This article was originally published on May 8, 2023 and has been updated to reflect that Bill S-211 received Royal Assent on May 11, 2023.
Canada's Bill S-211, An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to Amend the Customs Tariff, which requires ESG reporting on the risks of forced labour and child labour in supply chains will come into force on Jan. 1, 2024. Bill S-211 was passed at Third Reading in the House of Commons on May 3, 2023 and received Royal Assent on May 11, 2023 and has now become an act of Parliament and part of the law of Canada.
This guide will help you address forced labour and child labour in your business and supply chain.
Is your business subject to Bill S-211?
If your business is a corporation, a trust, a partnership or other unincorporated organization that meets at least one of the two following criteria (A or B), it will be subject to Bill S-211:
A. It is listed on a stock exchange in Canada.
B. (i) Has a place of business in Canada, does business in Canada or has assets in Canada and
(ii) 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:
- Has at least CAD$20 million in assets.
- Has generated at least CAD$40 million in revenue.
- Has an average of at least 250 employees.
A business subject to Bill S-211 is an "Entity."
Does your business have to prepare, file and post an annual report under Bill S-211?
An Entity must file an annual report (referred to herein as a "Supply Chain Risk Report") if it meets any of the following criteria:
- Produces, sells or distributes goods in Canada or elsewhere.
- Imports goods into Canada that are made outside of Canada.
- Controls an Entity that is engaged in any of the activities described in (a) or (b) above.
An Entity that is required to prepare, file and post a Supply Chain Risk Report is referred to herein as a "Reporting Entity."
What information must be included in the Supply Chain Risk Report?
Every Reporting Entity must file a Supply Chain Risk Report with the federal Minister of Public Safety and Emergency Preparedness on or before May 31 of each calendar year. The Supply Chain Risk Report must set out the steps the Reporting Entity has taken during its 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 Reporting Entity, or of goods imported into Canada by the Reporting Entity.
A Reporting Entity's first Supply Chain Risk Report must be filed with the federal Minister of Public Safety and Emergency Preparedness and posted by the Reporting Entity in a prominent place on its website before May 31, 2024.
For example, if Bill S-211 comes into force on Jan. 1, 2024, and assuming that the Reporting Entity's most recent financial year end will be Dec. 31, 2023, the Reporting Entity's first Supply Chain Risk Report will cover the period Jan. 1, 2023 to Dec. 31, 2023.
In addition, the Supply Chain Risk Report must also include the following information in respect of the Reporting Entity:
- Its structure, activities and supply chains.
- Its policies and its due diligence processes in relation to forced labour and child labour.
- The parts of its business and supply chains that carry a risk of forced labour or child labour being used and the steps it has taken to assess and manage that risk.
- Any measures taken to remediate any forced labour or child labour.
- Any measures taken to remediate the loss of income to the most vulnerable families that results from any measure taken to eliminate the use of forced labour or child labour in its activities and supply chains.
- The training provided to employees on forced labour and child labour.
- How the Reporting Entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.
The Supply Chain Risk Report and Bill S-211 must now be on the agenda of your business or organization's Board of Directors.
Bill S-211 requires that the Supply Chain Risk Report be approved by the Reporting Entity's board of directors (if it is a corporation or, if not, then the governing body of the Reporting Entity). To evidence such approval, it must be signed by one or more directors (or, if not a corporation, one or more members of the governing body). By requiring the approval of the Supply Chain Risk Report by the board of directors, the legislation effectively escalates the issue of risks of forced labour and child labour in the operations and supply chains of the Reporting Entity's to the level of its most senior leaders and puts it on the agenda of your board of directors.
In their consideration and approval of the Supply Chain Risk Report, the directors will have a fiduciary duty to act honestly, in good faith, and in the best interests of the reporting entity, as well as to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Further, when acting with a view to the best interests of the Reporting Entity, the directors may consider the interests of stakeholders when exercising their fiduciary duties.
Accordingly, boards of directors should not consider the annual Supply Chain Risk Report to be a mere "tick the box" compliance exercise.
