What lessons did Canadian businesses learn from Bill S-211?
What lessons did Canadian businesses learn from Bill S-211?
Bill S-211 imposed strict mandatory reporting requirements on Canadian businesses to reduce the risk of child or forced labour in the supply chain. First reports became due on May 31, 2024, and it is important to understand:
- Who filed reports under Bill S-211
- Lessons learned during the reporting process
- Best practices for next year
Understanding the lessons learned during the first reporting period will help ensure that your business complies with the requirements of Bill S-211 and reduces the risk of child or forced labour in the supply chain.
Bill S-211, or the Fighting Against Forced Labour and Child Labour in Supply Chains Act, took effect on January 1, 2024. The bill imposed strict mandatory reporting requirements on Canadian businesses to reduce the risk of child or forced labour in the supply chain with first reports due on May 31, 2024. What are the key takeaways from the reporting process and how can your business ensure it fully complies with the reporting requirements next year?
During the first reporting period, Bill S-211 had a significant impact on how Canadian businesses contract within the supply chain and helped raise awareness of the global issue of child or forced labour. It also communicated that Canadian businesses have a responsibility to address and prevent these practices in alignment with the “S” or “social” pillar of ESG.
Let’s discuss the lessons learned from the first reporting period of Bill S-211. We’ll also share several best practices to help your business comply with the reporting requirements in the future.
Who filed under Bill S-211?
Approximately 4,000 companies filed reports for Bill S-211 by the May 31 deadline. This number can be attributed to several factors — including the tight timeline to file the first annual report after Bill S-211 took effect on January 1, 2024. Many Canadian businesses were caught by surprise, misunderstood or misapplied guidance provided, and weren’t clear on what they needed to deliver as the reporting deadline approached.
Additionally, the topic of ESG has become highly politicized. While opposition to ESG is mainly concentrated in the U.S., many Canadian companies believed that these initiatives wouldn’t add value and would drive up costs, further exacerbating inflation. This may have caused businesses to delay preparing reports for Bill S-211.
Some businesses may have also believed that Bill S-211 would not be enforced or the deadline would change. This caused many businesses to rush to deliver reports during the last week of the reporting period when the federal government did not update the deadline. Many businesses are still submitting reports well after the compliance filing deadline at the time of this article’s publication.
Despite the low number of reports submitted, no fines have yet been issued to businesses who did not file. The current focus is to get Canadian entities that need to comply to understand the extent of child or forced labour globally — and their role to prevent its inclusion in the supply chain. Stricter enforcement is anticipated for next year as new or updated legislation is introduced.
What lessons were learned during the reporting process?
Bill S-211 requires reporting entities to provide mandatory reports on or before May 31 of each year. This report must document all efforts during the previous financial year to prevent and reduce the risk that child or forced labour is present in the supply chain.
The current reporting process involves four:
- Structure, activities, and supply chains — The first step involves describing the business, its activities, associated subsidiaries, and the remediation measures it has taken to prevent child and forced labour and compensate vulnerable families for loss of income.
- Policies and due diligence — This step analyzes the policies and procedures in place for employee training and supplier onboarding to reduce the risk of child or forced labour in the supply chain.
- Risk assessment — This step involves performing a procurement analysis and reviewing it against risk indices to identify inherent risks. It also includes details of how the business assesses the effectiveness of the measures it has taken to ensure child or forced labour are not being used in its supply chain.
- Employee training — The final step involves providing details on the training given to employees to raise their awareness of the issue of child and forced labour in supply chains and help them to identify and reduce these risks.
Our advisors helped many businesses navigate the reporting requirements — and noticed a shift in mindset throughout the process. Bill S-211 enabled many business leaders to understand the impact of child and forced labour and its presence in the supply chain. Many businesses started with the goal of simply filling out the forms to achieve minimum compliance. However, they ended up seeing the reporting process as a valuable exercise to help prevent the exploitation of vulnerable populations.
What are the best practices for next year’s reporting period?
Bill S-211 is currently focused on getting businesses to think critically about where their goods come from, who their suppliers are, and what risks exist in their supply chain. While it does not require your business to fill all gaps and remove all risks from its supply chain, stricter enforcement is expected next year — and you need to take the right steps to ensure your business is compliant.
