From Challenges to Compliance: A Look at the Inaugural Reporting Period Under Canada’s Forced and Child Labour Legislation

As outlined in our prior bulletins on this topic, Canada’s new supply chains legislation, the Fighting Against Forced Labour and Child Labour in Supply Chains Act (Act), requires reporting entities to complete and submit to the Government a mandatory online questionnaire (Questionnaire) and report (Report) about the measures they have taken to address and prevent forced and child labour in their supply chains during their previous fiscal year. The Act came into force on January 1, 2024, and the inaugural Report was due by May 31, 2024 (or earlier for certain federally incorporated entities that provide their annual financial statements to shareholders before May 31 of each year). The next reporting cycle opens January 1, 2025.

Following the May 31 deadline, the Government has acknowledged that challenges arose during the reporting period and sought input from stakeholders with the goal of providing updated guidance (Updated Guidance) for the next reporting cycle.

In this post-reporting deadline bulletin, we provide an overview of some of the key insights and statistics that arise in the “2024 Annual Report to Parliament on the Fighting Against Forced Labour and Child Labour in Supply Chains Act” published by Public Safety Canada (2024 Annual Report) and provide some forward-looking updates with respect to preparing for the next reporting cycle that opens on January 1, 2025.

Key Insights 

The 2024 Annual Report was published on September 27, 2024, and provides answers to some of the most common questions we received during the inaugural reporting cycle, as set out below:

• How many Reports do you expect to be filed? For the 2024 Reporting Cycle, on or before the May 31 deadline, the Government received 5,650 Reports from entities, 2,086 of which were joint Reports. The Government has continued to receive late Reports. As of July 31, 2024, the Government had received over 500 late Reports. The 2024 Annual Report considers only those Reports that were filed on or before May 31, 2024.
• What is the purpose and use of the data collected in the Questionnaire? The Government designed the Questionnaire to collect the information necessary to satisfy the mandatory reporting requirements under the Act, as well as to collect identifying information. By collecting this data through the Questionnaire, Public Safety Canada will be better positioned to measure its progress year over year.
• What happens if a Report is filed late? For the 2024 Reporting Cycle, late Reports are being accepted by Public Safety Canada and uploaded to the online catalogue after being marked with a notation indicating that they were received late. As a late Report is statutorily non-compliant, this approach may change as the Government adapts its approach to enforcement.
• What is the Government’s approach to enforcement? In 2024, the Government took no enforcement action. Consistent with its messaging at various stakeholder engagement meetings, Public Safety Canada prioritized education and raising awareness of the Act and its requirements. This approach is subject to change and should be monitored for updates.

Key Market Statistics 

In addition to providing answers to common questions, the 2024 Annual Report provides some valuable insight into the current market practices in Canada aimed at addressing and preventing the risk of child and forced labour in entities’ operations and supply chains.

• Who are the other reporting entities? 81.95% of Reports were received from entities headquartered or principally located in Canada and reporting for the following industry sectors: Manufacturing (38.3%), Wholesale Trade (22.3%), and Retail Trade (21.8%).
• How far along in the process are other reporting entities? Approximately one-third of reporting entities (38.2%) confirmed they had identified parts of their activities and supply chains that carried a risk of child and forced labour. Whereas 39.4% had started the process but identified gaps, and 22.4% had not begun the process of identifying risks.
• What are others doing to prevent and reduce the risk of forced and child labour? The most common step selected by reporting entities to prevent and reduce risks in their operations and supply chains was regular audits and monitoring (48.6%). Examples of these processes included screening potential suppliers, vendors and/or partners using software programs and internal and third-party audits. The remaining responses included developing and implementing due diligence policies and processes (44%); monitoring suppliers (37.5%); developing or implementing standards, codes of conduct or compliance checklists (36%); and gathering information on recruitment and maintaining internal controls to ensure voluntary recruitment (33.1%).
• How common are policies and due diligence processes? 71.3% of reporting entities indicated that they have policies and due diligence processes in place related to child and/or forced labour. Of the top three reporting sectors, manufacturing was the leading sector.
• Do other entities provide training to their employees? Yes, but less than half of the reporting entities did so (44.4%). Of those that provided training, 39.8% indicated that the training was mandatory for all employees.
• How do other entities assess the effectiveness of their efforts to prevent and reduce the risk of forced and child labour? Of the reporting entities that monitor the effectiveness of their efforts (43.5%), key performance indicators and annual reviews were the most commonly reported way in which they assessed their effectiveness.

Looking Ahead 

The Reports for the next cycle are due on or before May 31, 2025. However, Public Safety Canada has stated that Updated Guidance can be expected in “late Fall” of this year. There is no indication as to what this Updated Guidance will look like, but it is reportedly being updated to address the concerns that were raised during the first reporting period, including those related to:

• The scope and application of the Act, in particular, the discrepancy between the Guidance and the Act with respect to which entities have reporting obligations
• What constitutes “very minor dealings”
• The intended scope of its extraterritorial application

As entities prepare for the next reporting cycle, prior to the release of the Updated Guidance, it may be helpful to:

• Review the Key Market Statistics above for an overview of the general market approach to these issues. This information can provide a foundation from which entities can assess their approach to addressing and preventing the risk of child and forced labour, compared to that of others in the market. This comparison may assist your organization in focusing its efforts to update or revise its current approach to ensure that it is perceived to be aligned with current practices and trends by the general and investing public
• Review the Report filed in 2024 for any commitments made in its inaugural Report. If commitments were made, it is important to ensure that your company has fulfilled, or taken steps to fulfill, these commitments in the current fiscal year
• Review whether your organization still meets the requirements for preparing and filing a Report (for those entities that had reporting obligations for 2023)
• Review whether your organization now satisfies the criteria in the Act such that it is now an entity with reporting obligations (for those organizations that did not prepare a Report for 2024)

Finally, under the new North American Trade Agreement (CUSMA), Canada, the United States and Mexico agreed to tackle the issue of forced and child labour. Notwithstanding the recent enactment of the Act, as recently as September 2024, the Government has confirmed that it is working on another bill related to this issue that has been described as “due diligence” legislation. The Government is reportedly seeking to introduce this bill this year. However, as of the date of this Bulletin, the bill has yet to be introduced to Parliament.

To learn more about the developments surrounding Canada’s forced labour and modern slavery legislation, see our previous May 2023 Blakes Bulletin: Parliament Passes Bill S-211: The New Forced Labour and Supply Chain Reporting Law, October 2023 Blakes Bulletin: Complying With Canada’s Forced and Child Labour in Supply Chains Act: Are You Ready?, December 2023 Blakes Bulletin: Part I: Canada Unveils Long-Awaited Guidance on Act Fighting Forced Labour and Child Labour in Supply Chains and January 2024 Blakes Bulletin: Part II: Significant Implications Arising From Guidance on Modern Slavery Act.

For further information about any aspect of this bulletin, please contact the authors of this bulletin or any other member of our International Trade group.