* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
Canada has the opportunity to take informed and ambitious steps to ensure greater corporate accountability
Arianne Griffith is senior research and policy fellow & business services manager at the Rights Lab, University of Nottingham.
Canada is preparing to join the growing number of countries taking action to address forced labour, human trafficking and labour abuses in supply chains.
On 30 June 2019, it concluded a public consultation on labour exploitation in global supply chains which it launched in response to the report ‘A Call to Action: Ending the Use of All Forms of Child Labour in Supply Chains’ published by the Standing Committee on Foreign Affairs and International Development (the Committee).
Canada is now at a crossroads. Having had the benefit of time and other countries’ experience, it has the opportunity to take informed and ambitious steps to ensure greater corporate accountability. In order to do that, legislators should avoid the major shortcomings of comparable legislation in other jurisdictions. Critical to this is adopting a human rights due diligence approach to corporate accountability legislation and thereby requiring more than transparency reporting from companies.
Corporate accountability mechanisms have evolved considerably over the last decade. The 2010 the Transparency in Supply Chains (TISC) Act in the U.S. state of California was the first of its kind. Like the UK Modern Slavery Act (MSA) of 2015 and the 2017 Australian MSA that followed, it required certain large companies doing business there to report on their efforts to address forced labour and or other forms of contemporary slavery in their supply chains. While the Australian MSA is an improvement on its predecessor, it perpetuates the main shortcoming of this first generation of corporate accountability legislation. That is, it requires companies to report rather than requiring them to act.
France ushered in the second generation of corporate accountability legislation with the passage of its Duty of Vigilance Law. With it came two key shifts, the first was that the legislation took the full spectrum of human rights into account (rather than only those that occurred in the context of modern slavery or forced labour). The second, was the adoption of a human rights due diligence (HRDD) approach.
HRDD is described in the UN Guiding Principles on Business and Human Rights as the continuous process whereby a company identifies risks of negative human rights impacts, takes steps to prevent and mitigate the risks, monitors the effectiveness of and accounts for those actions.
In May 2019, the Dutch Senate followed suit with its approval of the Child Labour Due Diligence Law. The new law will require companies supplying goods to Dutch end-users, to exercise due diligence to reduce the risk of child labour in their supply chains. Where there is a ‘reasonable suspicion’ of child labour, companies will be required to implement an action plan to address the risks. This is a promising development despite the decision to limit the scope of this legislation to the risk of child labour.
Critically, these laws create an obligation of action rather than result. That is because HRDD requires action. Such a legislative requirement strengthens rather than undermines efforts to ensure that companies address forced labour and other human rights abuses in their supply chains. Widespread adoption of a HRDD model will also allow for a degree of harmonisation in legislation between States to the extent that may be achieved outside of international law.
In its forthcoming legislation, Canada should follow the direction of travel by pivoting away from TISC reporting legislation to require mandatory HRDD instead.
The current trend towards mandatory HRDD seems set to continue.
While ‘first-generation’ legislation has led to higher levels of engagement and transparency which can support greater corporate accountability, it is inherently limited - and we have quickly outgrown it. Four years after the introduction of the UK MSA, minimum compliance remains below 25%. It is worth noting that higher levels of compliance would not necessarily correspond with more meaningful or effective action from companies, it could simply lead to more (and arguably, ‘better’) reporting. This would be welcome, but it would not be enough.
Developments in Canada have been promising. State level commitments, interventions from investors, a bill tabled in the Commons, the publication of the Committee’s 2018 Report and most recently, the consultation on supply chains all suggest growing support for corporate accountability in Canada. Admittedly, this has not been without incident.
Legislation that adopts a mandatory HRDD model would better support meaningful engagement from business and will allow Canada to avoid some of the shortcomings of earlier legislation. For the same reason, it should introduce penalties for inaction or breach alongside incentives for business which could promote uptake and use. Mandatory reporting requirements have received multi-stakeholder support in other contexts and should also be included. Together, this will allow the next instalment of supply chains legislation to improve on the last. Canada should take the opportunity to demonstrate its commitment to addressing these issues and also, to take the lead.