Supply chain consultations – Issue paper

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Introduction

The Government of Canada is seeking the views of stakeholders and partners, including unions, businesses, experts, investors, civil society organizations, and provinces and territories, on possible measures to address labour exploitation in global supply chains, as Phase I of its consultation process.

The consultation is in response to the 2018 report by the Subcommittee on International Human Rights of the Standing Committee on Foreign Affairs and International Development (SDIR), entitled, A Call to Action: Ending the Use of all Forms of Child Labour in Supply Chains. The report, which was tabled following a study undertaken by SDIR in 2017, highlighted the importance of collaboration between the federal government and businesses, civil society and provincial and territorial governments to eliminate child labour from global supply chains.

The term “labour exploitation” is used for the purposes of this consultation in order to encompass the range of issues that could be addressed through future legislation or policy initiatives, including, but not limited to child labour. This is because, in practice, it can be difficult to identify child labour and it is a challenge to separate it from other labour or human rights abuses and violations, including forced labour, bonded labour, and trafficking in persons.

Current international approaches to addressing human rights abuses and violations through supply chains have focused on various issues: some focus on modern slavery (a term not used by the Government of Canada as it is not defined in international law or domestic legislation), while others take a more comprehensive approach to human rights abuses or environmental issues.

This consultation will build off the 2017 SDIR study, as well as domestic and international momentum and expertise, while taking into consideration the Canadian context. It will also examine how possible new initiatives could fit with existing and related policy and legislative frameworks. The results will be used to inform the scope and focus of any future supply chain legislation or policy initiatives in Canada, which would be considered with the following long-term goals in mind:

  • Heightened awareness amongst all relevant stakeholders of the risks of labour exploitation;
  • Increased transparency and best practices with respect to addressing labour exploitation;
  • Support for Canadian businesses, and others, to respond more effectively to the risks of labour exploitation;
  • Increased action on the part of businesses, and others, who are not already taking action in this area;
  • A level playing field by applying the same standards to all sectors and businesses;
  • Harmonization of Canadian and international efforts to address labour exploitation; and
  • Better information for consumers and investors to make informed decisions.

Process

This is the first phase of the consultation on measures to address labour exploitation in global supply chains. This issue paper has been prepared to provide context, background information, and as a guide to further discussion.

We invite you to share your views at one of the following roundtables, or to submit your feedback in writing through the survey by June 21, 2019.

Background

Global context

The tragic Rana Plaza garment factory collapse in Bangladesh in 2013 mobilized efforts to improve working conditions in supply chains. Since that event, discussions about labour and human rights throughout global supply chains have taken on increasing urgency – including at the G7, G20, the United Nations (UN) and the International Labour Organization (ILO).

Forced labour is found in every country and every sector of activity. The ILO estimates that there are approximately 152 million child labourers globally, with 73 million children engaged in hazardous work, and 4.3 million in forced labour. It also estimates 25 million victims of forced labour worldwide. Women and girls are vastly over-represented, making up 71 percent of victims. World Vision Canada released a study asserting that 1,200 companies in Canada imported goods at risk of being produced by child labour and forced labour in 2015.

These practices can fall into the scope of broader social and environmental risks faced by supply chain operations. The working conditions in supply chains may constitute a violation of human rights.

Definitions

Child Labour

According to the ILO, child labour refers to work that is mentally, physically, socially and/or morally dangerous and harmful to children; and that interferes with their schooling. Canada has ratified ILO Convention 138 on Minimum Age for Admission to Employment, 1973.

Worst Forms of Child Labour

The ILO defines the worst forms of child labour as all forms of slavery or practices similar to slavery, such as the trafficking of children and forced labour; child pornography and prostitution, the use of a child for illicit activities; or hazardous work which is likely to harm the health, safety or morals of children. Canada has ratified ILO Convention 182 on Worst Forms of Child Labour, 1999.

