Public consultation on potential due diligence and civil liability measures to fight labour exploitation in supply chains

Table of contents

• Background
  • Consultation overview
  • Issue
  • Purpose of this consultation
• Section 1: Key elements of a due diligence regime
  • Scope
  • Coverage
  • Due diligence and reporting obligations
  • Compliance and enforcement
• Section 2: Civil liability
• Section 3: Ways to maximize effectiveness and ensure coherence with the forced labour import prohibition
• Annex A: Impacts on businesses and shifts in global trade
• Submit your feedback

Background

Consultation overview

The Government of Canada is seeking views on options to strengthen Canada's approach to addressing forced labour and labour exploitation in global supply chains. The consultation focuses on potential due diligence requirements for businesses, possible civil liability measures, and ways to ensure coherence between any future due diligence framework and Canada's forced labour import prohibition. Feedback received will help inform policy development and ensure that proposed measures effectively protect workers while remaining practical, proportionate, and responsive to the needs of Canadian businesses.

Issue

Recent shifts in global trade—particularly among Canada’s key partners—have increased uncertainty and prompted a growing reliance on protectionist measures, reshaping international global trade relationships and significantly impacting Canada’s economy, workers and businesses. In this evolving environment, Canadian companies are reassessing their supply chains to ensure increased resiliency against risks or shocks that may impact their ability to deliver goods and services to Canadians, including exposure to labour exploitation within global supply chains.

Latest International Labour Organization (ILO) estimates indicate that there are more than 27.6 million victims of forced labour worldwide – an increase of 2.7 million people since 2016.

• 17.3 million (private economy)
• 6.3 million (forced sexual exploitation)
• 3.9 million (state imposed forced labour)

138 million children were estimated to be in child labour as of 2024. Approximately forty percent (54 million) were engaged in hazardous work.

The prevalence and persistence of labour exploitation in global supply chains has garnered increased attention in international fora, where stakeholders from civil society and industry have urgently called on governments to adopt measures to address the issue. Addressing forced labour and labour exploitation is seen as not only a moral imperative but also essential to ensuring a level playing field for Canadian businesses. Addressing forced labour is essential to supporting more resilient and secure supply chains and has been shown to yield considerable economic and social benefits, including through improved workers’ health, higher investment in developing workers’ skillset, increased investments in innovation, and supporting a level playing field for businesses.^{Footnote 1}

Multiple jurisdictions have adopted or announced a range of approaches, including supply chain legislation and import bans. Import bans and supply chain legislation are distinct but complementary measures.

Import bans aim to stop goods that have already been produced using forced labour from entering the country or from being released in the market. This is a “post-production” measure against an importer as a consequence for entities who have supply chains exposed to forced labour. Countries such as the United States and Mexico have adopted import bans that block goods made in whole or in part with forced labour.

Supply chain legislation is a proactive measure that aims to improve working conditions abroad by requiring regulated parties to either (1) identify, address and remediate risks of adverse impacts to fundamental labour, human and/or environmental rights in their supply chains (commonly called due diligence legislation) or (2) examine their supply chains and report publicly on the findings (commonly called transparency legislation). The United Kingdom and Australia have adopted transparency legislation while, France, Norway and Germany have adopted due diligence legislation. The European Union (EU) recently adopted the Corporate Sustainability Due Diligence Directive (CSDDD). EU member states must incorporate the directive into their national laws by July 2028, and its requirements will begin applying to companies on July 26, 2029.

In Canada, significant efforts have been made to address forced labour and child labour in global supply chains. In 2020, to meet its obligations under the Canada-United States-Mexico Agreement (CUSMA), Canada amended the Customs Tariff to prohibit the importation of goods mined, manufactured or produced using forced labour. Building on this measure, Parliament enacted the Fighting Against Forced Labour and Child Labour in Supply Chains Act (Supply Chains Act) in 2023, establishing a supply chain transparency regime that requires certain entities and government institutions to report on the steps they have taken to prevent and reduce the risk of child and forced labour in their operations and supply chains.

With the coming into force of the Supply Chains Act, Canada became the first country to combine a mandatory supply chain reporting regime (transparency) with an import prohibition on goods produced through forced labour.^{Footnote 2}

Purpose of this consultation

Canada has taken important steps to address forced labour and child labour by ratifying International Labour Organization (ILO) Convention 29 (and its associated protocol) and Convention 105 on forced labour, as well as Convention 138 on minimum age of work and Convention 182 on the worst forms of child labour. In addition, to tackle the issue in global supply chains, Canada has introduced an import prohibition on goods produced using forced labour and establishing a supply chain transparency regime through the Supply Chains Act. These measures have increased awareness of labour exploitation risks and improved transparency regarding how organizations identify and manage such risks.

While transparency requirements encourage companies to report on the actions they are taking, they do not require companies to identify, prevent, mitigate, or remediate labour exploitation in their operations and supply chains. Similarly, the forced labour import prohibition addresses goods entering the Canadian market but does not impose broader obligations on businesses to proactively manage labour exploitation risks throughout their value chains.

