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Parliament passed Bill S-211: Are you ready to meet the new requirements?

Parliament passed Bill S-211: Are you ready to meet the new requirements?

Synopsis
6 Minute Read

The Canadian Parliament has passed Bill S-211 to reduce the risk of child or forced labour in supply chains used by Canadian businesses — encouraging businesses to make the “social” component of ESG a central tenet of their business strategies.

This Act will take effect on January 1, 2024. It includes steps organizations must take to decrease risks and will also require affected organizations to submit formalized reporting by May 31, 2024.

Canadian businesses are encouraged to review the criteria outlined in the Act to determine if they will be required to provide this mandatory reporting, explore what the mandatory report must include, and discover how the Act may help accelerate ESG planning within their organization.

Partner, National Leader, Environmental, Social and Governance

The Canadian Parliament passed Bill S-211 or Fighting Against Forced Labour and Child Labour in Supply Chains Act on May 3, 2023, to protect vulnerable populations from human rights abuses and exploitation. The bill has received royal assent and will impose strict reporting requirements on Canadian businesses when it takes effect on January 1, 2024.

Bill S-211 will have a significant impact on the way Canadian businesses contract within the supply chain and may affect your organization if it produces, sells, or distributes goods in Canada or elsewhere, imports goods produced outside of Canada into the country, or controls an entity engaged in either of the above activities.

The Act will also encourage your organization to re-evaluate and accelerate its environmental, social, and governance (ESG) strategies. It is essential to review your organization’s current ESG strategy before Bill S-211 takes effect to ensure the material topics you have identified in your “S” or “social” pillar align with this important new development.

When will Bill S-211 take effect?

Bill S-211 requires Canadian businesses to report on forced labour and child labour in supply chains. It outlines the steps organizations must take to prevent and reduce the risk that operations, including those of third parties within the supply chain, make use of forced and/or child labour.

The act also amends the Customs Tariff to allow for a prohibition on the importation of goods manufactured or produced, in whole or in part, by forced labour or child labour.

Bill S-211 will take effect January 1, 2024, with first reports required to be filed on or before May 31, 2024. There are two questions that you need to ask yourself now:

  1. Does Bill S-211 apply to your organization?
  2. If it does apply, have you started to assess how your organization prevents and reduces the risk that forced or child labour was used at any step of the production of goods that you produced or imported into Canada and how your organization can publish the required annual report?

Organizations that fail to submit a satisfactory annual report or make it public, obstruct a designated official, or fail to comply with an order from the Minister are guilty of a summary offence and liable to a fine of up to $250,000.

Senior executive teams and boards of directors also need to take note as every director or officer who directed, authorized, assented to, acquiesced, or participated in any of these offences will also be personally liable for the offence.

Fact sheet: What does your business need to know to comply with Bill S-211?

Download our fact sheet for answers to your biggest questions about this new regulation.

Who will be affected by Bill S-211?

Bill S-211 clearly defines which entities (corporate or a trust, partnership, or other unincorporated organization) will be required to provide this mandatory reporting. If you are an entity that engages in any of the following activities, you need to pay particular attention to this article:

  1. Produces, sells, or distributes goods in Canada or elsewhere
  2. Imports into Canada goods produced outside Canada, or
  3. Controls an entity engaged in either of the above activities.

To qualify, the above-mentioned entities must either be listed on a Canadian stock exchange or meet two of the following three criteria based on consolidated financial statements:

  1. Have at least $20 million in assets
  2. Generate at least $40 million in revenue, or
  3. Employ an average of at least 250 employees.

The Act also applies to government institutions, which include federal government ministries, departments, and Crown corporations. Additional entities subject to the Act may be added at a later date through regulation.

All entities who meet the above criteria are required to report to the Minister on or before May 31 of each year.

What will the report include?

Affected organizations must document all efforts during the previous financial year to prevent and reduce the risk that forced labour or child labour is used at any step within its business and supply chain activities. This includes child labour and forced labour within Canada’s borders or elsewhere.

The report must also include the following information in respect of each entity subject to the report:

  1. Its structure, activities, and supply chains
  2. Its policies and its due diligence processes in relation to forced labour and child labour
  3. 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
  4. Any measures taken to remediate any forced labour or child labour
  5. 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
  6. The training provided to employees on forced labour and child labour
  7. How the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains

The annual reports must be approved by the organization’s governing body (e.g., board of directors) and then submitted to the Minister of Public Safety and Emergency Preparedness (the Minister) by May 31 of each year, with the first annual report due May 31, 2024.

Organizations subject to the Act are also required to make these reports publicly available, including on their website. If the organization is incorporated under the Canada Business Corporations Act or another federal statute, it must also provide the annual report to its shareholders. Eventually, the Minister will create a centralized publicly accessible electronic registry so that members of the public can review the reports that are submitted.

What is the ESG impact?

Bill S-211 will encourage Canadian organizations to re-evaluate business relationships with each tier of the supply chain from an ESG perspective, with a focus on the “S” or “social” aspect.

While social is a broad term that encompasses many different factors, it essentially is a call to be more mindful of what happens both within and outside your organization — and empowers you to use your position, visibility, and influence to make the world a better place. It encompasses more than charitable giving or creating a Corporate Social Responsibility (CSR) plan, instead it is a call to participate in creating a healthy, safe, and sustainable society for everybody.

The stricter oversight and regulation of Bill S-211 will require Canadian businesses to make ESG a central tenet of their strategies. It will require your organization to create a robust approach towards social responsibility and perform due diligence to help your organization both identify and monitor the risk of these labour practices within every rung of your supply chain.

Bill S-211 is an example of how society is continuing to confront social and environmental issues to create a more sustainable, responsible, and ethical future. The Act will galvanize Canadian companies who may be behind on their corporate responsibility initiatives to create and embrace ESG strategies to address the risks that may be present within their operations and business activities. It also encourages boards to increase their governance oversight to ensure their companies are taking the right actions to make the world a better place.

Is your business prepared for Bill S-211?

Bill S-211 introduces a strict new set of rules to prevent human rights abuses by reducing the risk of forced labour and child labour in supply chains. It will also accelerate ESG strategies within your business by encouraging you to perform due diligence with each tier of your supply chain to determine if their practices are compatible with your standards and values.

MNP has a robust ESG practice and experienced advisors that can help your organization create or refine its ESG strategy. If you need help developing a framework to meet the requirements outlined in Bill S-211, fill out the form below or contact MNP’s Edward Olson at 250.718.8687 or [email protected] for advice.

Request a free consultation to discuss your Bill S-211 strategy

Fill out the form below and a member of our team will reach out to answer your questions.

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