Forced Labour

The ILO defines forced labour as all work or service which is demanded from any person under threat of a penalty and for which the person has not offered him or herself voluntarily. Victims of forced labour include both adults and children. Forced labour is one of the worst forms of child labour. Canada has ratified ILO Convention 29 on Forced Labour, 1930, and intends to ratify Protocol 29 on Forced Labour, 2014.

Trafficking in Persons

According to the UN Protocol to Prevent, Suppress and Punish Trafficking in Persons, Especially Women and Children, trafficking in persons, also referred to as human trafficking, is the recruitment, transportation, transfer, harbouring or receipt of persons, by means of the threat or use of force or other forms of coercion, of abduction, of fraud, of deception, of the abuse of power, to achieve the consent of a person having control over another person, for the purpose of exploitation. Exploitation includes, at a minimum, the exploitation of the prostitution of others or other forms of sexual exploitation, forced labour or services, slavery or practices similar to slavery, servitude or the removal of organs. Canada ratified the Protocol in 2002.

In the Canadian context, human trafficking is defined in the Criminal Code. It involves the recruitment, transportation, harbouring and/ or exercising control, direction or influence over the movements of a person in order to exploit that person, typically through sexual exploitation or forced labour. Human trafficking is often confused with migrant smuggling and although the crimes may overlap, they are distinct and require separate legal and policy responses.

Labour Rights and Human Rights

Labour rights and human rights refer to internationally recognized rights understood as those expressed in the International Bill of Human Rights (consisting of the Universal Declaration of Human Rights and the main instruments through which it has been codified: the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights), coupled with the principles and rights set out in the ILO's Declaration on Fundamental Principles and Rights at Work (1998).

Responsible Supply Chains

Responsible supply chains refers to a company's approach to managing its supply chain. This includes its relationships with its sub-contractors, which is oriented towards the implementation of international, environmental and social norms, including respect for human and labour rights.

The management of a company's supply chain could be guided by internationally-recognized responsible business conduct standards and norms, such as the Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights (UNGPs)(PDF 1MB) , and the ILO Tripartite Declaration on Multinational Enterprises.

Due Diligence

The OECD Due Diligence Guidance for Responsible Business Conduct provides practical support to enterprises by providing explanations of its due diligence recommendations and associated provisions. Implementing these recommendations can help enterprises avoid and address adverse impacts related to workers, human rights, the environment, bribery, consumers and corporate governance that may be associated with their operations, supply chains and other business relationships.

A global priority

Eliminating child labour, forced labour and human trafficking is a global priority as outlined by the UN Convention on the Rights of the Child (UNCRC), the ILO Minimum Age Convention and the ILO Worst Forms of Child Labour Convention. Sustainable Development Goal target 8.7 calls on Member States to take immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labour, including the unlawful recruitment and use of child soldiers, and by 2025 end child labour in all its forms.

Promoting compliance with fundamental principles and rights at work (FPRW) in enterprises and global supply chains is one of the three thematic priorities of the ILO's integrated strategy on FPRW for 2016-2020.

The UN Protocol to Prevent, Suppress, and Punish Trafficking in Persons, Especially Women and Children obliges parties to take measures to prevent and combat trafficking in persons and to protect victims.

Current Canadian landscape

Canada has joined forces with other governments and partners as part of its commitment to end these practices:

  • As part of Canada's G7 Presidency, G7 Security Ministers made commitments to work with the private sector, civil society and other stakeholders to eliminate trafficking in persons, forced labour, child labour and all forms of slavery, including modern slavery, from G7 economies and from global supply chains.
  • In September 2018, G20 Labour and Employment Ministers endorsed the G20 Strategy to eradicate child labour, forced labour, human trafficking and modern slavery in the world of work.
  • Canada participates in a number of multi-stakeholder fora designed to promote human rights and transparency, and is a leader in advancing the OECD's Responsible Business Conduct (RBC) agenda. Multilaterally, Canada promotes international RBC standards in a number of fora including the OECD, the G7, the Asia Pacific Economic Co-operation and the Organization of American States.
  • Canada and other States have endorsed the United Kingdom's 2017 Call to Action to end forced labour, modern slavery and trafficking.
  • In September 2018, Australia, Canada, New Zealand, the United Kingdom and the United States launched the Principles to Guide Government Action to Combat Human Trafficking in Global Supply Chains, calling for responsible government procurement practices.

