Majority of Canadian businesses concerned about meeting new modern anti-slavery law obligations

TORONTO, Nov. 2, 2023 - With most Canadian businesses preparing to comply with new federal anti-slavery legislation, more than half say they are worried about their ability to properly assess and manage supply chain risks and meet reporting timelines, finds a newKPMG in Canada survey.

KPMG’s 2023 Private Enterprise™ Business Survey found that 56 per cent of small- and medium-sized businesses (SMBs) in Canada are concerned about their ability to map out forced labour and child labour risks across their entire supply chain and 54 per cent worry about their ability to manage those risks.

Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act requires public and certain private companies to review and assess working conditions in their overall supply chain and first report on their effortsto eliminate these practices by May 31, 2024. Companies will be required to report annually to show continued progress in reducing forced and child labour practices.

For businesses, the law creates an expanded level of accountability and transparency and encompasses goods sourced from countries with weak or non-existent labour protections for adult workers and children.

“Some companies may not be aware of who the workers are that produce their goods and raw materials, because they rely on outsourcing and contract labour that is so often hidden from view,” says Jillian Frank, a KPMG Law Partner and National Environmental, Social and Governance (ESG) Legal Services Lead for KPMG in Canada. “As our survey shows, while most business leaders are aware of the new law, many are concerned they don’t have the ability to assess working conditions in their extended supply chain to identify any abusive working conditions.”

• 82 per cent of Canadian SMBs say they are aware of Canada’s new anti-modern slavery law
• 63 per cent have a “good understanding” of how the law’s requirements relate to their business
• 58 per cent are concerned about meeting the May 2024 reporting timeline
• 56 per cent are concerned about their ability to map out their company’s full, extended supply chain
• 53 per cent are “really worried” that somewhere in their supply chain they’ll be exposed and face a consumer backlash and/or stiff financial penalties.

Currently, nearly six in 10 companies say they already have programs in place to identify and prevent human rights risks in their supply chains and to prevent and remedy modern slavery. But many SMBs (62 per cent) are concerned that the significant complexity and scope of the assessments required by the new legislation, will bring additional business expenses at a time when they are already facing numerous cost pressures.

“Supply chains are often highly complex and businesses and suppliers at all levels face pressures to keep costs low for consumers,” explains Ms. Frank. “Accurately tracing and preventing the risks of forced labour and child labour takes significant time and resources, and a long-term commitment to work with suppliers to improve labour conditions. The immediate, internal costs to conduct an in-depth assessment, identify gaps and analyze data should not be underestimated, nor should the long-term costs of implementing responsible purchasing practices with suppliers.”

• 59 per cent already have a program to prevent and remedy modern slavery in their extended supply chain and any goods they import
• 63 per cent have started to review gaps between current supply chain management systems and new legal requirements
• 64 per cent already conduct regular risks assessment related to working conditions and human rights in their operations and supply chains
• A further 56 per cent are concerned about increased trade and customs risks when importing goods into Canada (e.g., imported mined, manufactured or produced goods could be seized at the border)
  

“Some businesses are already in a position to adapt existing supply chain compliance programs to meet the requirements under the new law and are currently examining all aspects of their extended supply chain,” says Kim Swanzey, Partner in ESG and National Sustainable Supply Chain Leader at KPMG in Canada. “The negative consequences of failing to undertake this important work include reputational, financial, trade or even legal risks, which makes confronting modern slavery a business imperative.”

KPMG in Canada surveyed business owners or executive level C-suite decision-makers at 700 small-and-medium-sized Canadian companies between August 30 and Sept. 25, 2023, using Sago’s premier business research panel. Eighty-two per cent of the SMBs surveyed are privately held and 18 per cent are publicly traded. Forty-one per cent are family-owned businesses. A quarter of the companies surveyed have more than C$500 million and less than C$1 billion in annual revenue, a quarter have more than C$300 million and less than $500 million in annual revenue, 23 per cent have between C$100 million and C$300 million in annual revenue, and 26 per cent have between C$10 million and C$50 million in annual revenue. No companies were surveyed under C$10 million.

Katarina Lukich
National Communications & Media Relations
KPMG in Canada
416-468-7729
klukich@kpmg.ca