Investors concerned by Canada’s lag in regulating supply chain disclosure: report

Canada is lagging behind other jurisdictions in establishing a regulatory framework for due diligence around human rights in global supply chains, according to a new report by the Shareholder Association for Research and Education.

The report says this lack of regulatory framework creates a challenge for institutional investors using a benchmark to compare Canadian equity investments with their international counterparts. Moreover, Canadian institutional investors are concerned about the lack of accountability, says Delaney Greig, engagement analyst at the association and a co-author of the report.

“Not only is it morally and legally wrong, but beyond that for investors, specifically long-term investors, it’s associated with a number of risks to the companies they’re invested in.”

These include reputational, legal and operational risks, adds Delaney. “There’s now been cases where companies have had shipments seized because of allegations of forced labour and, as a result, they haven’t been able to import or sell their goods.”

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The report reviewed supply chain transparency legislation in countries and jurisdictions around the world, finding Britain, France and California are ahead of Canada in implementing legislation that tackles forced labour. In Canada, corporate reporting is voluntary and inconsistent, and the federal government hasn’t mandated such reporting or provided any guidelines to date, says the report.

The report also reviewed other legislation to glean best practices should Canada adopt a regulation, including: allowing companies to assess actual and potential human rights impacts; identify where the companies have leverage, responsibility and action; mitigate impacts and ensure remedy for workers; and monitor, review, report and improve their systems.

While best practices would vary by company, Delaney says it’s generally something that has transparency across the whole supply chain, “not just at the first tier of suppliers the seller would be directly contracting with, but he’s able to get a window down the chain and see there’s procedures and policies in place to ensure there’s no forced labour.”

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