Executives on Notice: Canadian Supply Chain Law Targets Businesses

A new Canadian supply chain law set to take effect Jan. 1, 2024, will place the responsibility on brands, retailers, and importers to identify and prevent child and forced labor within their supplier networks.

The “Fighting Against Forced Labour and Child Labour in Supply Chains Act” is one of several new laws aimed at promoting a more ethical and sustainable global supply chain. The law applies to both domestic and international businesses that meet at least two of three thresholds: CAD $40 million in gross worldwide revenues, $20 million in assets, or an average of 250 employees or more.

“This law is particularly important as it has an impact on the global scale, including nationally and in North America opposed to only third-world countries,” said Rejean (Reggie) Provost,  enterprise account executive, team lead ESG Strategy at TradeBeyond. “It is as broad as any law can be to the point that it may cause a challenge to the government and agencies to enforce and to manage.”

How Canada’s law will impact international businesses

Failing to comply with these laws is no longer an option and exposes companies not only to reputational risks but lost profits.

“With the current ESG practices gaining traction globally, this decade will most likely be remembered as a crossroads in society for how it manufactures products,” said Provost, noting that companies are increasingly aware of the bad press associated with failing to comply with the law. “In today’s world of social media, no one can hide.”

Failing to comply could also lead to long periods of detention at the border or, in a worst-case scenario, a complete ban on imports—both of which would result in large revenue loss.
But it’s not all scare tactics. For international companies doing business in Canada, preparing for compliance today will ensure they are ready when a similar law is applied in their country—a development that is only a matter of when not if.

Provost also added that these types of legislation could very likely create a shift in the supply chain, impacting where companies can source products from.

“Countries that are more opaque and that offer resistance to third-party auditors, for example, might start losing business, and other countries that have stronger labor laws might start benefiting from additional or new business,” he said.

Prepping your business for compliance

The first step in preparing for compliance is to map your supply chain and engage with them on your objectives. Next, companies need to develop mechanisms such as a corrective action plan or critical path management tool to help ensure they are mitigating all risk.

Communication, both internally and externally, on all the steps and procedures will be imperative during this process. Ultimately, it should be clear to everyone they must accept these changes and use them to their benefit to build a more reliable, fair, and sustainable supplier base.

“Brands, retailers, and importers will need to have more visibility and transparency within their supply chain,” said Provost. “Although this is painful and requires time and a good technological partner, this will result in building a more robust and resilient supply chain and eventually reduce cost.”

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