The Government of Canada has in place a suite of measures to address these practices and their root causes. The Government Response to the House of Commons' Standing Committee on Foreign Affairs and International Development's report outlines the measures it is taking in Canada and abroad to eliminate child labour in global supply chains, including the worst forms of child labour.

Canada also has a number of measures in place to address forced labour and human trafficking, conduct ethical procurement, ensure respect for labour rights in trade agreements, and promote responsible business practices in global supply chains.

For more information on the current Canadian landscape, please see Annex A.

International developments

Since the 1990s, civil society and labour unions raised public and consumer awareness about human and labour rights abuses in the supply chains of the garment, footwear, tobacco, electronics, seafood, palm oil and cocoa industries, among many others. The global response to supply chains in the minerals and metals sector, in particular conflict minerals (tin, tantalum, tungsten and gold) extracted from the African Great Lakes region has also been highly coordinated among governments, companies and civil society. 

Companies are increasingly collaborating with civil society groups on multi-stakeholder initiatives to address the broader challenge of responsible supply chains, and are adopting voluntary measures to disclose information about their suppliers and codes of conduct.  

Government-backed multi-stakeholder initiatives and agreements are also emerging as a policy tool for monitoring and building capacity on company due diligence. These mechanisms are voluntary, with firm commitments and performance metrics.

For example, in Germany, the Partnership for Sustainable Textiles was established in 2014 to promote responsible supply chains. The Textile Partnership includes approximately 130 members from the German government, non-governmental organizations, businesses, unions and standards organizations.

The Government of Germany signals in its National Action Plan on Business and Human Rights that industry should achieve certain metrics by 2020. If not, it will pass legislation to mandate supply chain due diligence.  The Netherlands has advanced sectoral “covenants” in various sectors, including garment, gold, pension plans, banking, and agrifood.

Other non-legislative options also include:

  • Public procurement incentives by different levels of government and public entities. 
  • Leveraging the capacity of investors to incentivize portfolio companies to strengthen RBC practices. 
  • Delivering capacity building to host governments and suppliers in developing countries.

Moreover, a growing number of jurisdictions including Australia, California, the Netherlands, and the United Kingdom have advanced legislation requiring companies to report on their efforts to address child and/or forced labour or modern slavery in their supply chains. Hong Kong is considering following these initiatives.

In 2017, France adopted a law on the Duty of Care (Devoir de vigilance) mandating large companies to perform due diligence to identify, prevent, mitigate and account for human rights and environmental risks in their operations, subsidiaries and their supply chains.

It should be noted that some Canadian companies and their subsidiaries operating in these jurisdictions may also be required to comply with these reporting or due diligence obligations.

Italy and Switzerland are actively considering similar measures that establish the human rights due diligence responsibilities of businesses.

Germany, Luxembourg, and Sweden, and others are also considering legislative options.  

A summary of international legislative measures is included in Annex B.

Considerations

Transparency measures require businesses operating in a certain jurisdiction to report on their actions to assess the risk of labour exploitation in their operations and supply chains. Other measures require due diligence, which mandate businesses operating in a certain jurisdiction to report on their actions to address labour exploitation in their operations and supply chains.

At their core, these measures are intended to improve corporate reporting and prevent business practices that could increase the risks of labour exploitation. Studies have found that the various legislative options have been important for raising awareness, to foster collaboration among stakeholders and to consider processes to evaluate and monitor risk.

The global trend towards legislative measures is relatively recent, and emerging evaluations of the effectiveness of such measures are beginning to unfold. For example, a March 2019 report entitled “Full disclosure: Towards Better Modern Slavery Reporting, published by the non-governmental organizations International Corporate Accountability Roundtable (ICAR) and Focus on Labour Exploitation (FLEX), provides an evaluation of the results of existing supply chain legislation, including some of the perceived successes and perceived gaps in current practices.

