Brands and Retailers Must Adjust Processes in Response to Canada’s Supply Chain Act

For years, human rights advocates warned that Canada was falling behind in its obligation to combat modern slavery in global supply chains, contending that the country had become a “dumping ground” for goods tainted by forced labor that other countries had rejected. Now Canada is taking action to correct that.

This spring, the country passed Bill S-211, officially known as the “Fighting Against Forced Labour and Child Labour in Supply Chains Act.” Effective on Jan. 1, 2024, the law places the responsibility on brands, retailers, and importers to identify and eliminate human rights violations within their supplier networks.

The bill aligns Canada with the growing global trend of legislation aimed at eradicating modern slavery and promoting social sustainability. By some measures, it may be the most sweeping supply chain due diligence law in North America, even more so than the United States’ Uyghur Forced Labor Prevention Act (UFLPA). Where the UFLPA specifically targets goods produced in China’s Xinjiang region, Bill S-211 focuses on supply chain due diligence obligations for businesses operating in Canada, irrespective of the origin of goods.

The law applies to both domestic and international businesses that meet at least two of these three thresholds: $40 million Canadian dollars ($30 million) in gross worldwide revenues; $20 million ($15 million) in assets; or an average of 250 employees or more. Regardless of their industry, companies that meet these criteria must produce annual reports outlining their due diligence measures to identify and mitigate the risk of modern slavery in their supply chains. These reports must include information about a company’s policies, procedures, risk assessments, and remedial actions taken to address any identified issues. To ensure transparency, these reports must be published on a publicly accessible website.

The first reporting deadline under the law is May 31, 2024, a date that’s sure to receive considerable attention in boardrooms because of the law’s unique enforcement structure. Businesses that don’t comply will be subject to fines of up to $250,000, and unlike other global supply chain due diligence laws, Bill S-211 holds business leaders personally liable for any company offenses they directed, authorized, or in any way participated in. If that language strikes fear in chief executives, it’s meant to.

Introducing visibility and creating safeguards

Complying with the law will pose considerable challenges, especially for brands and retailers that must navigate complex global supply chains of hundreds of suppliers. That requires coordination, accountability, and visibility, but thankfully it’s made much more manageable by a multi-enterprise platform, sometimes also known by Gartner as a multienterprise collaboration network. These cloud-based platforms support collaboration between businesses, their suppliers, and their third-party partners, introducing complete visibility into a company’s supplier base, from vendors to factories to raw material providers.

More from Sourcing Journal

To comply with the law, supply chain managers will need to establish robust systems and processes to identify and address any instances of modern slavery or forced labor within their supply chains. This involves enhanced supplier vetting, auditing, and monitoring mechanisms to ensure compliance and ethical practices — all of which can be simplified through the supplier relationship management (SRM) tools of a multi-enterprise platform.

These platforms create a window into an enterprise’s entire supplier base, enabling the traceability that Bill S-211 requires, allowing businesses to easily document the chain of custody of every material they use in every product they make, so they can prove that no forced labor was involved at any stage of its creation.

Multi-enterprise platforms also foster collaboration with industry associations and non-governmental organizations (NGOs) that can also prove invaluable in navigating the complexities of supply chain management in light of Bill S-211. There are multi-enterprise platforms that can even integrate with sustainability databases from business associations and nonprofits like Amfori and Worldwide Responsible Accredited Production (WRAP), which monitor and certify the social sustainability of factories and suppliers.

By making critical certification details from these partners available in real time, these integrations eliminate the need for supply chain managers and compliance teams to log in to multiple systems, speeding up a critical step in the sourcing process. And they create other efficiencies as well, for instance by saving retailers and brands time through automating the onboarding process for vendors and factories and ensuring that all new suppliers have read and consented to the company’s terms. This way from the very earliest stages of working with a supplier, there’s total transparency about your ESG standards and expectations.

These platforms also enforce a company’s social and environmental standards by preventing merchandisers from booking orders with non-compliant suppliers and preventing shipping departments from booking shipments with these vendors. These are the kinds of safeguards that brands and retailers need in place to prevent lapses that could violate Bill S-211. And through supply chain mapping, businesses are granted a fuller understanding of their social and environmental footprint, including where their yarns and fabrics come from, how much carbon they’re emitting, and whether their downstream suppliers are vetted and accredited.

There’s no sugarcoating it: Bill S-211 will be a tough adjustment for many businesses, but it’s a necessary one. By implementing responsible sourcing practices with a multi-enterprise platform, businesses can protect their reputation, strengthen consumer trust, and contribute to a more sustainable global supply chain ecosystem, while fostering the long-term resilience they need to remain competitive well into the future.  

Rejean Provost is the team lead, ESG strategy for TradeBeyond, a provider of extended supply chain management solutions for private label and branded merchandise. He has more than 35 years of experience in retail, merchandising, sourcing, manufacturing and technology related to the apparel and footwear industries.

Click here to read the full article.