Better Late Than Never: Canada Set to Introduce Supply Chain Legislation

Canada Set to Follow in Footsteps of U.K., Australia and Others on Modern Slavery Legislation

A recently drafted bill has Canada set to join the growing list of countries intent on introducing national legislation on supply chain transparency and modern slavery. On April 4, 2019, the joint parliamentary committee on modern slavery and human trafficking announced it had drafted the Transparency In Supply Chains Act (the TSCA). The TSCA, which will soon begin the process of obtaining Senate approval in Canada,  would establish reporting and compliance obligations for Canadian companies with respect to their efforts to end modern slavery within global supply chains.  The Bill’s announcement serves as a signal to Canadian companies that their supply chain management strategies and reporting practices will soon begin to receive more attention from regulators.

Though not yet a law, the TSCA appears to be very much aligned with legislation already in place around the globe. As such, it is not too early for companies to take stock of their current supply chain management practices in anticipation of changes to come. Here is a brief rundown of what companies might expect from the proposed Canadian bill.

What the Draft TSCA Looks Like

As drafted, the TSCA would apply to companies with assets over CAD 20 million and revenue over CAD 40 million, which is a similar (though notably smaller) threshold than either the UK or Australian MSAs. The Draft TSCA includes four mechanisms designed to compel corporate action on modern slavery:

  1. A supply chain reporting requirement for qualifying companies;
  2. A duty of care to take reasonable steps to avoid modern slavery;
  3. The creation of an Ombudsperson and Compliance Committee; and
  4. Mechanisms to receive and investigate disclosures of modern slavery from whistleblowers.

While mandatory reporting is in line with existing mandatory disclosure legislation, the creation of a duty of care for companies would take the Canadian TSCA further than existing modern slavery legislation and would align it with more stringent due diligence legislation such as the French Duty of Care Act.  The creation of this positive obligation would mean companies could be held liable if their non-compliance is found to cause harm to individuals within their supply chain.

The Ombudsperson and Compliance Committee would help companies by creating a regulatory structure to assist companies through formal guidance on acceptable practices, and help improve transparency by creating mechanisms to receive and investigate whistleblower disclosures on modern slavery. These measures (if adopted) are likely to be well received by Human Rights NGOs that have voiced concerns over the lack of regulatory support in other jurisdictions.

What We Might Expect

In the past, Modern Slavery Legislation has received a fair share of criticism from NGOs and government officials alike due to ambiguous language, insufficient enforcement measures, poor guidance from regulators, or a combination of all three. At the same time, regulators have also demonstrated a willingness to proactively respond to calls from civil society for regulatory reform. While the Canadian TSCA is unlikely to re-invent the wheel with respect to Modern Slavery regulation, it does introduce a few tweaks, such as the imposition of a duty of care for companies to engage in due diligence, that might address some common regulatory challenges. If the Draft TSCA is any indication of what the final legislative product may look like, it appears that Canadian legislators are intent on keeping the trends of regulatory innovation and improvement alive.

 

What Are You Waiting For?

Whatever the TSCA’s final form will take, the message for Canadian companies is clear: start asking what your organization is doing to address modern slavery risks in its supply chain, because that question is likely to be raised by stakeholders far more often in the very near future.