What is Human Rights Due Diligence (HRDD)?

Human Rights Due Diligence is a process recognized through many countries’ regulations that companies can use to identify, prevent, and mitigate human rights risks in their operations and throughout their value chains. Companies should comply with human rights due diligence to ensure ethical practices and align with stakeholder expectations, while also minimizing legal and reputational risks.

The United Nations’ “Guiding Principles on Business and Human Rights” outline a six-step process for companies to follow in order to fulfill their obligation to respect human rights and avoid complicity in harm:

1. Policy commitment and integration: Companies should publicly commit to respect human rights and integrate HRDD into their business.
2. Human rights risk assessment: Companies should identify and assess the human rights risks they may encounter in their operations and supply chains.
3. Cease, prevent or mitigate: Companies should work to stop, prevent or mitigate any human rights impacts they identify.
4. Tracking and monitoring: Companies should monitor their HRDD progress and continuously evaluate their performance.
5. Reporting: Companies should report publicly on their HRDD efforts, providing transparency about their actions and progress.
6. Remediation: If companies identify any actual human rights abuses they should work closely with impacted parties to provide remediation.

Consequences for not following the HRDD

1. Human rights: Failure to address Human Rights Due Diligence (HRDD) within a company and its supply chain can lead to severe consequences, as exemplified by the Rana Plaza collapse in 2013, where over 1,000 people died and 2,500 were injured due to safety negligence. Companies sourcing from such environments risk foreseeable disasters, emphasizing the importance of addressing such risks through effective Human Rights Due Diligence (HRDD).
2. Legal: Neglecting proper implementation of Human Rights Due Diligence (HRDD) under mandatory laws can lead to significant legal consequences, including fines at both the corporate and personal levels. Inadequate Human Rights Due Diligence (HRDD), reporting, or implementation of subpar standards may also expose the company to claims, potentially resulting in substantial financial penalties.
3. Reputational damage: If companies fail to implement proper Human Rights Due Diligence (HRDD), members of the public may highlight this, which could bring reputational damage, in addition to possible legal consequences. This could further lead to loss of sales or difficulties hiring people.

What is Canada’s Modern Slavery Act?

The Canadian Parliament passed what is known as the Modern Slavery Act, effective from January 1, 2024. The Act imposes new reporting obligations, requiring Canadian entities to submit annual modern slavery reports detailing efforts to identify and prevent forced labor and child labor, with the first report due by May 31, 2024. Additionally, the Act amends a tariff to prohibit the importation of goods associated with these human rights violations, adopting definitions from international labor standards. Companies should expect to include the below specified details in their reports:

1. Corporate structure, activities, and supply chains.
2. Policies and due diligence processes.
3. Identification of business and supply chain segments at risk.
4. Remediation measures for instances of human rights violations.
5. Staff training for modern slavery awareness.
6. Self-assessment on preventing forced labor.

Violations of the Act, including failure to meet reporting obligations, providing false information, non-compliance with orders, refusal to participate in inspections, or obstructing inspections, may incur severe penalties, with fines up to $250,000 imposed by the federal Minister on individuals or entities breaching the Act.

Who is affected by the Modern Slavery Act?

The Act applies to any private-sector entity that is listed on a Canadian stock exchange or has a
place of business, assets, or conducts business in Canada, and meet at least two of
the following criteria:

• a minimum of $20 million in assets,
• a minimum of $40 million in annual sales, or
• at least 250 employees.

Position Green and Shift Critical International’s joint MSA solution

Our Canadian Modern Slavery Act (MSA) Solution is a comprehensive tool designed to meet the requirements of the Canadian Modern Slavery Act. Developed collaboratively between Shift Critical International (SCI) and the Human Rights team at Position Green, this innovative solution combines expertise to create a robust framework for companies navigating their obligations under The Act. The solution consists of the following:

• A template survey for companies to gather information about their corporate structure, activities, supply chains, policies, and due diligence processes related to forced labor and child labor.
• Three assessments to evaluate the risk of these issues in different aspects of the business and supply chain, providing a comprehensive understanding of potential vulnerabilities.
• Five dashboards to offer a visual representation of collected data, enabling organizations to track progress, identify concerns, and make informed decisions.

Leveraging the Canadian MSA Solution allows companies to streamline reporting, enhance transparency, and demonstrate a commitment to eradicating modern slavery from their operations—a collaborative effort addressing complex challenges in human rights and corporate responsibility.

Book a free demo to talk to one of our experts and see the software in action.