Organizations operating in Canada are under growing scrutiny from consumers, investors, and regulators to maintain ethical supply chains. Ethical sourcing and transparency have become critical factors in preserving and creating company value. It is now a reality that laggards in supply chain management can face significant business consequences, while organizations who prioritize ethical practices are rewarded.
By aligning with the recently enacted Fighting Against Forced Labour and Child Labour in Supply Chains Act (the Act), your business can not only meet regulatory expectations but also strengthen its supply chain, protect its brand reputation, and build trust with stakeholders.
In this guide, we offer practical insights into how businesses can navigate the complexities of the Act. We offer reflections from the 2024 reporting period, outline the reporting requirements and penalties associated with non-compliance, and offer strategies for going beyond compliance and building a resilient, ethical supply chain.
Why ethical supply chains matter
Global supply chains are under the microscope. With 27.8 million people subjected to forced labour globally, Canadian businesses face not only a legal obligation under the Act, but also a business imperative to ensure transparency and accountability in their operations. By prioritizing ethical supply chains, businesses can minimize disruptions, improve operational efficiency, and limit reputational risks.
The stakes are high
- Non-compliance with the Act carries several business risks, including substantial fines, reputational damage, stakeholder distrust, as well as disruptions to supply chains.
- Forced labour generates an estimated $236 billion in illegal profits annually.
- The G20 imports $468 billion annually in goods “at risk” of being tainted by forced labour.
Lessons learned from the first reporting year
Public Safety Canada’s 2024 Annual Report to Parliament on the Fighting Against Forced Labour and Child Labour in Supply Chains Act, offered several reflections on the 2024 reporting period. Understanding these findings can help organizations improve their compliance efforts, enhance transparency, and build better supply chains. Here are the key findings:
- Ethical due diligence and joint reports
- 71% of reporting entities (4,031 reports) have adopted structured due diligence processes to mitigate forced and child labour risks.
- Joint reports accounted for 36% of submissions, allowing organizations with risk profiles that are uniform across entities to address risks collaboratively while reducing administrative burden.
- Transparency milestones
- Of the 5,795 reports filed, 100% were publicly accessible, driving transparency and trust in the marketplace.
- 97% of reports were submitted by private entities, signaling the private sector’s critical role in safeguarding supply chains and unlocking value through stronger supplier relationships and operational transparency.
- Reports from businesses in manufacturing, wholesale, and retail sectors—making up over 80% of submissions—highlight these industries as leaders in driving sector-wide ethical standards while enhancing supply chain resilience.
- Stakeholder engagement
- Publicly available reports are fostering greater accountability and encouraging industry-wide improvements in ethical standards.
- Limited visibility beyond tier 1
- Many reporting entities did not have visibility into risks beyond their direct suppliers, leaving many risks unaddressed.
- Inconsistent reporting standards
- Variability across reports has made it challenging for stakeholders to assess compliance uniformly.
- Minimal training investments
- 55% of entities reported no structured training programs for employees to identify and mitigate forced labour risks, leaving critical gaps in internal capacity.
The risks of non-compliance
Failing to align with the Fighting Against Forced Labour and Child Labour in Supply Chains Act brings tangible risks:
The rewards of compliance
Aligning with the Act opens opportunities, builds trust, and strengthens supply chains in multiple ways:
Navigating the reporting requirements
Reporting under the Act is not just about compliance—it’s an opportunity to lead in ethical supply chain management, build trust, and preserve firm value.
The Act applies only to reporting entities—defined as corporations, trusts, partnerships, or other unincorporated organizations that either (a) are publicly listed on a stock exchange in Canada, or (b) have a place of business in Canada, do business in Canada, or hold assets in Canada, and meet at least two of the following thresholds in at least one of their two most recent financial years based on consolidated financials: possess at least $20 million in assets, generate at least $40 million in revenue, or employ an average of at least 250 employees; and produce goods in Canada or elsewhere, import goods into Canada, or control entities engaged in these activities.
