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Canada Needs New Reporting to End Forced Labour in Global Supply Chains

Manufacturers aren’t forced to be transparent about their practices. We say that should change.

By Kevin Thomas 4 Mar 2017 | TheTyee.ca

Kevin Thomas is the Director of Shareholder Engagement at the Shareholder Association for Research and Education (SHARE), a Canadian leader in responsible investment services, research and education for institutional investors.

No company sets out to use products made with forced labour. Canadian manufacturers and retailers would undoubtedly be horrified by even the possibility that employees in their global supply chains are at work involuntarily.

But the reality is that there are more than 21 million people working in conditions of forced labour worldwide, and the International Labour Organizations estimates 19 million of those are employed in the private sector. Billions of dollars of goods entering Canada each year come from jurisdictions or from industries where forced labour has been uncovered. Electronics, food, clothing, and commodities such as coffee are cited by the U.S. Department of Labor as “at risk” of child and forced labour, depending on their country of manufacture or origin.

That’s why jurisdictions like the U.K., California, France, and the EU have started to take action to combat the growth of forced labour by enacting legislation requiring companies to monitor their global supply chains for forced labour and to report publicly on their efforts. The thousands of reports now flowing in from companies required to report under the U.K.’s new Modern Slavery Act, for example — including some Canadian firms with U.K. operations — is a testament to the power of this growing wave of legislation.

Although Canada has yet to follow suit, we should.

In fact, coming on the heels of global legislation, we have the advantage of being able to learn from what’s been done elsewhere and develop our own effective approach.

We have a particular interest at stake. At the Shareholder Association for Research & Education (SHARE), we represent Canadian institutional investors that have an active interest in eradicating forced labour and other human rights abuses from the supply chains of the companies they own. Not just because, like most Canadians, we abhor the abuse of basic human rights, but because as investors we recognize that bad labour practices are ultimately bad for business and represent a genuine risk to the reputation and profitability of those companies that don’t conduct adequate due diligence.

At the same time, as investors we’re not interested in regulations that create unnecessary or overly expensive burdens for companies — regulations that are either ineffective or poorly designed. We’ve found, when engaging with companies on behalf of shareholders, that most share this view: they support efficient regulations that address problems as long as they don’t create new ones.

So we took a closer look at the wave of legislation aimed at eradicating forced labour and other human rights abuses by requiring companies to report on their due diligence practices in global supply chains. We asked what works well, what doesn’t, and what best responds to the investor interest in critical disclosures that will allow us to distinguish between well-managed companies and the others.

We are pleased to report that, on the whole, there is already considerable experience and best practice to draw on from companies, including Canadian leaders, that should help companies enact effective due diligence in their global supply chains and make public reporting both manageable and practical.

At the same time, it is evident that broad, legally mandated reporting requirements have real advantages over the patchwork of voluntary reporting Canadian investors are faced with now.

Investors need legal standards and frameworks that provide consistency in company reporting, while allowing for variance where business models differ. We need reporting across an entire market, allowing consumers and investors to compare performance amongst all competitors rather than amongst the few leaders who voluntarily disclose. For companies, standardized reporting also creates opportunities to learn from their peers and develop common approaches to due diligence. Legislation can promote continuous improvement by requiring a regular schedule of reporting that allows companies to learn from experience and adopt new practices over time.

That’s why the wave of supply chain transparency legislation now sweeping through other countries has been welcomed by investors in those countries. Similar legislation in Canada would be welcomed by investors here.  [Tyee]

Read more: Labour + Industry

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