Canada’s Supply Chain Act Is in Effect. Complying May Be Easier Said Than Done.

Involuntary servitude, debt bondage, child labor, and other variations of forced labor generate more than $150 billion in revenue per year globally. The scope of the problem is, quite frankly, staggering.

Consequently, governmental bodies around the world have passed anti-slavery legislation that seeks to hold businesses accountable for combating modern slavery in the supply chain. However, passing this legislation is by no means a guarantee of progress.

The most recent regulation attempting to curtail involuntary labor is Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act, which went into effect on January 1, 2024. To comply, organizations that operate or do business in Canada must detail how they and their business partners are working to phase out forced labor from their operations.

However, making and documenting progress will be easier said than done given the intricacies and vastness of modern supply chains. So, what meaningful steps can organizations take?

Supply chain mapping: A prerequisite for compliance

In 2024, the first year Canada’s new law is in effect, any company that does business in Canada and has $20 million or more in assets must submit a detailed report that outlines how the organization is working to prevent the use of forced labor in its supply chain.

This initial filing is designed to establish a baseline that businesses will be measured against in subsequent years to determine whether they’ve followed through on rooting out unethical practices deep within their supply chains and improving transparency across the board.

The biggest challenge for most businesses will be understanding the complex layers of their product supply chains. Many organizations have visibility into the labor practices of Direct or Tier-1 partners; however, visibility may be limited when it comes to Tier 2, 3+ sub suppliers and subcontractors. It’s critical to identify all links in the supply chain so the organization can do its due diligence regarding forced labor risk.

This is where supply chain mapping becomes important. Supply chain mapping is the practice of collecting data about the production of a good or service for reporting purposes. While it involves several manual components, supply chain mapping is only feasible at scale with the right technology.

A business’ specific technology implementation will depend on its goals and the compliance regulations it needs help adhering to. In this case, Canada’s supply chain labor transparency law requires business to report data on the structure of the company’s supply chain, its policies regarding forced labor, the parts of the business that are at risk of using forced labor, and what steps the business is taking to reduce this risk. In many cases, a supply chain management platform can provide the level of visibility that’s required to gather and track this data.

As supply chain leaders begin the process of identifying and collecting labor data from their sub-suppliers, they’ll likely encounter differing levels of engagement. Certain suppliers may be forthcoming and responsive, while others may be hesitant and slow to respond.

However, it’s important to emphasize the necessity of compliance and that failure to comply may jeopardize future partnerships. They should document their responses within their supply chain mapping solutions to ensure that auditors are aware that they performed their due diligence.

Taking steps toward a slavery-free supply chain

Policies like Canada’s anti-forced labor act are a valuable first step toward eradicating modern slavery, but they will only be effective if compliance follows.

To respond to these emerging regulations with greater agility, supply chain leaders need visibility into every supplier and contractor that touches their supply chain — and their policies regarding working conditions and forced labor. With a foundation of mapped supply chains, companies can more easily perform the requisite due diligence to understand and mitigate risks beyond their tier-1 partners.

Eliminating modern slavery from the supply chain is a massive, seemingly incomprehensible problem. It’s the efforts of individual supply chain leaders that can help move the needle in the right direction.