The first mandatory report under Canada’s new anti-modern slavery law is due on May 31, 2024. Are you ready to submit? Public Safety Canada released a much-awaited guidance on Fighting Against Forced Labour and Child Labour in Supply Chains Act to help you prepare, as well as an online questionnaire, an additional reporting burden.
Canada’s law is meant to provide supply-chain transparency through annual reporting. It requires public and private entities to submit annual reports of their due diligence programs to show that they and their suppliers are not using forced labor or child labor. The report due this May should cover an organization’s activities and actions in 2023.
When the Act passed on May 3, 2023, some stakeholders were unsure about certain aspects, including which entities were affected, what it means to “do business in Canada,” and how to calculate the Act’s financial thresholds.
Public Safety Canada answered any lingering questions about the law when it released a guidance and an online questionnaire on Dec. 20, 2023.
Guidance Addresses Common Questions
The guidance explains the content and information entities must provide in the report and how to go about the process. Here are some answers to five of the most common questions about the reporting requirement.
#1 Which entities are affected? What does “doing business in Canada” mean? “Entity” means a corporation, trust, partnership, or other unincorporated organization that’s either listed on a stock exchange in Canada or does business or has assets or has a place of business in the country. An organization is under the law’s jurisdiction if it has met at least two of these conditions recently: at least $20 million in assets; generated at least $40 million in revenue; employs an average of at least 250 employees.
“Doing business in Canada does not require having a place of business in Canada,” according to the guidance. The Act follows the criteria applied by the Canada Revenue Agency in defining an entity and the meaning of “doing business” in the country.
#2 How do you calculate thresholds under the Act? Asset and revenue values must be calculated based on consolidated financial statements. Asset and revenue values should be converted into Canadian dollars if those statements use a different currency. “Size-related thresholds refer to total (global) assets, revenue and employees,” the guidance said.
#3 What are the report’s length and format requirements? Your report should not exceed 10 pages. It can be in either English or French or both. It must be submitted as a PDF file not exceeding 100MB. Here’s an exception: if your report is both in English and French, then you may submit up to 20 pages.
#4 Should every entity within a corporate group submit a report? Not necessarily. A corporate group may submit a joint report if the information applies to its subsidiaries. If an entity within the corporate group has different activities or risk profiles from the other subsidiaries, then it should submit a separate report.
#5 Can companies that comply with modern slavery regulations in other countries submit the same information for the report mandated by Canada? Yes, if the information is relevant to the Canadian Act. Public Safety Canada acknowledged that modern slavery laws in various countries can sometimes overlap or diverge. Hence, companies are allowed to submit the same information as part of their Canadian report.
“For the purpose of transparency, entities should indicate in their report whether they also report under legislation in other jurisdictions,” the guidance added.
Online Questionnaire is Required
Public Safety Canada has provided an online questionnaire you may use as a guide for writing the mandatory annual report. Answering the online questionnaire is required, on top of the report.
The questionnaire includes both mandatory and optional questions meant to identify your organization, assess compliance, and offer a chance for you to provide explanation through some open-ended questions. It also confirms that the report you are submitting has been approved by the right people within the organization through a signed attestation.
The questionnaire includes the following sections:
- Identifying Information: 11 items; some questions have multiple parts.
- Annual Report: 18 items; some questions have multiple parts; some are open-ended.
- Reporting for Government Institutions: 17 items; some are open-ended.
Importance of Due Diligence
Due diligence is at the heart of Canada’s new law against modern slavery. The mandated annual report should describe how your due diligence process aligns with your ESG policies and program.
The Canadian government expects organizations to use due diligence not only in identifying – but also in responding – to “the real and potential adverse impacts of activities throughout the supply chain,” according to the guidance.
An advanced third-party risk management platform such as Ethixbase360 can facilitate and accelerate reporting and due diligence compliance. The platform provides robust third-party risk assessment, screening and monitoring, training, and remediation tools to ensure compliance with modern slavery regulations in Canada, the U.K., Australia, and other countries.
If you need practical tips and insights into Canada’s new anti-modern slavery law, attend the Modern Slavery and Human Rights Solution webinar on Feb. 8, 2024, at 11 a.m. EDT.
Contact Ethixbase360 for more information and expert guidance.