Our advisors recommend the following best practices from their experience of helping businesses navigate the reporting requirements of Bill S-211. This can help your business fill several commonly found gaps and mature its business activities in compliance with this law:
- Update your policies and due diligence processes
- Conduct a risk assessment
- Provide employee training
- Prepare for an assessment and monitor for updated legislation
Our advisors found that many businesses can improve their policies and due diligence processes to align with mitigating risks related to the use of forced and child labour. This includes incorporating language within current policies that prohibits the use of forced or child labour. Any changes should also flow through to contracts or policies that govern relationships with suppliers.
Businesses may also want to consider developing a supplier questionnaire. This tool could be implemented as part of supplier onboarding, used to evaluate the risks of forced or child labour among suppliers’ activities, and provide details about the procured goods.
Additionally, it is necessary to evaluate more than just your direct suppliers. Asking your suppliers about their policies, how they onboard their own suppliers, and where their suppliers get their goods will help your business further mitigate the risk of child or forced labour in its supply chain.
Compliance with Bill S-211 requires your business to perform a risk assessment to understand how and where the risk of child or forced labour may impact your supply chain and activities. Your business must identify the goods being purchased to support its activities and where these goods originate from to conduct this risk assessment. For example, risk indices show that child or forced labour is prevalent in supply chains for shrimp or whitefish products, creating a higher risk if your business procures these goods.
Our advisors observed that many businesses found this exercise challenging during the reporting process. This is due to the complexities and research involved to understand where risk exists among goods and countries in comparison to their supply chains. However, once this assessment was complete, it highlighted areas of the supply chain where additional due diligence and supplier monitoring was and is needed. Mechanisms and tools implemented should be identified within the next year’s compliance report.
Providing training to your employees is one of the requirements of Bill S-211 — however, our advisors identified gaps in employee training programs during the reporting process. This was not a surprise, considering the nature of this new law in Canada and that many companies historically did not identify this as a training requirement.
Training programs help raise employee awareness about the requirements of Bill S-211 and the global prevalence of child and forced labour. These programs also communicate that your business has zero tolerance for child and forced labour, and that this extends across your own operations and down your full supply chain. Every employee should be aware that they have a responsibility to reduce the risk of child or forced labour within business activities, including the suppliers you work with.
Additionally, provide training to your employees around how to onboard and engage with suppliers — as well as how to identify potential risks of child or forced labour. If any new mechanisms regarding evaluating and monitoring relationships with suppliers have been introduced, ensure that training covers how to use these tools. It is crucial to provide proper training to your employees to achieve compliance and reduce the risk of child or forced labour in the supply chain.
Stricter enforcement of Bill S-211 is anticipated in the future. Your business may be building new processes, updating its policies, or maturing its program to comply with Bill S-211. However, our advisors identified that these changes frequently aren’t fully implemented — and it is crucial to ensure your processes, policies, and programs are being put into action.
Putting these changes into practice can help measure whether your strategy is working effectively. It can also help ensure these changes can stand up and be defensible against a third-party audit as enforcement becomes stricter in the years ahead.
The federal government has indicated they will announce updates to the legislation for Bill S-211 in summer 2024. While there has been no announcement regarding what these updates might include, it may involve increased enforcement, introduce new areas of enforcement, or other factors that could have a significant impact on your business.
If you are a reporting entity, it is important to ensure that you monitor for these updates to Bill S-211 to ensure you are aware of any changes. This helps ensure you take the right steps to comply with the updated legislation when the next reports become due on May 31, 2025.
Is your business prepared for Bill S-211?
Child and forced labour are a growing global issue — and it is your responsibility as a business leader to take an active role in preventing its inclusion in the supply chain. The International Labour Organization estimates that there are approximately 28 million victims of forced labour globally. Bill S-211 is an important step to increase awareness and eradicate exploitative practices from the supply chain of Canadian businesses.
Keeping the lessons learned from the first reporting period in mind and implementing best practices within your business can help you comply with the requirements of Bill S-211 and reduce the risk of child or forced labour in the supply chain.
If you need help navigating the reporting requirements of Bill S-211, contact MNP’s Edward Olson at 250.718.8687 or [email protected] for more information. Our ESG team can also help your business develop customized staff training programs or assist with conducting a fulsome risk assessment of your supply chain.
Edward Olson CIA, CPA, CA
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