New Guidance Available Regarding Annual Reporting on Forced and Child Labour in Supply Chains

On December 20, 2023, Public Safety Canada released guidance regarding how subject entities and government institutions can ensure they comply with the new Fighting Against Forced Labour and Child Labour in Supply Chains Act (the Act). In June we released an article explaining what we knew about the reporting requirements at that time, although there was no detailed guidance.

The newly released guidance fills in some of the legislation's gaps, particularly the form, length, and content of the annual report that certain entities are required to create and submit, as well as the logistics around how and where to file the report.

As noted in our previous article, the reporting requirements apply to certain government institutions[1] and private-sector entities[2] that are producing, selling or distributing goods in Canada and elsewhere as well as entities importing goods produced outside Canada, or controlling an entity engaged in any of those activities[3] (see footnotes for more details on the particular entities and government institutions to which the rules apply).

What is the prescribed process for creating and submitting an annual report?

The guidance advises that entities should consult internally and gather the information required to create the report, obtain the necessary approval(s) and signature(s) from the relevant governing body, complete the online questionnaire (discussed in further detail below), submit the completed report, and publish the report to the entity's website.

What is the prescribed form/length of the annual report?

While there is no prescribed form of report, the guidance suggests using the newly released questionnaire as a template in developing the report. The completed report must be in PDF format and must not exceed ten pages in length (or twenty pages for reports provided in both English and French) and 100MB in size.

What is the questionnaire?

The questionnaire is an online form that must be completed prior to filing the annual report. Most of the information required in the questionnaire will mirror the annual report. The questionnaire requires certain identifying information about the entity, including its legal name, financial reporting year, industry it operates in, etc., and further requires the annual report disclosures set out in sections 11(1) and 11(3) of the Act.

The questions are generally presented as both open-ended and closed-ended questions, with a space for entities to provide additional information where applicable, up to 1,500 characters (per question).

Question 1 requires the entity to set out any steps it has taken in the previous financial year to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity. The entity can select from 23 options (e.g. mapping activities, mapping supply chains, developing and implementing grievance mechanisms, etc.), including "other" in which case the entity must specify.[4]

Questions 2 asks the entity to describe (a) its structure (e.g. corporation, trust, partnership, or other unincorporated organization) and (b) its activities (e.g. producing, selling, distributing goods in Canada or outside of Canada, etc.).[5]

Question 3 requires disclosure of whether the entity has policies and due diligence processes in place related to forced labour and/or child labour. If the entity answers in the affirmative, it must select from a list of 6 items identifying what it has done (such as embedding responsible business conduct into policies and management systems, ceasing, preventing or mitigating adverse impacts, etc.).[6]

Question 4 asks whether the entity has identified parts of its activities and supply chains that carry a risk of forced labour or child labour being used. If the entity answers in the affirmative, it must indicate whether it has identified forced or child labour risks related to any aspects on a list of fifteen (including the sector or industry, the types of products it sources, the tier one, tier two, or tier three suppliers, etc.).[7]

Question 5 seeks disclosure of whether the entity has identified forced labour or child labour risks in its activities and supply chains related to a list of 20 listed sectors and industries (including mining, quarrying, and oil and gas extraction, construction, transportation, and warehousing, etc.).

Question 6 requires the entity to disclose whether it has taken any measures to remediate any forced labour or child labour in its activities and supply chains, and if it has, it must describe the remediation measures taken.[8]

Question 7 seeks disclosure of whether the entity has taken any measures to remediate the loss of income to the most vulnerable families resulting from the measures taken to eliminate the use of forced labour or child labour in its activities and supply chains.[9]

Question 8 asks the entity whether it provides training to employees on forced labour and/or child labour.[10]

Question 9 requires disclosure of whether the entity has policies and procedures in place to assess its effectiveness in ensuring that forced labour and child labour are not being used in its activities and supply chains, and if it does, it must describe the method it uses to assess its effectiveness.[11]

Once the questionnaire is completed, the report is attached, and the submitter must make certain confirmations and attestations in order to submit both the questionnaire and report. Lastly, the submitter must provide their name, title, and email address.

Once the online submission has been made, the report will be made public in two ways. The entity must post its report in a prominent location on their website, and Public Safety Canada will also make the report publicly available in a catalogue on its website.

General Guidance & Next Steps

While the government guidance does not prescribe a level of detail that entities are required to provide in their reports, it advises that a "complete report will contain responses that are consistent with the information provided in the questionnaire" and suggests using an "appropriate level of detail proportionate to their size and risk profile". It sets out the characteristics of a compliant response and best practices, as well as provides additional resources for entities looking for more information.

Entities that are subject to the new legislation are encouraged to visit Public Safety Canada's website and review the recent guidance provided, and to register for its Information Session taking place on January 11, 2024. If you would like any additional information and/or assistance in preparing your annual reporting on this topic, please contact any member of our Business Law Group.

[1] Government institution as defined in the Access to Information Act, means "(a) any department or ministry of state of the Government of Canada, or any body or office, listed in Schedule I, and (b) any parent Crown corporation, and any wholly-owned subsidiary of such a corporation, within the meaning of section 83 of the Financial Administration Act."
[2] Entity means "a corporation or a trust, partnership or other unincorporated organization that (a) is listed on a stock exchange in Canada; (b) has a place of business in Canada, does business in Canada or has assets in Canada and that, based on its consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent financial years: (i) it has at least $20 million in assets, (ii) it has generated at least $40 million in revenue, and (iii) it employs an average of at least 250 employees; or (c) is prescribed by regulations".
[3] Act, ss 5, 9.
[4] Addresses s. 11(1) of the Act.
[5] Addresses s. 11(3)(a) of the Act.
[6] Addresses s. 11(3)(b) of the Act.
[7] Addresses s. 11(3)(c) of the Act.
[8] Addresses s. 11(3)(d) of the Act.
[9] Addresses s. 11(3)(e) of the Act.
[10] Addresses s. 11(3)(f) of the Act.
[11] Addresses s. 11(3)(g) of the Act.