- August 23, 2022
What Canada’s Proposed Supply Chain Diligence Law Means for Retailers
The Canadian government is cracking down on forced labour in the supply chain. In response to growing consumer concerns and criticisms that the country has been slow to respond to modern slavery, Canada’s Senate is moving forward with Bill S-211, the Fighting Against Forced Labour and Child Labour in Supply Chains Act, which passed its second reading and been referred to the Standing Senate Committee on Human Rights. Given the bill’s widespread support, it’s expected to pass soon and could go into effect as early as Jan. 1, 2023.
The need is clear. According to some estimates, Canada imports an estimated $34bn worth of products that may be made in part with forced or child labor every year. Supporters of S-211 say the bill is overdue, claiming that the country has become a “dumping ground” for goods made by slave labour that other countries have rejected.
The bill has been likened to the UK’s Modern Slavery Act of 2015 and Australia’s Commonwealth Modern Slavery Act of 2018, both of which place heightened reporting requirements on businesses importing goods. The bill also follows on the heels of the United States’ seismic Uyghur Forced Labour Prevention Act (UFLPA), which went into effect last month. That act requires importers to demonstrate to U.S. Customs that their goods were produced with no materials from the Xinjiang Uyghur Autonomous Region of China under the presumption that all materials from that region may be the product of forced labor.
Canada has already imposed sanctions on the Xinjiang Uyghur region and requires importers doing business in that region to sign a declaration that they are not knowingly sourcing from suppliers guilty of human rights violations. The Canada Border Services Agency also has the authority to detain imported goods on the suspicion of forced labor, but it has not made enforcement a priority. According to reports last year, Canada seized just one shipment of goods from China in a 21-month period, compared to more than 1,400 seizures made by United States customs during that same span.
Bill S-211 would bring much more serious scrutiny to the supply chain. While supporters concede it’s not enough to eliminate forced labor on its own, it’s seen as a first step, and a prelude to tighter regulations that are likely to follow.
Here’s what the legislation would mean for Canadian retailers and importers.
Which Companies Would Be Impacted?
The proposed legislation would impact narrowly defined government and corporate entities that produce, sell, or distribute goods in Canada or who import goods to Canada. Impacted entities are either listed on a Canadian stock exchange or have an establishment in Canada and have met two of the following three criteria during the last two years: they have generated income of at least $40 million, they have assets of at least $20 million, or they employ an average of 250 or more employees.
What Would S-211 Do?
Bill S-211 requires entities to prepare annual reports on their efforts to prevent forced labour and child labour from being used in goods imported to Canada. The report must highlight risks the entities have identified in their supply chain, and it must be distributed to the entities’ shareholders along with its financial statements. The reports will be made available to the public in an online registry from the Minister of Public Safety and Emergency Preparedness.
Entities that do not comply with the requirements will be subject to fines of up to $250,000.
How Can Brands and Retailers Prepare?
Canadian businesses should continue following Bill S-211 and prepare for its likely passage. To ensure their compliance, businesses should evaluate their supplier onboarding processes. Procurement leaders need to enforce their companies’ compliance standards at the earliest stages of the supplier life cycle, during the bidding and selection processes.
Businesses also need transparency into their extended supply chain, and that requires having the right technology solutions in place. CBX Cloud grants brands and retailers crucial visibility. Our system’s traceability tools allow companies to map their supply chains to the Nth tier, while our responsible sourcing platform provides a complete solution to manage all suppliers – from vendors to factories to raw material providers – and to ensure their compliance with environmental, social and governance (ESG) requirements.
CBX Cloud’s supplier relationship management platform safeguards against compliance violations by monitoring suppliers’ audit and inspection statuses, automatically preventing merchandisers from placing orders with non-compliant suppliers. At every step, CBX Cloud ensures your company is living up to its environmental and social standards.
To learn more about how CBX Cloud can help your business stay ahead of tightening global regulations, contact us today.