On May 3, Canada’s Parliament passed Bill S-211, the Modern Slavery Act, aimed at combating forced labour and child labour in supply chains. This new legislation has far-reaching implications for all Canadian-headquartered companies that meet the Act’s thresholds, especially those that are part of complex supply chains prone to human rights challenges, like mining.
The Act is expected to receive royal assent soon, which means its substantial reporting requirements will come into effect on Jan. 1, 2024. The deadline for the first report submission is on or before May 31, 2024. If your company is not already producing annual Modern Slavery Statements (under similar laws such as in Australia and the U.K.), now is the time to prepare for the requirements of the Modern Slavery Act.
In an industry that continues to struggle with social acceptance, the expectations of the new act can help mining companies to demonstrate and improve their efforts. Here is what your company can expect and how it can best prepare.
Context and applicability of the Modern Slavery Act
Modern slavery occurs in almost every country in the world and is part of many supply chains, cutting across ethnic, cultural, socio-economic, and religious lines. Recent estimates from the International Labour Organization put the number of people living in forced labour conditions, specifically, at 27.8 million globally, on any given day. In its efforts to curb this, Canada’s new Modern Slavery Act expands what is considered forced and child labour, and introduces mandatory reporting requirements that will apply to many Canadian headquartered and listed mining companies. This includes disclosing your company’s actions to manage forced and child labour risks — and their effectiveness.
Your company will be required to report if it is listed on a stock exchange, has a place of business, conducts business, or has assets in Canada, and if it meets at least two of the following conditions in at least one of the last two financial years: 1. have at least $20-million in assets; 2. generate at least $40-million in revenue, or; 3. employ an average of at least 250 employees. For comparison, the act has similar thresholds to those already used for disclosure requirements under the Extractive Sector Transparency Measures Act.
Implications for operators
On a global scale, companies generally demonstrate significant performance gaps with the requirements of modern slavery legislation. In 2022, only 33% of companies assessed by the Corporate Human Rights Benchmark put expectations on their suppliers, 11% worked with them on human rights, and 2% assessed issues and disclosed progress. In mining, the Responsible Mining Foundation (RMF) and World Resources Forum found in 2021 and 2023 that due diligence systems typically succeed at risk identification, but “fall far short of robust risk management.” As a whole, the mining sector has to make a significant effort to start to meet the requirements of Canada’s Modern Slavery Act. Implications for Canadian-operated and owned miners include:
Human rights due diligence: Canadian-owned, operating, or listed mining companies will need to implement comprehensive human rights due diligence (HRDD) processes to identify and mitigate the risk of forced labour and child labour (under-eighteens) in supply chains. This involves mapping supply chains, conducting ongoing risk assessments, developing policies and processes, and establishing supplier contracts and codes of conduct.
Improved reporting and monitoring: Under the act, companies are expected to document efforts to prevent and address forced labour and child labour and to make the information available to the public in a transparent and accessible manner, including displaying it prominently on the company website.
Penalties and fines: Companies failing to comply with reporting requirements or ministerial recommendations, or omitting or providing misleading information may be fined up to $250,000 per instance. Companies that fail to comply with import restrictions may face penalties and restrictions on their ability to import goods into Canada in the future.
Personal liability: Directors, officers, and other individuals who knowingly participate in, authorize, or assent to non-compliant activities can be held personally liable, in addition to the company’s offense. Liable persons would be subject to fines up to $250,000 per offence regardless of prosecution or conviction of the company itself.
Increased reputational risks: The act recognizes that failure to combat the human tragedy of forced labour is simply unethical. Non-compliance could result in significant reputational damage for Canadian companies. Stakeholders may interpret non-compliance as concealing unethical business practices or supporting forced or child labour.
How to get your company ready
There are steps that your mining company can take, in order to be ready to meet Canada’s process, performance, and disclosure expectations related to forced and child labour.
Review existing policies, procedures, and systems: In preparing for compliance, review your current management tools to ensure they align with the act’s requirements. Many will likely find gaps in policy, assessment, management integration, as well as monitoring and reporting.
Develop a comprehensive compliance plan: Once gaps are identified, develop a comprehensive compliance roadmap that includes mapping your supply chain, conducting risk assessments and human rights impact assessments, developing corporate human rights policies, and implementing supplier contracts and codes of conduct that reflect the new legislation’s requirements. The Model Contract Clauses for Human Rights Project provides useful contract clauses to help companies integrate human rights due diligence principles into contracting.
Engage with suppliers and partners: Collaboration with suppliers and partners is crucial for identifying and addressing potential human rights issues in the supply chain. The act requires companies to ensure that suppliers are aligned within the updated definitions of forced labour and child labour. Engage to establish clear expectations, open communication channels, and effective collaboration to implement good practices and ensure compliance.
Upgrade grievance mechanisms: Implementing effective feedback or grievance mechanisms is crucial for affected individuals to raise concerns and seek redress. This supports risk mitigation by supporting prompt, fair, and transparent handling of grievances, including providing appropriate remediation when necessary. Companies should ensure these mechanisms are aligned with the United Nations Guiding Principles effectiveness criteria, which is commonly lacking in industry currently.
Expand monitoring and reporting systems: Companies should integrate human rights performance into robust monitoring mechanisms, and submit it to internal and third-party audits. Monitoring should cover ongoing implementation and management, but also the effectiveness. Companies must report on compliance with their commitments and obligations, as part of continuous improvement and accountability in addressing operational and supply chain human rights concerns.
Train employees and management: Building a culture of awareness and commitment to ethical supply chain practices through training will help facilitate compliance. Provide internal training on human rights, modern slavery, and the new legislation, its requirements, and the importance of ethical supply chain management. This will help to ensure that workers and leaders know their responsibilities and can effectively implement management tools to ensure compliance.
What to expect in future
The prevalence of modern slavery globally has increased dramatically in recent years, growing from 40 million individuals living in conditions of modern slavery in 2016 to nearly 50 million in 2021. While Canada’s Modern Slavery Act represents a significant step forward in curbing forced and child labour, critics argue that the legislation may not go far enough. Concerns remain about the lack of enforcement mechanisms and the need for stronger collaboration between government, businesses, and civil society to achieve meaningful change. While it may see refinements over time, the act nonetheless helps move Canada forward on a journey to improve human rights risk management in global supply chains connected to Canada.
As global awareness of forced labour and child labour issues grows, companies can expect increased scrutiny of their supply chain practices across jurisdictions. Where similar legislation does not yet exist, governments worldwide are likely to introduce legislation like Bill S-211, leading to a more stringent regulatory environment. Proactive steps will leave your company better prepared to address modern slavery compliance and, more importantly, help reduce or even eradicate forced labour in your value chains.
Rachel Dekker and Elizabeth are the co-founders and managing partners of mining sustainability think tank and ESG consultancy Sympact. Sympact supports companies in ensuring their social performance and disclosures meet growing expectations through advisory services, training, and thought leadership products.