Supply chain transparency reporting begins in Canada

Part 1 of a monthly series decoding S-211

7 minute read
31 January 2024


On January 1, 2024, Canada's Fighting Against Forced Labour and Child Labour in Supply Chains Act ("S-211") came into force.

This is the first in a series of monthly articles to focus on S-211, examining its terms, its enforcement, best practices in compliance and reporting, and answering the many questions that arise as businesses and the federal government work to address the risks of forced labour and child labour in their operations and supply chains.

This new law requires in-scope businesses and organizations that are required to report under this law ("Reporting Entity") to prepare and file with the federal Minister of Public Safety, a report ("S-211 Report") on or before May 31 of each calendar year.

The S-211 Report must set out the steps the Reporting Entity has taken during its previous financial year to prevent and to reduce the risk that forced labour or child labour is used at any step in the production of goods in Canada or elsewhere by the Reporting Entity, or at any step in the production of goods imported into Canada by the Reporting Entity.

S-211 does not prescribe business conduct beyond reporting in compliance with S-211.

For details on S-211 and related compliance information, please use the following link to my earlier article:  Mandatory Supply Chain Transparency ESG Reporting Comes to Canada.

The context

On December 21, 2023, more than seven months after S-211 became law and a mere ten  days before the law came into force, the Minister of Public Safety published guidance ("Guidance") on S-211, The Guidance is meant  to address many of the questions that businesses had posed regarding the interpretation of S-211.

In addition to the Guidance, the Minister of Public Safety concurrently introduced a mandatory online questionnaire ("Questionnaire") that Reporting Entities must be complete when uploading their S-211 Reports for filing with the federal government.

The guidance

Below are a number of key elements of compliance with S-211 addressed by the Guidance. I note that there are still a number of gaps in the Guidance including those I have noted below.

Application of S-211

In determining whether S-211 applies to a specific business or organization or whether an "entity" is required to report, reference can be made to the Guidance, which provides limited clarity.

For example, with respect to the financial thresholds to be used in determining whether a business or organization is an "entity," the Guidance confirms that the assets referred to are global and gross (not net); that the revenue referred to is global revenue; and that the average number of employees referred to is a global number and it excludes contractors.

There are other elements of the Guidance that do not appear to provide enough clarity. For example, no detailed definition of "goods" is provided in S-211. The Guidance notes that "goods" refers to goods that are the subject of trade and commerce. It is not clear as to what this reference was intended to address.

In assessing whether an entity has to report and considering the meaning of producing, selling, distributing or importing goods, the Guidance notes that these terms are not intended to capture services that solely support the production, sale, distribution and importation of Goods such as marketing, administrative services, financial services and software services.

Joint reports are optional

The Guidance confirms that the filing of joint reports is optional. It also indicates that in certain circumstances, joint reports are not suitable such as where the Reporting Entities have risk profiles, policies or have taken actions that diverge significantly and in a way that would make it difficult to prepare an S-211 report accurately describing all of the entities.

Excluded information

Reporting Entities are not required to include in their S-211 reports any commercially sensitive information that would expose them to legal risk or compromise the privacy of any persons. In addition, they are not required to report on specific cases or allegations of forced labour or child labour.

Size of S-211 Reports

The Guidance indicates the maximum size of the S-211 Report is to be 10 pages or 100 MB. An S-211 Report of 20 pages is permitted if it is in both official languages, English, and French. There is no prescribed level of detail for the S-211 Report and Reporting Entities are recommended to use discretion in determining the appropriate level of detail proportionate to their size and risk profile.

The attestation and board approval

Prior to the publication of the Guidance, the attestation described in S-211 required a member of the governing body (the board of directors) to attest to the fact the board of directors had approved the S-211 report.

The Guidance introduced this attestation:

In accordance with the requirements of the Act, and in particular section 11 thereof, I attest that I have reviewed the information contained in the report for the entity or entities listed above. Based on my knowledge, and having exercised reasonable diligence, I attest that the information in the report is true, accurate and complete in all material respects for the purposes of the Act, for the reporting year listed above.

In their review and approval and in providing the attestation of the S-211 Report, directors will exercise their fiduciary duty to act honestly and in good faith with a view to the best interests of the Reporting Entity and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

In doing so, the Board of Directors of a Reporting Entity will need to determine the appropriate level of diligence that will be required in order to support the directors' exercise of their fiduciary duty, the directors' approval of the S-211 Report and the required attestation by a director.

I note that federal government institutions (i.e. departments, crown corporations, etc.) that are required to report under S-211 are not (yet) required to provide an attestation.

Looking ahead

  • Guidance to assist federal government institutions in their reporting obligations under S-211 is expected from the Minister of Public Safety.
  • Also expected from the Minister of Public Safety is the launch of a publicly available online searchable catalogue containing all reports filed under S-211.

Next month

Part 2 – The S-211 Questionnaire and Filing the S-211 Report

If you require legal advice complying with S-211, please contact the author.

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