Labour exploitation in global supply chains: What we heard report

Question 1 - What currently hinders businesses and others from knowing whether supply chains are free of labour exploitation?

Some supply chains are long and complex, involving thousands of worksites. Businesses noted that it can be difficult to verify whether labour exploitation is occurring beyond their immediate suppliers, or at best the businesses that feed these suppliers. In sectors at high risk of labour exploitation, sub-contracting can be common. This means that companies usually are not able to engage all suppliers, nor do they have influence to change practices.

We heard that some labour exploitation practices are industry-wide. This means that an individual businesses action may not work and could make it harder for them to compete with other businesses. We also heard that the most helpful approach is to strive for improvements, rather than trying to ensure that a supply chain is 100% free of labour exploitation.

Many participants, both in person and online, noted that companies could benefit from assistance in:

• understanding their supply chains, and
• fulfilling due diligence in a meaningful way

Civil society, labour organizations and investor groups noted that, for businesses, motivation to take on due diligence and reporting can be lacking.

Finally, the shortage of information about labour exploitation and companies’ efforts to address it makes it difficult to:

• have an informed discussion, and
• develop meaningful policy options

Investor organizations expressed the need for reliable and comparable information. This would allow them to analyze the economic, social and governance risks of companies in which they invest.

We heard of the importance of improving data collection and data sharing to find labour exploitation risks. We also heard of the importance of engaging stakeholders and of ensuring victims are protected.

Question 2 - How can Canada best address issues of labour exploitation in global supply chains? What should be the Government of Canada’s role?

Under the international framework of the United Nations Guiding Principles on Business and Human Rights (UNGPs), States should “encourage, and where appropriate require, business enterprises to communicate how they address their human rights impacts”. However, representatives from civil society, labour organizations and investor groups believe that:

• voluntary models do not go far enough, and
• Canada should require businesses to communicate how they address their human rights impacts

They strongly explained the moral and business case for raising the standard for responsible supply chains in the Canadian economy.

Representatives of businesses, industry and employer organizations did not disagree with supply chain legislation. However, some stakeholders noted that more research would be needed to determine whether it is effective. Some noted that they already report under the legislation of other countries. They highlighted the need to streamline these reporting procedures and compliance processes. This would help to coordinate across countries that have supply chain legislation in order to reduce burden on businesses.

Stakeholders recommended the following good practices related to supply chains. The Government of Canada could include these in legislation, or as part of broader non-legislative measures for responsible business conduct:

• a clear framework that describes what is being requested of companies
• guidance for businesses in carrying out their duties
• a central repository with public lists of companies subject to the law
• support for small and medium sized businesses or businesses with fewer resources to carry out their duties, and
• standardized data

Some participants, in-person and online, also noted that it would be important to have incentives or rewards, such as tax credits for reporting. Companies highlighted the need to:

• conduct risk assessments to prioritize reporting in their supply chains
• report on actions taken to mitigate those risks, and
• address any abuses found

For example, if companies find labour exploitation, then it is clear that their systems to find risks are working. It would then be important for the government to support the company in its efforts to resolve these issues.

Participants discussed a few other options to legislation, as well as the potential effects of a “do nothing” approach. Various participants noted that if there were no penalties or incentives for companies, it:

• could leave labour exploitation issues to the courts in a way that would be costly for companies
• would leave no room for policy makers, and
• would still likely require the government to educate industry and provide toolkits as a means to combat labour exploitation through supply chains. An investor representative indicated that a “do nothing” approach would leave investors in the dark

Question 3 - If the Government of Canada considers supply chain legislation, what should be the focus and scope?

The report “A Call to Action: Ending the Use of All Forms of Child Labour in Supply Chains,” was tabled on October 15, 2018. Since then, some stakeholders have continued to request that Canada introduce legislation that would require impacted businesses to carry out mandatory human rights due diligence. This type of legislation would make it mandatory for businesses to take reasonable steps to prevent and address human rights violations at any stage in the production of their goods.

Civil society, labour organizations, investor organizations, and many international advocates now claim that the transparency model of reporting, or reporting on specific issues, such as forced labour (as opposed to a broad human rights approach), is not enough. They point to a low level of compliance, and companies not being held responsible for failures to comply with reporting requirements.

