March 1, 2024
Updated April 17, 2024.
By May 31, 2024 (or possibly earlier for federally incorporated Reporting Entities), Reporting Entities under the federal Fighting Against Forced Labour and Child Labour in Supply Chains Act (Bill S-211) must submit their first Questionnaire and their first annual Report. The Act (aka the “Modern Slavery Act”) took effect on January 1, 2024. While the overarching reporting requirement is transparency, on December 20, 2023, Public Safety Canada launched its website and released much-anticipated Guidelines (which it updated on March 27, 2024) clarifying how to complete and submit the mandatory Questionnaire and Report.
If you’ve determined you’re a “Reporting Entity” with disclosure obligations under the Act, here’s a five-step approach to help you fulfill them.
1. Familiarize Yourself With Disclosure Requirements
Before you dive into completing the Questionnaire and preparing your initial Report, familiarize yourself with the information you’re obligated to disclose so you can use it to guide your information-gathering process.
Mandatory Online Questionnaire. You must complete an online Questionnaire in addition to the Report. You can review the Questionnaire’s questions in advance. It’s also helpful to start here because the Guidelines suggest using the Questionnaire as a template or guide to develop your Report. The Questionnaire includes both mandatory and optional questions. Some mandatory questions merely collect information to identify the Reporting Entity; others collect information necessary to gauge its compliance with the Act. You can, however, expand on your answers to mandatory closed-ended questions in your answers to the optional questions. Given the growing pressure for corporate transparency and increasing adoption of ESG (Environment, Social, Governance) principles and the fact the completed Questionnaire will likely be publicly accessible, this gives you the opportunity to demonstrate to your stakeholders and the general public leadership in your sector.
Mandatory Report. The Act requires you set out in the Report the steps you’ve taken to prevent and reduce the risk that forced labour or child labour is used at any step in your production of goods or of goods you’ve imported into Canada during your previous financial year. You must also report all the following information as part of the Supply Chain Risk Report:
2. Map Out Your Corporate Structure & Supply Chains
Begin your information-gathering exercise by creating a map of both your organizational structure and your supply chains.
Corporate Structure. If you’re a standalone organization with no subsidiaries and no parent, this step will be straightforward. However, if you directly or indirectly control another organization (your subsidiaries) and/or another organization directly or indirectly controls you (your parent), an internal conversation about which related organizations are Reporting Entities under the Act and how each related Reporting Entity will fulfill its obligations is in order. So start by mapping out your organizational chart and gathering information about all related organizations with an initial view to identifying which are Reporting Entities under the Act and to inform your internal conversations about how each will meet its reporting obligations. For example, will each Reporting Entity undertake the reporting process relative to its own activities and supply chains (single report(s)), or will the ultimate parent do so in relation to all its subsidiaries (joint report)? The Act does offer a few Reporting options. You won’t likely be in a position to determine the one that fits best until you’re further along in the process but it’s helpful to keep them in mind at this stage so you can make a decision as early as possible:
Supply Chain. Once you’ve identified all related Reporting Entities, map out the entire supply chain for each. The Guidelines clarify that “supply” chain includes suppliers of goods and services that contribute to your production of goods produced, sold, distributed or imported, from sourcing the raw materials to the final product. So, it covers both direct and indirect suppliers and service providers, both in and outside Canada, but excludes end users or purchaser. Depending on the extent of the supply chains, it could make it more manageable to break suppliers into Tier 1 and Tier 2 supply chains based on materiality of the contracts involved.
3. Conduct a Self Audit
Conduct a self audit to gather information about your activities and your supply chain so you can identify the parts of your business and supply chains that carry a risk of using forced or child labour, the steps you’re already undertaking to assess and manage that risk in key reporting areas and identify any gaps. As you’re moving through this process – necessary for each Reporting Entity in your organizational structure – keep in mind:
Governance Structure. Ask questions such as:
Policies. Review your policies and procedures and ask whether you have the relevant ones and whether they’re current, and particularly that they address forced and child labour, such as a:
Procurement. Review your supply chain and ask questions like:
Internal Education & Training. Determine whether and what education and training you’re conducting about forced and child labour at all levels of your organization:
4. Assess & Remediate Risks
Now that you’ve gathered the necessary information, use it to assess the forced and child labour risks in your business and your supply chain and how you can remediate them.
Assess Risks. Determine:
Remediate Risks. The existence of gaps doesn’t mean you aren’t in compliance with the Act; remember, the Act doesn’t require Reporting Entities to take any specific steps to remediate the risk of forced and child labour in your supply chains, only to disclose them. And since the Report is intended to be factual, not aspirational, focus on concrete measures you’ve already taken, whether they’re fully implemented or not, rather than those you intend to take in the future. However, and bearing in mind the Report will be publicly available, if your strategic goals include the remediation of identified forced and child labour risks this process will help you identify the measures you can plan for to plug any gaps you identified and include those you get started on in your next Report. For example, do you need to:
5. Fulfill Your Mandatory Disclosure Obligations
The final step is to fulfill your mandatory disclosure obligations.
Online Questionnaire. Complete the mandatory Online Questionnaire. The Guidelines confirm failure to do so is an offence under the Act. While it’s not yet clear whether the Questionnaire will be publicly accessible in the same manner as the Report, even if not it’s likely it will be accessible through the federal access to information legislation. However, there’s no obligation to report commercially sensitive information, and don’t include personal or confidential information in your responses. The Guidelines set out an attestation statement. To complete the Questionnaire, you must confirm you’ve included the text of the suggested attestation statement verbatim; you can’t complete the Questionnaire and Report filing processes without it. The Questionnaire is relatively lengthy but functionally user-friendly. However, there’s no “save” or “submit” option at the end of the Questionnaire; instead you are prompted to upload your Report. Therefore, it’s likely wise to be prepared to submit your Report at the same time that you complete the Questionnaire.
Report. Each Reporting Entity must also prepare and submit its Report. Your completed Questionnaire and your Report should be consistent. And it is clear the Report will be publicly accessible, so again, don’t include include commercially sensitive, personal or confidential information in your Report.
Publish. You must publish the final submitted Report on a “prominent place” on your website. If you don’t have a website, be prepared to produce a physical copy of the report to any member of the public who requests one, though it’s possible you can meet this obligation by directing requests to Public Safety Canada’s will make the submitted report publicly available via its website catalogue.
Delivery to Shareholders. If you’re federally incorporated, you must also take positive steps to “provide” the Report to your shareholders “along with” your annual financial statements and other annual materials. This suggests that such Reporting Entities might need to at least complete their Report before the May 31 deadline depending on their year-end date.
Please contact your McInnes Cooper lawyer or any member of our ESG Team @ McInnes Cooper to discuss preparing your mandatory ESG report under Canada’s Modern Slavery Act.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
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