Beyond Borders: The Modern Slavery Act and Supply Chains

Gone are the days when companies didn’t need to be concerned about their value chains.

Although Canadian businesses have not needed to consider the impact of modern slavery and human trafficking as a result of a historically strong human rights record, the Fighting Against Forced Labour and Child Labour in Supply Chains Act (Bill S-211), commonly referred to as Canada’s Modern Slavery Act (“MSA”) is prompting Canadian companies to proactively enhance their due diligence and expand awareness, accountability and transparency regarding the global supply chains that support their business.

Understanding the MSA

The MSA requires companies to assess, understand and ensure compliance with measures to prevent modern slavery and human trafficking throughout their supply chains. This includes risk assessments, in-depth supply chain monitoring and transparent annual reporting.

However, the MSA is more than a legal mandate; it’s a push for global corporate responsibility in a time where Environment, Social and Governance (“ESG”) principles are increasingly prioritized. It advances beyond domestic borders to address complete global supply chains, where risks of forced labor and human trafficking are more prevalent. For Canadian companies operating internationally, the MSA becomes even more relevant in ensuring ethical practices and transparency in both direct and indirect supply chains, despite varying regional standards and accepted norms.

Companies are required to publish annual reports detailing their policies, due diligence processes, risk assessments, remediation measures, and training related to forced labor and child labor. These reports are approved by the company’s governing bodies – such as its board of directors – and include an attestation signed by a senior officer.

Implications for Canadian Companies

Direct and Indirect Supply Chains: The MSA requires companies to conduct comprehensive due diligence on their direct suppliers and the entire network of indirect suppliers to identify and mitigate risks of forced labor and child labor.

Risk Management: Identifying and mitigating risks in supply chains is achieved through regular supplier audits and compliance confirmations, along with the implementation of robust policies, processes, and training programs to address these risks.

Reputation and ESG Alignment: Demonstrating a commitment to ethical practices aligns with ESG trends, enhancing company reputation and attracting socially conscious, risk-adverse investors. It also encourages continued collaboration among suppliers and other stakeholders.

Accountability: Non-compliance can lead to penalties, fines, imprisonment for false or misleading information, all of which could also damage a company’s reputation and stakeholder trust. Further, governments are afforded investigative powers to verify compliance.

Global Conflicts and Supply Chains

Global and regional conflicts and geopolitical tensions have amplified the importance of understanding supply chains – and in many cases have made it much more challenging. Disruptions in traditional supply chains due to conflicts and geopolitical tensions can force companies to seek alternatives; this can increase the risk of inadvertently supporting forced labor or unethical supply. Companies must be increasingly vigilant and proactive in tracing their supply chains to ensure compliance with the MSA.

The team at 5Q proudly supports our clients to ensure robust, yet ‘right-sized’ ESG reporting, and adhering to the requirements of the MSA.  We look forward to collaborating with your team to streamline processes and elevate your ESG profile.

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