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Using the wrong supplier or overseas partner could not only disrupt your business operations and damage your reputation, but it could also invite significant unanticipated costs. Newly enacted anti-forced labor legislation could catch businesses and public-sector organizations off guard. Designed to hold businesses and institutions accountable for reporting on their respective supply chains and any possible presence of child and forced labor, the legislation demands a set of public declarations to ensure adherence.
Businesses listed on a Canadian stock exchange or that fall within two of the following criteria must complete and submit a report and compliance questionnaire to the federal government: $20 million in assets $40 million in revenue 250+ employees This potentially adds administrative burden of having to scrutinize direct imports, as well as the sourcing processes of suppliers – even those from traditionally low-risk countries – to begin the process of determining if input materials sourced from elsewhere don’t include the use of forced labor.
Known formally as the Fighting Against Forced Labor and Child Labour in Supply Chains Act, Canada’s anti-forced labour legislation was officially passed in May 2023 but came into effect on January 1, 2024. It places higher reporting requirements on businesses that are listed on a Canadian stock exchange or those that meet two of the three criteria mentioned. According to the Act, businesses must file their reports every calendar year by May 31. Failure to do so could invite penalties of $250,000.
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Countries that follow OECD guidelines are also recommended to set up a National Contact Point or NCP, which is responsible for promoting these guidelines. These NCPs also contribute to the resolution of issues that arise in relation to the implementation of the OECD guidelines. Additionally, they are also expected to operate in accordance with the core criteria of visibility, accessibility, transparency, and accountability.
The Organization for Economic Co-operation and Development (OECD) guidelines for multinational enterprises are a set of recommendations that list voluntary principles and standards for responsible business conduct. They are consistent with domestic and international laws in areas such as human rights, employment and industrial relations, disclosure, environment, combating bribery, consumer rights and interests, science and technology, competition, and taxation.
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As a business owner, monitoring raw material sourcing could be a challenging proposition when relying on external partners, who may overlook certain parameters. Non-compliance with reporting requirements can lead to penalties for your business, including fines, searches, and compliance orders.
Training includes courses, awareness activities, and organization-wide initiatives. It's crucial to single out departments or branches where instances of forced labor are most identifiable. If no formal training is conducted, referencing government policies and adherence expectations are advised.
Businesses must perform their own due diligence and use the federal government’s questionnaire, which outlines required assessment steps. The same applies for sister companies.
To compile a report, businesses must evaluate 8 key areas (found in the guidelines and the Act itself) which should include whether the company has policies, procedures, and trainings related to forced labor.
Businesses falling within the scope of the Act must file their reports by May 31st every year. Failing to do so could result in fines of up to $250,000 not only on businesses but also on their board of directors.
Post the report prominently on your website. Ensure you have met the requirements of the new legislation and consider consulting with trade advisors to ensure you’ve properly complied with new requirements.
Educate all stakeholders involved about the consequences of non-compliance for effective risk mitigation.
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Implementing the Act aligns with global standards adopted by developed nations, ensuring ethical sourcing practices across supply chains.
3 - Focus on human rights
2 - Implement training
1 - Submit report
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Learn about the hidden risks lurking in your supply chain
Here’s how businesses in the U.S. are adapting to the updated UFLPA regulations.
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