Due diligence and risk assessment obligations for supply chain management under Canada’s modern day slavery laws

The Fighting Against Forced Labour and Child Labour in Supply Chains Act places significant emphasis on due diligence and risk assessment as fundamental components of effective supply chain management. The legislation requires entities to implement comprehensive processes for identifying, assessing and managing risks of forced labour and child labour throughout their operations and supply chains, moving beyond mere compliance to establish proactive risk management frameworks.

Due diligence under the Act encompasses the ongoing process of identifying actual and potential negative impacts of forced labour and child labour in an entity's operations and supply chains. This process must be systematic, risk-based and proportionate to the entity's size, sector and operating context. The Act requires entities to describe their due diligence processes in their annual reports, demonstrating not only what measures they have implemented but also how these measures are integrated into their broader business operations and decision-making processes.

Risk assessment forms the foundation of effective due diligence and must consider both inherent risks associated with specific industries, geographic regions and business models, as well as residual risks that remain after mitigation measures have been implemented. Entities must identify parts of their business and supply chains that carry a risk of forced labour or child labour being used, taking into account factors such as the nature of the work, the vulnerability of workers, the geographic location of operations and the complexity of supply chain structures.

Geographic risk factors are particularly important in the Canadian context, as many Canadian entities source goods and services from regions with higher risks of forced labour and child labour. High-risk jurisdictions often include countries with weak labour law enforcement, high levels of poverty, political instability or documented cases of forced labour and child labour. However, entities must also consider domestic risks, as forced labour and child labour can occur within Canada, particularly in sectors such as agriculture, manufacturing and domestic work.

Industry-specific risks vary significantly across sectors. For example, the extractive industries may face risks related to artisanal mining and the use of child labour in mining operations, while the textile and apparel industry must contend with risks in manufacturing facilities and cotton production. The technology sector faces risks related to mineral extraction for electronic components, while the food and beverage industry must consider risks in agricultural production and food processing.

The Act requires entities to take steps to assess and manage identified risks, which must be documented and reported annually. Effective risk management involves implementing appropriate controls proportionate to the level of risk identified, such as supplier codes of conduct, contractual clauses, auditing programmes and worker grievance mechanisms. Entities must also establish systems for monitoring the effectiveness of these controls and adjusting them as necessary based on changing circumstances or new information.

Practical implementation of due diligence processes should begin with comprehensive supply chain mapping to understand the full scope of an entity's operations and relationships. This includes identifying all suppliers, contractors and business partners, as well as understanding the geographic locations and industry sectors involved in the supply chain. Organisations should develop risk assessment matrices that consider both likelihood and impact of forced labour and child labour risks, allowing for prioritisation of due diligence efforts.

Supplier engagement is a critical component of effective due diligence, requiring entities to communicate their expectations regarding forced labour and child labour prevention to all suppliers and business partners. This typically involves implementing supplier codes of conduct, requiring contractual commitments to labour standards and establishing regular communication channels with suppliers about labour practices and working conditions.

Regular monitoring and auditing are essential for maintaining effective due diligence processes. This may include on-site inspections, worker interviews, document reviews and third-party audits. Entities should establish clear criteria for evaluating supplier performance and develop corrective action plans for addressing identified deficiencies. The monitoring process should be ongoing rather than periodic, with continuous assessment of risks and regular updates to risk mitigation strategies.

Technology can significantly enhance due diligence efforts through supply chain mapping software, risk assessment platforms and monitoring systems that provide real-time visibility into supply chain operations. These tools can help entities track supplier performance, identify emerging risks and maintain comprehensive records of due diligence activities for reporting purposes.

Collaboration with industry peers, civil society organisations and other stakeholders can strengthen due diligence efforts by sharing information about risks and best practices. Many industries have developed collective initiatives to address forced labour and child labour risks, providing entities with opportunities to participate in sector-wide efforts while fulfilling their individual obligations under the Act.