According to the report, the positive outcomes of supply chain legislation include increased awareness of labour exploitation in global supply chains, which can result in additional resources being allocated to tackle these issues. Moreover, increased reporting can strengthen the ability of external stakeholders to measure company performance, and provides the information necessary for civil society to engage with affected workers. For companies that report publicly on key aspects of their supply chain, benefits could include improved reputation, greater operational efficiency, and a leveling of the playing field.

The report notes that there are still challenges to meaningfully addressing labour exploitation in supply chains, relating in part to a lack of information on risk assessment and mitigation processes, a lack of tools for monitoring compliance, and a lack of effective enforcement mechanisms. There is also interest in considering harmonization across jurisdictions.

These consultations will be an important opportunity for Canada to consider other models and lessons learned.

Existing models of supply chain legislation differ in large part according to the following criteria:

  • The purpose and scope of the legislation: whether it is limited to child labour, expanded to forced labour and human trafficking, or covers all human rights and the environment more broadly.
  • The type of obligations/requirements contained in the legislation: whether it is limited to requiring reporting on existing actions taken, or expanded to require proactive due diligence.
    • The content of any reporting or due diligence requirements: identifying what those requirements are and whether they are optional or mandatory.
    • The frequency of any reporting or due diligence requirements: whether there is a one-off commitment or an annual requirement to provide updates.
  • The penalties for non-compliance: whether penalties are designed solely to bring companies into compliance, or offer the possibility of further sanctions and civil or criminal liability.
  • The accessibility of any reporting or due diligence communications: whether the Government or a third party hosts an accessible central registry, or companies post on their own websites.
  • The applicability of legislation.
    • whether all companies operating in a jurisdiction would be required to comply, or only companies of a certain size, or certain industries.
    • whether the legislation applies solely to private entities, or the Government also commits to the same reporting or due diligence requirements.
  • The scope or extra-territoriality of reporting/due diligence requirements: whether the obligations extend to companies operating in a country or under its jurisdiction, and to its subsidiaries, suppliers and sub-contractors operating in a foreign jurisdiction.
  • The measures established by Government to support companies in complying with legislative requirements, and in supporting stakeholders to maintain policy dialogue, provide feedback and share lessons learned.

Annex A - Additional Information on the current Canadian landscape

Responsible Business Conduct

The Government of Canada expects all Canadian companies operating in Canada and abroad, regardless of sector, to respect human rights, all applicable laws and international standards, to operate transparently and in consultation with host governments and local communities, and to work in a socially and environmentally responsible manner, in accordance with internationally recognized guidance. This expectation applies to Canadian companies sourcing their goods and services abroad as well.

Canada has created a Corporate Social Responsibility Toolkit (CSR) that includes a section on sustainable purchasing, as well as the publication of a Corporate Social Responsibility Implementation Guide for Canadian Business, providing practical advice to companies.

Canada has also created a framework to guide responsible business conduct efforts of the extractive sector known as the Doing Business the Canadian Way: A Strategy to Advance CSR in Canada's Extractive Sector Abroad (the CSR Strategy). Launched in 2009, and updated in 2014, the CSR Strategy is part of Canada's efforts to help foster and promote sustainable economic development and responsible business practices in countries where Canadian extractive sector companies operate. The strategy is scheduled to be reviewed in 2019 and will consider international trends and good practices for responsible business conduct.

Canada maintains a National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises. The NCP assists enterprises and their stakeholders to take appropriate measures to further the effectiveness of the Guidelines by undertaking promotional activities, handling inquiries, and contributing to the resolution of issues that may arise from the alleged non-observance of the Guidelines in specific instances, including responsible supply chain management. The Canadian NCP has provided support to the OECD in the development and dissemination of various guidance documents to help Canadian companies prevent and mitigate risks in supply chain management for the mineral, agriculture and garment sectors. It also collaborated with Global Compact Network Canada (GCNC) to develop a business-friendly handbook to showcase several examples of Canadian businesses implementing the OECD due diligence guidance, whose main role is to further the effectiveness of the Guidelines.

