Canada has a new Responsible Enterprise watchdog - is it enough to tackle corporate human rights abuse?

25/4/19 - Isobel O'Connell, Canadian social performance strategist

Strong legislation is needed for a 'Made in Canada' approach, argues Isobel O'Connell

Canada’s private and public sectors are increasingly focussed on international corporate activity, from sweatshops, conflict minerals in the mining industry, unsafe factory conditions, or egregious working hours in China.

In January 2018, Canada’s Ministry of Trade announced a new independent post – the Canadian Ombudsperson for Responsible Enterprise (CORE) - to investigate human rights abuses connected to corporate activity abroad. (This position replaces the Office of the Extractive Sector CSR Counsellor.)

As the first-ever position of its kind in the world, CORE is designed to increase accountability for Canadian companies operating abroad in the mining, oil and gas, and garment industries.

But questions remain about how the CORE will operate and how effective it will be. Will it have the power to compel testimony? How will its powers lead a multifaceted, collaborative approach for Canadian businesses to address human right issues within their supply chains?

According to available information, the CORE might have the power to: investigate situations, even when there has not been a formal complaint; make findings public; make public recommendations, such as corporate and governmental compensation policy changes, and the withdrawal of Canadian government support; seek counsel from a multi-stakeholder advisory body; and provide additional advice on responsible business conduct.

Seizing the opportunity

One missing piece in CORE’s remit is the need for what you might call a ‘Made in Canada’ approach, addressing human rights issues in Canadian companies’ supply chains, both at home and abroad.

This could include measures such as: complete a risk mapping exercise intended to identify, analyze and classify the risks; implement a mechanism to regularly assess the risk map; undertake measures designed to mitigate risks or prevent serious violations; establish a risk alert and warning system; and establish a follow-up mechanism and an assessment procedure to evaluate efficiency.

But the first step CORE should champion is the adoption of national legislation encouraging Canadian companies to be more careful about their impact on human rights, not only directly but also through their subsidiaries, affiliates and supply chains.

Desperate contexts

Pressure has been mounting for Canada to follow other governments that have already passed legislation to increase transparency in supply chains, such as in the UK, Australia, France, the Netherlands, and the State of California. Similar laws are pending in Switzerland and proposed in Hong Kong.

The UK’s Modern Slavery Act (2015) requires companies to publish statements on what due diligence they have in place with regard to modern slavery, but it does not require companies to carry out that due diligence. By contrast, last year France unveiled a wide-ranging Duty of Care Law, which requires companies to not only actively identify serious human rights risks, including modern slavery, but also to  and prevent their occurrence.

Modern slavery legislation and supply chain reporting are currently high on the Government of Canada’s agenda and have some cross-party support.

Further to the announcement of the CORE, in April 2019, a focused draft legislation - Transparency in Supply Chains Act (TSCA) – was tabled imposing obligations on Canadian companies' supply chains by the All-Party Parliamentary Group to End Modern Slavery and Human Trafficking.

This piece of legislation is set to be tabled shortly in the Senate, and follows a stalled private member bill to enact a Canadian Modern Slavery Act (C-423) by Liberal MP John McKay in December 2018.

Bridging the divide

The proposed TCSA has come to a “fork in the road” with two ways forward, though in fact, they converge. First, companies need to monitor compliance levels, and determine whether penalties and independent oversight are needed. At a global level, compliance can include the United National Guiding Principles, OECD Guidelines for Multinational Enterprises, and the Global Compact among other human rights standards.

It is simply not enough for a company to just draft a policy or a supplier code of conduct, or total up the number of sustainability initiatives in their supply chain, and think they are doing the right thing. The days of accountability by case study are fading. Countries and companies must actually do the work and invest the capital to create lasting change in their supply chains.

Second, the Government of Canada can establish legislation, such as the proposed TCSA, to ensure the reporting of compliance levels are of good quality. For example, large companies in Canada can be expected to develop, implement, and publish their due diligence plans to the CORE to help identify risks and prevent infringements on human rights, fundamental freedoms, health and safety, and the environment.

France’s Duty of Care Law and the UK’s Modern Slavery Act are models which would be a significant step toward better regulation. They also have the potential to cover impacts resulting from the companies’ own activities, the companies under their control, and their suppliers and subcontractors.

Canada’s appointment of CORE is a start, and quite a good one. But it will take strong legislation to create a robust ‘Made in Canada’ approach to the urgent human rights issues in supply chains.

Isobel O'Connell is a recognised Canadian social performance strategist who focuses on human rights, shared value and risk management.