Forced Labor Risks Highlighted in Canada’s 2024 Annual Report

The first reporting year under Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act has brought both progress and challenges to light.

With 5,795 reports submitted on or before the May 31 reporting deadline, the findings reveal that many businesses are still struggling to manage forced labor risks effectively, while others are taking meaningful steps toward compliance.

What is Canada’s Forced Labour Act?

The Act which came into force on January 1, 2024, requires government institutions and qualifying private entities to submit annual reports on their efforts to reduce risks of forced labor and child labor. These reports must cover:

• Policies and processes for addressing forced labor risks
• Risk identification across supply chains, from raw materials to subcontractors
• Remediation efforts where labor rights violations are uncovered
• Employee training on recognizing and mitigating risks

Reports are made publicly accessible, promoting transparency and accountability while aligning Canada with global frameworks such as the UK Modern Slavery Act and the Australian Modern Slavery Act.

Key forced labor risks identified in the report

The first annual public report identified three forced labor risks:

1. The origin of raw materials or commodities used in production
2. Sector-specific vulnerabilities, especially in textiles
3. Lack of transparency with Tier 1 (direct) suppliers

In industries such as textiles, where outsourcing and subcontracting are common, these findings put a spotlight on the urgency of developing a more robust approach to risk identification and management.

The report also provided insights into the risk identification and management maturity of businesses. Out of 5,650 private entities that submitted reports:

• 38.2% confirmed they had identified parts of their activities and supply chains that carry a risk of forced or child labor.
• 39.4% had started the process of identifying risk but noted gaps in their assessments.
• 22.4% of all entities noted they had yet to begin, showing that there is still a long way to go for full compliance and effective risk management.

Steps taken to mitigate risks

Despite the challenges, many entities reported adopting various strategies to mitigate forced labor risks. While some have implemented proactive measures, others are still in the early stages:

• Over 48% conducted internal assessments to identify risk hotspots
• More than 44% implemented due diligence policies to address and prevent forced or child labor
• Around 38.5% initiated supplier monitoring programs, with some conducting third-party audits or using risk assessment tools
• Nearly 37% required suppliers to adopt codes of conduct

Gaps and opportunities for improvement

While progress is evident, the report highlights key gaps that businesses must address:

1. Lack of employee training: Only 44.4% of entities reported providing training on forced labor risks, with fewer making such training mandatory for all employees. Without adequate education, the ability to identify and manage risks is limited.
2. Limited robust reviews: Only 43.5% of entities have mechanisms to assess the success of their mitigation strategies, leaving many organizations at risk of repeating past mistakes due to weak feedback loops.
3. Remediation efforts fall short: Fewer than 4% of entities reported taking substantial remediation actions when forced labor instances were identified, reflecting an area where businesses can improve accountability and impact.

How companies can prepare for Canadian forced labor compliance

The next annual reports are due by May 31, 2025. All companies in scope must complete an online questionnaire and submit an annual report detailing their efforts to address forced labor in their supply chains. Here are some steps businesses can take to prepare for compliance:

• Map and document every step of your supply chain, identifying high-risk areas for forced and child labor. Use verification tools like Oritain’s forensic technology to substantiate documentation and product origins to build transparency and trust with suppliers.
• Develop and implement a robust risk assessment that identifies potential forced labor risks and their root causes.
• Carefully vet and select suppliers, including codes of conduct in contracts.
• Prioritize employee training on forced labor risks, making it mandatory for all employees at every level of the organization.
• Regularly review and assess the effectiveness of mitigation strategies in place by tracking supplier improvements, conducting annual audits, etc.
• Engage suppliers, workers, and industry partners to foster transparency and accountability.