to forced labor and child labor, identify areas of its business and supply chains susceptible to such risks, and elucidate the steps taken to assess and manage these risks.
Additionally, entities must report on any measures taken to remediate instances of forced labor or child labor, along with efforts to mitigate the loss of income to vulnerable families resulting from these remediation measures. The training provided to employees on forced labor and child labor is also a key aspect of the report, as well as an evaluation of the entity's effectiveness in ensuring that forced labor and child labor are not present in its business and supply chains.
How We Align With the Act
At TO THE MARKET, we pride ourselves on offering products that meet the highest ethical and sustainable standards. The passage of this Act gives us confidence that legislative efforts will continue to improve business’s dedication to responsible business practices. Our vetting survey for clients and makers ensures that we work with stakeholders who fully comply with local labor laws and adhere to the most stringent international labor standards.
These reporting requirements underscore the legislative commitment to eradicating exploitative practices and promote transparency and accountability among entities operating within Canadian borders or involved in the importation of goods into the country. As advocates for ethical and sustainable commerce, this reporting framework is a positive step towards a more responsible and conscientious business landscape.
Looking Ahead
While some provisions of the Act are not yet in force, its existence signals a collective effort to eradicate child and forced labor from supply chains. We eagerly await further developments of this Act, as it fortifies the foundation for a more ethical and sustainable business landscape in Canada.
