The New Canadian Modern Slavery Act: Are you prepared?

Introduction

Modern slavery affects approximately 50 million people[1] worldwide. The problem exists in every type of economy, from highly developed countries like Canada to the poorest nations. Failure to implement measures to curb modern slavery in supply chains can threaten an organization's social license to operate, erode public trust and expose it to legal and financial risks.

Besides overseeing core operations, financial performance, and environmental goals, boards must ensure transparent supply chains and operations with strong anti-slavery measures.

Their expanded role of managing modern slavery risk presents directors with a considerable challenge.

Modern slavery is often misunderstood

Modern slavery is a severe crime, that involves trapping victims through coercion, isolation, and debt bondage. Diverse forms of exploitation–including threats of violence, restricted communication and forced labour–highlight modern slavery's complex, hidden nature.

Forced labour, an alarming aspect of modern slavery, spans all sectors and regions, including developed nations and distant communities. The UN expressed concern over[2] Canada's temporary foreign worker programs, citing forced labour risks and the need for worker protection.

Directors face genuine risks in relation to Modern Slavery

The complex nature of supply chains may inadvertently hide modern slavery. While organizations may closely monitor their Tier 1 suppliers, their difficulty lies in identifying risks and enforcing ethical standards with lower-tier suppliers.

Alongside ethical implications, the effects of modern slavery on organizations are wide-reaching and carry significant operational, legal, and reputational risks.

1. Personal liability

Canada's Fighting Against Forced Labour and Child Labour in Supply Chains Act[3] (formerly Bill S-211) requires organizations to report annually on their measures against forced and child labour in their operations and supply chains.

Directors who sign off on reports containing errors can be held personally liable.

2. Operational disruption

Organizations that cannot prove their products are free from modern slavery may face operational disruption and financial consequences. Products possibly tied to modern slavery may be held at borders, showing a shift towards increased scrutiny and heightened expectations in the fight against modern slavery.

In 2024, US authorities seized luxury vehicles[4], and Canadian authorities impounded solar modules due to suspected ties to forced labour[5].       

3. Reputational risks

As headlines show[6], neglecting human rights violations can harm a company's reputation, shareholder value, and stakeholder trust.

The rising bar for combating modern slavery

Canada's Fighting Against Forced Labour and Child Labour in Supply Chains Act primarily focuses on increasing transparency. Additionally, the Act requires organizations to disclose their efforts to tackle modern slavery. Therefore, organizations should consider how to demonstrate ongoing progress in mitigating these issues.

Global standards demand proactive action

Stricter regulations in jurisdictions like the UK and Australia highlight the global shift towards demanding more proactive measures against modern slavery.

Given this international trend, Canadian organizations should consider moving beyond compliance with reporting requirements and actively commit to protecting human rights. This commitment includes screening and continuous monitoring of their supply chains to eliminate exploitative practices.

Showcasing improvements by 2025 reporting deadline

The initial anti-slavery reports, due in May 2024, will serve as a benchmark for future improvements in strengthening controls and safeguards.

For Canadian organizations, embracing proactive strategies is vital to fulfilling legal and ethical obligations, effective risk management, and maintaining operational stability in a market increasingly focused on social responsibility.

Optimizing supply chains through funding and partnerships

Large organizations face challenges with increasing supply chain transparency given the complexity and scale of global supply chains, diverse regulations, and difficulties in monitoring and enforcing standards among suppliers.

Directors must ensure funding and resources are allocated for technology upgrades for better tracking and reporting, training for employees and suppliers, and audits of their programs, and suppliers.

Canadian organizations can adapt quickly to regulations and unlock value by partnering with experienced global partners in anti-modern slavery initiatives and sustainable supply chain development.

Discover more in "A new era of supply chain transparency."[7]

 

Sarah Kalma

Senior Manager, Deloitte

skalma@deloitte.ca

 

Kolby Kyle

Partner, Deloitte

kokyle@deloitte.ca