Many stakeholders in favour of mandatory human rights due diligence legislation pointed to the following models as examples^{Footnote 1} :

• the French model, and
• the Swiss “Responsible Business Initiative” model^{Footnote 2} , launched by a broad coalition of civil society organizations

They noted that Canada could draw from:

• the UNGPs
• the Organization for Economic Cooperation and Development (OECD) Due Diligence Guidance, and
• the International Labour Organization’s (ILO) Tripartite Declaration on Multinational Enterprises

Some in favour of due diligence also noted that it would only be effective if it is supervised and enforced through potential penalties.

The importance of addressing all human rights violations was also discussed. Representatives from both civil society and business mentioned other factors connected to or, in some cases, causing forced labour or child labour. These included working wages, maternity benefits, and recruitment fees. They explained that due diligence efforts and practices trickle down the supply chain and enable companies and partners to gather more information and data.

One Canadian industry representative noted its members would be more comfortable with transparency reporting measures, similar to the UK and Australian Modern Slavery Acts. Industry and employer groups and businesses generally asked that the government consider the following issues:

• building capacity for businesses to improve their supply chains and use existing tools
• avoiding adding burden on companies
• recognition that if requirements are applied to companies of all sizes, competitiveness of some industry segments could be affected
• allowing time for industry to understand their responsibilities under any new legislation or regulations through a gradual phased-in approach:
  • including time to be able to identify, mitigate and address sectors with the highest risks, and
  • avoiding duplicating reporting procedures. For example, if a business reports in the United Kingdom, that could suffice in Canada as well

Conclusion

Overall, representatives of civil society, labour organizations, industry and employer representatives, businesses, representatives of international organizations and academics agreed more needs to be done to address labour exploitation in global supply chains. Most stakeholders noted the value of due diligence and addressing risks throughout supply chains. A few businesses expressed more comfort with reporting on steps taken to prevent the risk of human rights violations. However, they did not oppose a due diligence model that would require businesses to take action to address any violation suspected or found within their supply chains.

Discussions and survey responses included advice and questions about how supply chain legislation could best apply within Canada. There was a clear message that legislation should not be overly demanding on businesses. At the same time, many businesses are looking to the Government to guide and support them in addressing supply chain concerns. There was also general consensus that Canada should consider mandatory due diligence legislation. Stakeholders also generally agreed that legislation should be modelled on the OECD Due Diligence Guidelines and should be based on the experience of European countries. This could include a broad scope with a human rights perspective.

Some industries noted a preference for a more focused scope (for example on forced labour). However, there may be support for a broader human rights approach if a gradual approach that prioritizes high-risk sectors is considered. This would also require ongoing support from Government, to enable businesses to fulfill their new obligations. While one multinational corporation questioned the overall value of supply chain legislation, other industry and business representatives did not express strong opposition to supply chain legislation.

Finally, there are many challenges to understanding supply chains. Many businesses lack the tools or ability to monitor and influence their suppliers. Moving forward, participants noted that it will be important to:

• consider ways to improve the knowledge base around labour exploitation in supply chains, and
• increase knowledge about the forms labour exploitation can take

Roundtables

Roundtable discussions took place in Toronto (May 23), Vancouver (June 11), and in Ottawa (June 18). The roundtable in Ottawa was hosted by The Honourable Patty Hajdu, then Minister of Employment, Workforce Development and Labour. The Honourable John McKay, who is a Co-Chair of the All-Party Parliamentary Group to End Modern Slavery and Human Trafficking, also participated.