Reporting entities must:
- Prepare a risk report that details the steps taken during the previous financial year to prevent and reduce the risk of forced and child labour in their supply chains. This report must also address the entity’s policies, due diligence processes, identified risks, remediation measures, employee training, and assessments of effectiveness.
- Complete an online questionnaire that collects information aligned with the content of the risk report. The questionnaire portal on the Public Safety Canada website also serves as the mechanism for submitting the risk report to Public Safety Canada.
- Publish the risk report in a prominent place on the organization’s website, making it readily accessible to the public.
To make the most of the reporting process, the following steps and considerations can guide your approach in the building of the risk report.
Lay the foundation for accurate and clear risk reporting
Your risk report serves as a formal declaration of your organization's efforts to combat forced and child labour. In accordance with Subsection 11(1) of the Act, it is imperative that you clearly describe the measures undertaken during the previous financial year to mitigate risks associated with both your operations in Canada and your import activities. Furthermore, Subsection 11(3) mandates a comprehensive disclosure of the fundamental elements of your organization's structure, policies, and practices, including:
A thorough and thoughtful response to these requirements not only ensures compliance with the Act but also showcases your organization’s commitment to ethical leadership and accountability.
Build trust through transparency
Transparency is a cornerstone of the Act. Your report must be credible, evidence-based, and free from embellishments. Once finalized, make your report publicly available on your website in a prominent location, ensuring it’s easy for stakeholders to find and reference.
Prepare for submission and approval
Adhering to the Act’s approval process is just as important as the content itself. Review your report thoroughly with your governing body, ensuring all statements align with Public Safety Canada’s Approval and Attestation guidance. Submit your report and the online questionnaire by May 31, 2025, to meet the regulatory deadline.
Think beyond compliance: Create value through ethical practices
While fulfilling the Act’s requirements is essential, this process also presents a unique opportunity to demonstrate leadership and innovation. Consider these actions to maximize the impact:
- Highlight progress and plans: Use the report to share concrete initiatives or progressive measures, even if not required. This showcases your commitment to long-term improvement.
- Establish a risk hierarchy: Categorize risks in your supply chain to prioritize areas for action and enhance your risk management framework.
- Develop monitoring mechanisms: Plan how you’ll track progress and evaluate next year’s reporting outcomes to demonstrate year-on-year progress.
- Anticipate business risks: Discuss internally the potential reputational and operational challenges that may arise from supply chain disruptions, and plan accordingly.
By embracing these opportunities, your organization can align compliance efforts with broader business goals, driving value for stakeholders and reinforcing your role as a responsible global citizen.
Final considerations
Compliance with the Fighting Against Forced Labour and Child Labour in Supply Chains Act is about more than ticking boxes; it’s an opportunity to demonstrate your organization’s commitment to ethical and sustainable supply chain practices. By crafting a comprehensive and transparent report, you can strengthen your brand reputation, build trust with stakeholders, improve your market position, and contribute to a more equitable global supply chain. As the reporting deadline approaches, let these considerations guide you toward a meaningful and impactful submission.
How BDO can help
BDO Canada is committed to supporting organizations in their journey towards sustainable and responsible business practices. Our team of professionals can assist you in assessing your supply chain risks, developing effective compliance programs, and implementing strategies to mitigate potential issues.
Our services include:
- Supply chain risk assessment: Identifying and prioritizing potential risks within your supply chain to inform effective mitigation strategies.
- Supply chain training: Empowering your team with the knowledge and tools to implement robust due diligence processes.
- Supply chain risk reporting: Assisting in the preparation of comprehensive reports that meet regulatory standards and demonstrate your commitment to ethical sourcing.
- Supply chain and sustainability strategy: Developing a long-term strategy to build a sustainable and resilient supply chain that aligns with your business objectives.
By working with BDO, you can build a more sustainable, ethical, and resilient supply chain that safeguards your reputation and drives long-term value.
Your Compliance with Canada’s Supply Chains Act Webinar
In this on-demand webinar, we explored essential regulatory changes, compliance requirements, and risk mitigation strategies.
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