In April 2019, the Government announced the Canadian Ombudsperson for Responsible Enterprise (CORE) as an additional measure to complement the NCP. Although not specifically focused on supply chains, it is intended that the CORE look at allegations of human rights abuse arising from Canadian business operations abroad in the mining, oil and gas and garment sectors.

Trade and technical assistance

Canada's labour approach to Free Trade Agreements is to negotiate comprehensive and enforceable labour provisions in the form of a Labour Chapter that is subject to an enforceable dispute settlement process. These provisions aim to combat lax labour standards from trade partners, level the playing field and ensure fair competition between trading partners.

In addition to committing Parties to ensure that national laws and policies provide protection and promote internationally recognized labour principles and rights, the most recent model labour chapter includes provisions to address violence against workers exercising their labour rights, and ensure that migrant workers are protected under labour laws. Canada also seeks to include gender-related protections.

Canada seeks to include a non-derogation clause that prevents Parties from deviating from their domestic labour laws in order to encourage trade or investment, and subjects labour obligations to an enforceable dispute settlement mechanism to ensure compliance.

Canada works closely with partner countries and international organizations in developing cooperation and technical assistance programs to help build capacity in partner countries to respect commitments arising from these agreements.

In addition to the labour provisions in free trade agreements, Canada prohibits the importation of all commercial goods made with prison labour.

Procurement practices

Governments in Canada support ethical sourcing and procurement processes that respect international standards against criminal conduct and human rights abuse. This includes leveraging procurement practices to eliminate the use of child labour and forced labour from federal procurement supply chains.

In September 2018, the Government of Canada launched a new Apparel Initiative for clothing and textile suppliers contracting with the Government. The new initiative requires suppliers to self-certify to eight fundamental human and labour rights including freedom from child labour, forced labour, discrimination and abuse, and access to fair wages and safe working conditions.

The Government has also adopted an Integrity Regime to demonstrate its commitment to doing business with ethical suppliers, industry and individuals that respect the law and act with integrity. The enhancement of this Integrity Regime will expand the list of convictions that can lead to debarment, to include Criminal Code offences related to human trafficking of children and adults. A clause will be incorporated into all Government of Canada contracts requiring suppliers to certify that they have taken all reasonable steps to guard against the use of forced labour within their supply chains.

The Code of Conduct for federal procurement is also being reviewed, with the goal of ensuring it appropriately captures expected behaviours for suppliers regarding human and labour rights.

Addressing Human Trafficking

In Budget 2019, Canada announced its intentions to develop a whole-of-government strategy to combat human trafficking; this work is being informed by several consultations that were held in 2018.

Canada is also committed to leveraging multilateral partnerships to counter this crime, and works closely with NGOs, international organizations and partner countries to address human trafficking, with a core focus on sharing best practices and lessons learned related to prevention, protection and rehabilitation of victims and survivors, while advocating for the integration of gender equality as a cross-cutting consideration. Canada also funds capacity-building initiatives to help countries in their fight against transnational organized crime, including trafficking in persons. These capacity-building projects include support to key countries to assist them in developing and adopting appropriate legislation, training justice and law enforcement officials to prevent, identify and disrupt human trafficking networks.

Through its Feminist International Assistance policy, Canada also aims to address the high rates of gender and sexual-based violence experienced by women and girls, particularly in exploitative situations. Investments in international assistance are key to reducing poverty, inequality, violence and conflict, which otherwise increase vulnerability to human trafficking, especially for women, children and youth. This is why Canada supports developing countries' efforts to reduce vulnerabilities, especially for women, children, adolescents and young adults at risk of being trafficked. We do so by helping them to strengthen their labour laws, public health, education and child protection systems, as well as building the capacity of law enforcement and justice systems to address all forms of sexual and gender-based violence.

Annex B – International legislative and non-legislative measures

*The information below can be found in the report entitled “Business and Human Rights: Navigating a Changing Legal Landscape”.

