Modern slavery reporting

In less than two months, thousands of companies will submit their second annual modern slavery report and complete the online questionnaire in accordance with the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”). Since the Act was passed in May 2023, Public Safety Canada (“PSC”) issued revised guidance in November 2024 (the “Guidance”), clarifying how it intends to interpret and enforce the reporting obligations under the Act. Simultaneously, human rights due diligence legislation, as well as related investigations and enforcement actions, continue to evolve across jurisdictions worldwide.

Below are key updates from the Guidance along with our analysis of 5,764 modern slavery reports published prior to the 2024 deadline. We provide recommendations for companies to consider as they prepare and finalize their 2025 reports and responses to the online questionnaire.

In November 2024, PSC released updated guidance that clarified several aspects of the intended scope and applicability of the Act and the reporting requirements.

Importantly, PSC confirmed that reports prepared using previous versions of the Guidance will be accepted for the 2025 reporting year. Key changes and questions to consider from the revised Guidance include:

Applicability – entity:

• Entity definition: A non-exhaustive list of relevant factors has been provided, including where goods are produced, sold, or distributed; where employees are located; and where deliveries, payments, purchases, contracts or asset acquisition occur. It also includes the location of assets, inventories, or bank accounts.
• Assets in Canada: Organizations assessing whether they have “assets in Canada” need only consider tangible property, thus excluding intangibles such as intellectual property, securities, and goodwill.
• Employees: For thresholds concerning the number of employees, the Guidance no longer refers to the definition of “employee” under Canadian common law. Instead, employee headcount is now calculated based on the number of full-time, part-time, and temporary employees in Canada and other jurisdictions, while excluding independent contractors.
• Government bodies: Provincial or municipal government bodies may be captured by the definition of an “entity” under the Act.

Applicability – reportable activities:

• Activities: Entities solely involved in distributing and selling, (i.e., not producing or importing goods, or controlling entities that produce or import goods), are not expected to report under the Act. PSC has indicated that it does not expect to seek enforcement actions in those instances. Accordingly, PSC has removed “distributing” and “selling” from the online questionnaire as options for reportable activities.
• Importing: An entity is considered an importer of goods if it is the “true importer” responsible for causing the goods to be brought into Canada. In general, this includes entities that account for or pay the duties on imported goods. Purchasing goods from a third party outside Canada, where that third party is considered the importer, is not considered “importing goods” under the Act. The Guidance clarifies that the following organizations are generally not considered importers: customs brokers, express couriers, trade consultants, or other “third parties authorized to transact business on behalf of the importer, or to account for goods in lieu of the importer".
• Goods: Goods are defined as tangible physical property that is the subject of trade and commerce, consistent with the ordinary sense of the word. The Guidance expressly excludes real property, electricity, software services, and insurance plans.
• Very minor dealings: Reporting requirements may not apply to certain goods considered to be “very minor dealings”, which PSC interprets “in accordance with generally accepted principles of de minimis and evaluated within the context of each entity's business.”
• Control: The Guidance clarifies that “control” may either be direct and indirect and can extend throughout an entity’s organizational structure. PSC recommends referring to the Office of the Superintendent of Financial Institutions’ guidance and relevant accounting standards to assess whether an entity directly or indirectly controls another for the purpose of the Act.

Report content

• Allegations or cases: Entities are not required to report on specific cases or allegations of forced or child labour, especially if it compromises any individual’s privacy.
• Risk assessment: If a risk assessment reveals no evidence of forced or child labour, entities can select “not applicable” under subsection (d) (remediation efforts) in the questionnaire and reflect this outcome in their report.
• Third-party training: Entities are no longer encouraged to report on training provided to direct suppliers or third parties; this option has been removed from subsection (f) of the questionnaire.

Report format and filing

• Signing: Reports submitted without an attestation statement and a valid signature will not be published in PSC’s library catalogue. Typing “signed” in the signature block does not constitute a valid signature.
• International reports: Reports developed to meet requirements in other jurisdictions are accepted by PSC if the report also complies with the obligations under the Act.
• Revisions: Revised reports may be submitted until May 31 of the following year if new information becomes available. Revisions must be reapproved and attested.

Questionnaire responses

• Differences: The current questionnaire includes a revised set of questions and response options. Entities should not rely on the previous year's questionnaire to prepare their 2025 submission. KPMG Law has developed an updated annotated version of the questionnaire to assist with preparation and review. Please contact our team for more information.
• Mandatory requirement: Completion of the questionnaire is mandatory. Entities must submit both the report and the questionnaire to comply with the Act; submission of the report alone is not sufficient.

Although the updated Guidance provides valuable insight into how PSC interprets and intends to enforce the Act, it is not legally binding. Companies must continue to ensure compliance with the requirements explicitly outlined in the Act.

In 2024, KPMG Canada reviewed 5,794 reports submitted to PSC pursuant to the Act. Reporting entities included organizations of all sizes across all sectors, including the public sector. We observed that the majority (approximately 80 percent) sourced goods and services globally, and 15 percent of entities also reported under other international reporting frameworks.

The reporting process has highlighted examples of strong practices in managing forced and child labour within business operations and supply chains. Such examples serve as useful benchmarks for broader industry improvement. Among the reporting entities:

• 20 percent reported that they have undertaken some level of supply chain mapping. However, only 5 percent clearly indicated that this mapping extended beyond Tier 1 suppliers (also referred to as “direct”, “primary”, or “level 1” suppliers).
• 40 percent stated they had some form of supplier risk assessment in place to identify modern slavery risks, while 35 percent reported having due diligence programs within their own operations and 40 percent carried out due diligence of suppliers.
• 60 percent reported providing some form of human rights training for their workforce.
• Just under 5 percent of reporting entities demonstrated clear alignment with multiple reporting criteria, such as supply chain mapping, supplier risk assessment, due diligence across operations and suppliers, performance evaluation, and human rights training. Of these entities, the majority (70 percent) also claimed they adhered to global human rights standards.

Below are key recommendations for companies preparing their second annual report:

• Check for consistency: In preparing the second report, companies may seek to reduce content or detail to minimize risk. However, doing so may leave information gaps or put the entity at risk of failing to meet the reporting requirements. It is essential to structure the report by focusing first on the mandatory content and to identify any material to business operations, assets, or supply chains.
• Consider commitments: In their first report, some organizations chose to make voluntary commitments not required by the Act, such as creating policies, implementing due diligence programs, or providing training to all employees. If progress on these commitments has been limited, this may result in misleading report. Thus, it is important to identify what progress has been made on such commitments. Before making new commitments, organizations should assess whether their goals are realistic and whether the necessary resources are available to support them.
• Be precise with language: When describing risk assessments, screening processes, or corporate policies, companies may describe the process, scope, or outcomes in broad or vague terms. To avoid overstating the impact or effectiveness of the risk mitigation efforts, companies should, for example, clearly state who conducted the assessment (e.g., the company, its suppliers, and/or third-party platform or consultancy) and what the scope entailed.
• Compare and contrast: In the first year, the report structure, design and content varied greatly across sectors and organization sizes. PSC’s online report library offers valuable insight into how competitors, clients, or other stakeholders are approaching compliance. Reviewing these examples can help improve and inform your own reporting strategy.
• Plan for reviews: Regardless of company size, modern slavery risks vary based on each business’s operations and context. With only weeks remaining before the deadline, it is important to allocate sufficient time for internal stakeholders (e.g., executives, committees, and the board of directors) to review and approve the report and questionnaire in advance of the May 31 deadline.