In addition, the directors hold responsibility to exercise oversight of how management is addressing the risk of forced labour and child labour in the entity's operations and supply chains. This is a critical board role given the wide variety of risks including reputational risk, financial and credit risk, brand erosion risk, litigation risk, regulatory compliance risk, supply chain instability risk and activist investors that adverse human rights impacts in a business and its supply chains can give rise to.
Will the Supply Chain Risk Report be publicly available?
All Supply Chain Risk Reports will be made publicly available.
- Supply Chain Risk Reports must be filed with the federal Minister of Public Safety and Emergency Preparedness and will be posted on an electronic registry that it will maintain.
- Supply Chain Risk Reports must be posted by the Reporting Entity in a prominent place on its website.
- If the Reporting Entity is incorporated under the Canada Business Corporations Act or under any other act of Parliament, it must provide the Supply Chain Risk Report to each shareholder along with the its annual financial statements.
To meet the demands of this challenging environment, boards of directors need to be fully prepared, equipped and committed to oversee both how their businesses are managing the risks of forced labour and child labour in their operations and supply chains, and how their businesses are addressing these risks in their corporate and enterprise risk management strategies. Otherwise, these business and legal risks will be unmanaged and unmitigated.
Are there penalties for not filing a Supply Chain Risk Report?
Bill S-211 provides for a number of offences related to the Supply Chain Risk Report. These include:
- Failing to file a report.
- Failing to have it approved by the board of directors.
- Failing to have it signed by a director.
- Failing to send the report to shareholders with the annual financial statements (for federally incorporated corporations).
- Knowingly making a false or misleading statement in the Supply Chain Risk Report.
Directors and officers who direct, authorize, assent to, acquiesce or participate in the commission of an offence may also be personally liable.
How should a board of directors prepare For Bill S-211?
The Supply Chain Risk Report will ultimately be the responsibility of the board of directors. Accordingly, planning must begin at the board level to ensure that management is appropriately and effectively tasked and resourced to carry out the necessary due diligence to identify, assess and address the risks of forced labour and child labour in the Reporting Entity's operations and supply chains.
Businesses should be mapping their supply chains and conducting risk-based due diligence to trace and verify the sourcing of inputs in its supply chains and to assess whether forced labour or child labour has been or is being used at any tier of the supply chain – from raw materials to finished goods.
Does Bill S-211 ban the importation of goods made with child labour?
On July 1, 2020, as part of its implementation of the United States-Mexico Canada Agreement, Canada amended its Customs Tariff to prohibit the importation of goods mined, manufactured or produced wholly or in part by forced labour. Bill S-211 would amend the Customs Tariff to also prohibit the importation of goods mined, manufactured or produced wholly or in part by child labour.
Bill S-211 will be the very first ban anywhere on the importation of all child labour-made goods.
Bill S-211 is not the last word.
On March 28, 2023, as part of Budget 2023, and in the Debate at Third Reading of Bill S-211 on April 26, 2023, the Canadian federal government announced that it would introduce legislation in 2024 to eradicate forced labour from Canadian supply chains and to strengthen the prohibition on the importation of goods produced by forced labour.
It is possible that such future legislation could be closer to the United Nations Guiding Principles on Business and Human Rights-based European legislative tool of choice -- mandatory human rights due diligence legislation that would to require businesses to identify, prevent, mitigate and be accountable for the adverse impacts on human rights of their operations and supply chains.
How we can help you
Learn more about our Canadian ESG Advisory services and how Gowling WLG can provide advice on:
- Supplier Codes of Conduct
- Directors Duties and Board Education/Training
- Updating Supply Contracts
- Supply Chain Mapping and Due Diligence
- Stakeholder Identification and Engagement
- ESG Governance and Reporting
- ESG Regulatory and Litigation
- Class Action Defence
For further information, contact the author Stephen Pike at stephen.pike@gowlingwIg.com.
More in this series
For further information, watch Stephen's latest webinar on Forced Labour and Child Labour in Supply Chains or read the first 17 parts of our Guide to addressing forced labour and child labour in your business and supply chain: