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Canada’s “Modern Slavery Act” Annual Report: 5 Steps

Published:

March 1, 2024

Author(s):

• Basia Dzierzanowska
• Alexandra Gosse

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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:

• Your structure, activities and supply chains.
• Your policies and due diligence processes regarding forced and child labour.
• The parts of your business and supply chains that carry a risk of the use of forced or child labour and the steps you’ve taken to assess and manage that risk.
• Measures you’ve taken to remediate any forced or child labour.
• Measures you’ve taken to remediate the loss of income to the most vulnerable families resulting from any measure taken to eliminate the use of forced labour or child labour in your activities and supply chains.
• The training you’ve given employees on forced and child labour.
• How you assess your effectiveness in ensuring your business and supply chains aren’t employing forced and child labour. 

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:

• Single Report. Each of the Reporting Entities – this could be your parent, you, your subsidiaries – can submit a separate Report for your own respective activities.
• Joint Report. The Reporting Entities can submit a joint Report for the activities of all Reporting Entities’ activities. Bear in mind the Guidelines indicate a joint Report is only appropriate where the reported information generally applies to all Reporting Entities it covers, so it’s not appropriate where their risk profiles or policies or actions significantly differ.

• Multiple Jurisdictions. The Guidelines recognize Reporting Entities operating internationally might be required to report on modern slavery in other jurisdictions. Such Reporting Entities can reproduce information in their Reports based on other reports – but remember that every jurisdiction has their own reporting requirements, and they could be significantly different. Even if you’re reproducing information from other reports, your Canadian Report still has to meet the Canadian Act’s specific requirements.

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:

• In its January 11, 2024, briefing, Public Safety Canada confirmed it understands Reporting Entities might not yet have measures in place to report on for some or all of the Report requirements. However, Reporting Entities can state this in their Report and still be compliant with the Act.

• The Guidelines clarify the Report’s not intended as an aspirational statement but instead as a statement of concrete actions the Reporting Entity is undertaking, with the understanding some could span multiple years.

• The Guidelines also clarify you can include measures you’re taking that aren’t solely dedicated to child and forced labour, such as human rights due diligence and ESG initiatives.

Governance Structure. Ask questions such as:

• Are there appropriate governance structures to establish and maintain modern slavery disclosure controls and procedures?
• Is there a Board committee or a Board working group responsible for overseeing modern slavery risk identification and mitigation?

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:

• Human rights policy?
• Corporate code of conduct or ethics?
• Supplier code of conduct?
• Whistleblowing policy?

Procurement. Review your supply chain and ask questions like:

• Do you have a comprehensive list of all suppliers and where each operates?
• Do you have procedures for supplier screening and ongoing diligence with respect to forced and child labour?
• Do all supplier contracts include forced and child labour risk-mitigation provisions?
• Should you retain a third party to help you assess forced and child labour risks in your supply chain?

Internal Education & Training. Determine whether and what education and training you’re conducting about forced and child labour at all levels of your organization:

• Board of Directors?
• Executive team?
• Procurement team?
• Employees?

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:

• Which parts of your business carry a risk of modern slavery.
• Which parts of your supply chain carry a risk of modern slavery.
• What and where those risks are.
• The measures, if any, you’ve already taken to address those risks.
• The gaps, if any, in risk-mitigation measures.

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:

• Revise existing or implement new policies?
• Revise existing or implement new procedures?

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.

• Single or Joint. By this time, you’ll likely have the information you need to decide whether to submit a single or a joint Report. If you submit a joint Report, it must clearly identify the name of each Reporting Entity it covers and specify what information applies to what Reporting Entity. The Guidelines indicate your Reports should state whether you also report under the modern slavery laws of another jurisdiction. It’s therefore wise to ensure your Canadian Report and any modern slavery report you submit in another jurisdiction are consistent. 

• Report Approval. The appropriate governing body or bodies must approve the Report. If you’re submitting a single Report, your governing body (typically, your Board of Directors) must approve it. If you’re submitting a joint Report, either the governing body of each Reporting Entity the Report covers or the governing body of the parent Reporting Entity can approve the Report. You must include also include in the Report submission the signed attestation statement the Guidelines set out.

• Submission. You must submit the Report in one of the two Canadian official languages (English and French) although the Guidelines recommend you submit it in both. The updated Guidelines no longer set the maximum Report length at 10 pages (20 if you submit the Report in both Canadian official languages) but does recommend this maximum. The Report must be in PDF format and not exceed 100MB in size. Once you’ve completed the Questionnaire, you will be prompted to upload your attested Report PDF, then “submit”. You should then receive a confirmation message.

• Public Access. The Minister of Public Safety will store all submitted Reports in an online, searchable, publicly accessible catalogue on Public Safety Canada’s website.

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.

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