Canadian businesses will be held to more rigorous reporting standards as a result
As shareholders and stakeholders alike pay more attention to corporate Environmental, Social and Governance (ESG) matters, Canada is expected to soon join other Western nations in tabling, and even passing, legislation on modern-day slavery in supply chains.
“In Canada, we expect to have a modern slavery act passed this year,” says Kellie Johnston, a senior member of Norton Rose Fulbright LLP’s global risk advisory practice, from her Calgary office. Her firm has been at the table in these discussions, Johnston told Canadian Lawyer.
Last April the All-Party Parliamentary Group to End Modern Slavery and Human Trafficking announced the completion of the draft Transparency In Supply Chains Act (TSCA). The parliamentary group was launched in April 2018.
Elsewhere, California, the United Kingdom, Australia, and European countries such as France, the Netherlands and Norway have already passed legislation requiring companies to confirm that they have found not forced labour, child labour or human trafficking in their vendor supply chains. Companies in these jurisdictions must also publish their findings on their corporate websites, says Johnston.
And in the UK and Australia, the company’s board of directors must sign off on such a report, says Stephen Pike, a partner in Gowling WLG in Toronto who advises global and Canadian businesses.
“What we’re seeing around the world is more and more legislation and mandatory due diligence,” says Pike, who recently published the third in a trilogy of articles on modern slavery issues in businesses and supply chains in Canada.
“If Canada moves ahead, this will put pressure immediately on Canadian companies.”
Some companies are already having to comply with this, he adds, if they do business in jurisdictions such as the U.K. that have already enacted anti-slavery supply chain legislation. “Modern slavery legislation in various jurisdictions goes beyond public companies, and focusses on companies doing business in that jurisdiction.”
The issue has gained momentum as investors and other stakeholders are putting pressure on corporations to achieve ESG goals. Pike says that in the past two years, shareholder proposals seeking greater reporting on supply chains have been put forward at annual meetings of two Canadian public companies, and in the U.S. activist shareholders have tried to push through similar changes.
Although the two Canadian public companies were a retailer and a dairy manufacturer, industries such as mining have also been paying attention to their supply chains. This is, in part, in light of class-action lawsuits such as that against Vancouver-based Nevsun Resources, charged in 2014 by three Eritreans of using forced labour at its Bisha mine in Eritrea. (The Supreme Court of Canada heard arguments in the case in January 2019.)
“That is an issue from the supply chain perspective,” says Johnston. “And certainly from an ESG or sustainability perspective, mining companies are going to need to and want to get ahead of that, and make sure that they go through their supply chain and ensure that they don't have any of those kinds of risks there.”
Modern-day slavery includes child labour, debt bondage labour, forced labour, and human trafficked labour. According to the International Labour Organization, 152 million children around the world are child labourers, with 73 million of those engaged in hazardous work. Meanwhile, an estimated 40.3 million adults are in modern slavery, including 24.9 million in forced labour.
“It’s becoming one of the most prominent social issues in terms of ESG,” says Pike, as corporate boards of directors shift their focus more to stakeholders’ interests.
In the United States, he notes, global asset manager BlackRock CEO Larry Fink wrote an open letter to CEOs, telling them they must deliver not only solid financial performance, but demonstrate how they make a positive contribution to society. And last year the Business Roundtable “got 118 CEOs of American companies to sign a statement of corporate purpose that those companies share a fundamental commitment to all their stakeholders,” he says.
In his view, dealing with modern slavery in supply chains “absolutely will become more important to Canadian companies.”
The Transparency In Supply Chains Act would impose obligations on Canadian businesses to take steps to prevent the use of modern slavery in their overseas supply chains, and create reporting obligations on qualifying entities, including completion of a supply chain questionnaire on a company’s policies and procedures related to forced labour, child labour, and human trafficking.
It would also establish a duty of care for all businesses meeting a regulated annual turnover threshold.
France established a duty of care last year that “creates an added layer of responsibility on companies to ensure that they have gone through their supply chain and they don't have modern slavery,” says Johnston. Canada has discussed this as well, she adds, as there has been criticism of the ineffectiveness of legislation in the U.K. and other jurisdictions that requires companies to simply report on their supply chain.
