In anticipation of the upcoming second reporting period under the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the "Act"), Public Safety Canada is taking steps to deepen its insight into the disclosure made by entities in 2024 and bring more clarity to the reporting process for subsequent cycles. These steps include:
- the release of in-depth data analysis on the first reporting cycle under the Act through the tabling of the Act's first report to Parliament on September 27, 2024 (the "2024 Report"); and
- the expected publication of updated guidance later this fall aiming to close gaps in the legislation to allow for more predictability on the application of the Act and help companies and government institutions better understand reporting expectations.
These steps are welcome in light of the questions, concerns and confusion expressed in the inaugural year regarding who must report and how the report must be made.
In this bulletin, we examine the 2024 Report's data and explore what it means for reporting entities for the coming reporting year.
Public Safety Canada's 2024 Report to Parliament
Below are a few key takeaways from the 2024 Report:
Thousands of Report Filed. When the Senate first considered this new legislation in 2022, it noted that the Act may cover 8,000 to 10,000 entities, a prediction that now rings true. As of May 31, 2024, the deadline for submitting the required reports, 5,795 submissions had been received by Public Safety Canada from entities and government institutions. Among these submissions, 2,086 were reports covering more than one entity, for example, a parent company and its subsidiaries or multiple entities belonging to the same corporate group. Consequently, the total number of entities caught by the Act could be close to 8,000.
No Enforcement in the First Year. No orders for corrective measures were made, no charges were laid and no fines have been imposed for non-compliance during the inaugural year, whether for late submissions or otherwise. This is despite over 500 reports being submitted after the filing deadline (late reports were not considered in the data analysis for the 2024 Report). Instead, the government indicated in its 2024 Report that it "prioritized raising awareness of the reporting requirements to encourage meaningful action." This approach is consistent with the historical patterns of the federal government in rolling out similar legislation. However, we are not aware of any signals that the same level of leniency will be granted in the 2025 reporting cycle and caution that Public Safety Canada will likely be less accommodating in future years.
Most Represented Industries.Manufacturing, wholesale and retail companies represented the major proportion of filers (82%). These industries may therefore remain the principal focus of the federal government moving forward, both with respect to educational initiatives and enforcement.
International Reach. Approximately 18% of the entities who submitted their reports were located abroad, representing 1,020 foreign entities. These were mostly from the US (the other countries were not specified). This may mean that many more foreign entities could be subject to the Act without yet being aware of this.
Rejected Reports. Public Safety Canada confirms that certain reports were rejected and have not been published in the online catalogue, because they did not pass the quality assurance check. This includes reports that contained no information relevant to the Act or that did not include a proper attestation. However, the 2024 Report did not comment on whether Public Safety Canada notified the entities whose reports weren't published in the online catalogue.
Revised reports. The Act allows entities to file revised reports in order to make corrections or add additional information to their original submission. Of the 5,795 reports received before the reporting deadline, 135 reports were revised reports, which account for approximately 2.3% of timely filers.
Assessment of Risks. About one in five entities (22%) reported that they had not yet started the process of identifying risks in their operations or supply chains. For those entities that had at least started the process of identifying risks, the primary areas of concern raised are the raw materials or commodities used in their supply chains, the sector or industry they operate in, tier 1 suppliers, the location of activities, operations or factories and the types of products sourced.
Policies, Due Diligence and Training. Most entities that filed a report (71%) indicated having policies and due diligence processes in place related to forced labour and/or child labour. However, less than half of entities (44%) provided some form of training to employees on modern slavery risks. The sectors reporting the highest rates of training, policies and due diligence processes are professional, scientific and technical services, finance and insurance, and manufacturing.
New Guidance and Next Steps
With updated guidance expected later this fall, we anticipate Public Safety Canada may seek to clarify its interpretation of the scope of the Act's application. As a result, it would be prudent for entities and government institutions to rethink their previous analysis on the applicability of the Act to their business in light of the updated guidance.
At the same time, the Canadian government has been facing increased pressure, particularly from the US, to be vigilant in blocking imports of goods made by forced labour. Although the Act simultaneously amended the Customs Tariff to prohibit imports produced wholly or partially with child labour (in addition to forced labour), Canadian authorities have not yet officially released new processes or controls to stop imports made from forced labour or child labour at the border.
Bearing the likelihood of increased border enforcement, there is a compelling argument for companies to review their operations and supply chains, including their contracts, training and supplier codes to reduce forced labour and child labour risks, even if they are not required to report under the Act.
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