Australia

Australian Modern Slavery Act 2018 (effective January 2019): Certain entities based or operating in Australia are required to publish a statement setting out the steps taken to address modern slavery, which must be published and submitted to the government, who must register compliant statements on an internet-based register. There is currently no financial penalty for non-compliance.

California

California Transparency in Supply Chains Act 2010 (effective January 2012): Certain sellers and manufacturers doing business in California must publish efforts to eradicate human trafficking in direct supply chains annually. The Attorney General may seek an injunction to require an entity to comply.

France

Law 2017-399 related to Duty of Vigilance of Parent Companies and Commissioning Companies(effective March 2017): Certain large French companies must report on steps taken in relation to human rights and the environment and implement and publish a vigilance plan. Third parties may seek injunctions to require an entity to comply. Damages may be imposed for non-compliance.

Germany

Germany Proposal for a framework law on the sustainable design of global value chains and the amendment of commercial law provisions, including a core law on the regulation of human rights and environmental due diligence in global value chains (proposed law): Under the proposal, certain German companies would be required to report publicly on the fulfilment of due diligence relating to the environment and human rights. Sanctions for non-compliance include fines, criminal liability, and exclusion from public procurement processes.

Hong Kong

Hong Kong Modern Slavery Bill 2017(proposed law): Under the proposed law, certain companies doing business in Hong Kong must issue a statement outlining the steps taken to address modern slavery in the business and supply chain (or state that no steps have been taken).The Chief Executive in Council may seek an injunction to require an entity to comply. There would be no financial penalty for non-compliance.

Netherlands

Dutch Child Labour Bill (proposed law): Under the proposed law, certain companies doing business in the Netherlands would be required to certify that they have conducted due diligence in relation to child labour in their supply chains. The Dutch supervising authority may seek injunctive relief to require an entity to comply. A fine may also be imposed for non-compliance.

New South Wales

New South Wales Modern Slavery Act 2018 (passed, not yet effective): Certain entities with employees in New South Wales must publish a statement with respect to steps taken to ensure that the entities' goods and services are not a product of supply chains in which modern slavery is taking place. A fine may be imposed for failures to make a statement in compliance with the Act or where false or misleading information has been given.

Switzerland

The Responsible Business Initiative (proposed initiative): If implemented, Swiss-based companies would have to meet certain requirements, including carrying out appropriate due diligence on any potential impacts on internationally-recognized human rights and environmental standards in their organizations.

Counter-Proposal by the Swiss Parliament to the Responsible Business Initiative (proposed law)would be required to report publicly on measures taken to ensure compliance with human rights and environment laws binding under Swiss law in the company's areas of activity, including abroad and with third parties.

United States

US Federal Acquisition Regulation: Ending Trafficking in Persons (effective March 2015): Certain contractors to the US government must annually confirm (after carrying out due diligence) that no trafficking activities (which include forced labour) are taking place and that compliance plans have been implemented. There are a range of penalties for non-compliance.

US Dodd-Frank Act Final Rule 1502 (effective February 2012): Certain SEC issuers manufacturing or contracting for products from conflict mineral countries must file annual reports detailing steps taken regarding the source of the product. There is no financial penalty for non-compliance of this rule. However, there is potential liability for false or misleading statements.

United Kingdom

UK Modern Slavery Act 2015(effective March 2015): Certain companies doing business in the UK must issue a statement setting out the steps taken to address modern slavery in the business and supply chain (or state that no steps have been taken).The Secretary of State may seek an injunction to require an entity to comply. There is no financial penalty for non-compliance.

European Union

EU Non-financial Reporting Directive (EU member States required to implement by Dec 2017): EU member States must enact legislation requiring certain large public interest entities to report annually on non-financial issues including human rights. Each member State must stipulate the consequences (if any) for non-compliance.

Conflict Minerals Regulation (partly effective 2017, main operative provisions directly effective on companies in 2021): Certain importers of tin, tungsten, tantalum and/or gold must conduct and report on due diligence on supply chains. EU member States may decide on infringement consequences. Currently there are no financial penalties for non-compliance.

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