Representatives from the following organizations participated in the labour exploitation in global supply chains consultations roundtable discussions:

• Æquo/Bâtirente
• Air Canada
• Amazon
• Amnesty International Canada
• Aritzia
• Above Ground
• Assembly of First Nations
• Assent Compliance
• Baker McKenzie LLP
• Bank of Montreal Global Asset Management
• Borden Ladner Gervais LLP
• Canadian Apparel Federation
• Canadian Association of Importers and Exporters
• Canada Building Trades Union
• Canadian Center to End Human Trafficking
• Canadian Chamber of Commerce
• Canadian Commercial Corporation
• Canadian Labour Congress
• Canadian Network for Corporate Accountability
• Canadian Tire Corporation
• Coca-Cola Company
• Consumer Goods Forum
• COSTCO
• Council of Canadian Innovators
• Disney
• Engineers Without Borders Canada / Mining Shared Value
• Fair Trade Canada
• Federally Regulated Employers – Transportation and Communications (FETCO)
• Giant Tiger
• Government of Canada
• Hudson Bay Company
• IMPACT
• Loblaws
• Mining Association of Canada
• Mountain Equipment Coop
• Norton Rose Fulbright Canada, LLP
• Oxfam Canada
• Prospectors and Developers Association of Canada (PDAC)
• Retail Council of Canada
• Royal Bank of Canada – RBC Global Asset Management
• Saint Mary’s University
• Shareholder Association for Research and Education
• Supply Chain Management Association (SCMA)
• The B Team
• Ulula
• UNICEF
• United States Department of Labor
• United Steel Workers
• UPS Canada
• Walmart
• Women’s Business Enterprise Canada
• Women of the Métis Nation
• World Vision Canada
• York University’s Schulich School of Business – Centre of Excellence in Responsible Business

Online survey

We posted an anonymous online survey in Spring 2019 on the Consulting with Canadians website. The purpose of the survey was to help the Government of Canada identify how best to work with companies and other partners in addressing labour exploitation through global supply chains.

We received survey responses from:

• academics
• experts
• business representatives
• industry association representatives
• National Indigenous Organizations
• international organizations
• non-governmental organizations
• civil society organizations
• representative of a provincial or territorial government
• representatives of a municipal government
• shareholders
• investor organizations
• trade unions
• members of the public

Survey questions included:

1. Do current actions and initiatives in Canada go far enough to prevent and address labour exploitation through global supply chains?
2. If additional measures were taken in Canada to address labour exploitation in supply chains, should they address:
   • Child Labour and Forced Labour (as defined by the ILO)
   • Trafficking in Persons (as defined in Canada’s Criminal Code)
   • Other human rights abuses or violations
   • Which other human rights abuses or violations?
   • working conditions
   • Which working conditions?
   • Environmental impact of business operations
   • The ways in which women and girls are differently affected by labour exploitation – including a gender-responsive approach
   • All of the above
   • Other
   • What else should be addressed by additional measures?
3. Should the Government of Canada pursue further measures to raise the business community’s awareness of labour exploitation in supply chains, and provide guidance on ways to identify and address risks?
   • Please elaborate
4. A “transparency reporting” requirement could require business entities operating in Canada and potentially Canadian owned (or registered) business entities operating abroad to report annually on their actions to assess the risk of labour exploitation in their operations and supply chains.
   • Should “transparency reporting” be required from businesses and if so, should the government provide guidance to them in this respect? What are the advantages or disadvantages of this option?
5. A “due diligence” requirement could mandate businesses operating in Canada and Canadian owned (or registered) businesses operating abroad to report annually on their actions to address labour exploitation in their operations and supply chains.
   • Should “due diligence” be required from businesses and, if so, should the government provide guidance to them in this respect? What are the advantages or disadvantages of this option?
6. Which criteria could be used to determine the threshold for company size with respect to the possible legislative requirements for businesses?
   • Annual Revenue
   • Number of employees
   • Other. Please elaborate
7. Should transparency reporting or due diligence requirements apply to both goods and services?
   • Please elaborate
8. Should transparency reporting or due diligence requirements apply to the entire corporate structure of a business, including its entire supply chain?
   • Please elaborate
9. How could the Government of Canada ensure that businesses are compliant with transparency or due diligence requirements?
   • Please elaborate
10. What would be the most effective way to publicly report on efforts to address labour exploitation?
    • Please elaborate
11. What could “good practices” look like for businesses to address potential labour exploitation in their supply chains?
    • Please elaborate
12. What information should be included in awareness material and guidance for businesses?
    • Please elaborate
13. What are some of the critical influencing factors, or challenges, of which the Government of Canada should be aware?
    • Please elaborate
14. Are there any other legislative on non-legislative options that should be considered?