In recent years, a growing number of jurisdictions have moved beyond transparency-based approaches by introducing or considering mandatory human rights due diligence (MHRDD) requirements. Countries such as France, Germany, and Norway have adopted due diligence legislation, while the European Union has enacted the Corporate Sustainability Due Diligence Directive (CSDDD). These initiatives generally require companies to take concrete steps to identify and address human rights risks and harms in their operations and supply chains, rather than simply reporting on them.

These international developments are increasingly shaping global business practices, supply chains, and market expectations. As companies that operate in or export to these jurisdictions adapt to new requirements, Canadian businesses may face growing pressure from customers, investors, lenders, and business partners to demonstrate that they have effective due diligence processes in place. At the same time, stronger due diligence measures can help Canadian companies better identify and manage supply chain risks, improve resilience, enhance competitiveness in international markets, and support responsible business conduct.

Enhancing Canada’s framework could also help level the playing field for Canadian businesses. Many companies already undertake due diligence to meet the expectations of customers, investors, and foreign regulatory regimes. Establishing clear and consistent requirements can help ensure that businesses that invest in responsible supply chain practices are not placed at a competitive disadvantage. At the same time, stronger due diligence obligations can help protect workers from labour exploitation and support fair competition in the marketplace. Effective due diligence frameworks can also improve access to remedy where harms have taken place and contribute to fairer and more sustainable working conditions across global supply chains.

Mandatory human rights due diligence laws are widely recognized as an important part of a "smart mix" of measures to foster business respect for human rights, as reflected in the United Nations Guiding Principles on Business and Human Rights (UNGPs). Many experts consider due diligence requirements to be more effective than transparency measures alone in driving meaningful corporate action to prevent and address labour exploitation.

Against this backdrop, the Government of Canada is seeking views on whether additional measures are needed to strengthen Canada's approach to addressing forced labour in global supply chains. In a rapidly changing global economy, stronger due diligence measures could help position Canadian businesses to compete in markets where responsible business conduct is increasingly becoming an expectation. In turn, this increased due diligence will strengthen confidence in Canadian supply chains, and reinforce Canada’s leadership in building a fair, resilient and competitive global economy. The perspectives gathered through the consultation will help inform the path forward.

To support this work, the government has developed options related to various elements of a potential due diligence regime, including:

• scope;
• coverage and applicability;
• due diligence and reporting obligations; and
• compliance and enforcement mechanisms.

Alternative approaches are also proposed for certain elements to help minimize administrative burden on businesses (see Annex A for more information on potential impacts).

Through this consultation, we are seeking feedback on these elements, as well as on potential civil liability provisions for victims of forced labour and ways to strengthen coherence between any future due diligence framework and Canada's existing forced labour import prohibition. The feedback received will help inform future policy considerations and ensure that the perspectives of businesses, workers, rights holders, civil society organizations, Indigenous partners, and other stakeholders are taken into account.

Addressing forced labour and labour exploitation in global supply chains is a complex challenge that requires ongoing collaboration among governments, businesses, workers, and civil society. We appreciate the valuable input stakeholders have provided to date and look forward to continuing this important dialogue.

Section 1: Key elements of a due diligence regime

Due diligence regimes generally impose obligations on entities to identify, prevent, mitigate and account for how they address actual and potential adverse impacts in their supply chains/value chains. Additionally, when actual adverse impacts are found, entities may be required to provide or cooperate in remediation.

The following figure provides an overview of a typical due diligence process:

Figure 1: Due diligence process and supporting measures^{Footnote 3}

Source: Organisation for Economic Co-operation and Development

Scope

Why this matters

The scope will determine which labour rights risks regulated parties would be required to identify and address. Establishing an appropriate scope is important to ensure the regime effectively addresses labour exploitation while providing businesses with clear and proportionate expectations regarding their due diligence responsibilities.

Option 1: Regulated parties would be obligated to undertake due diligence in regard to actual and potential adverse impacts on fundamental labour rights, as identified in the International Labour Organization’s (ILO) Declaration on Fundamental Principles and Rights at Work. These are:

• freedom of association and the effective recognition of the right to collective bargaining;
• the elimination of all forms of forced or compulsory labour;
• the effective abolition of child labour;
• the elimination of discrimination in respect of employment and occupation; and
• a safe and healthy working environment.

Rationale: This would cover the spectrum of fundamental labour rights and be in line with existing binding international labour obligations. It would demonstrate a stronger commitment to tackling all forms of labour exploitation in supply chains more broadly and not just focus on the most egregious forms of labour exploitation, that being forced and child labour. Fundamental principles and rights at work (FPRW) are universal human rights and immutable in nature. They are inseparable, interrelated and mutually reinforcing. While the scope would not cover human rights more broadly as defined in international human rights instruments,^{Footnote 4} its focus on the FPRW would directly address the scourge of labour exploitation.

Alternative option:

• Option 2: Limit the scope of due diligence obligations to forced labour and child labour, thereby focusing on the most egregious labour rights violations.

Coverage

Why this matters

The coverage will determine which organizations are subject to due diligence obligations. Setting appropriate thresholds and applicability criteria is important to ensure the regime targets organizations with the capacity and influence to drive meaningful change, while balancing impacts on smaller businesses and maintaining a level playing field among regulated entities.

Option 1: The due diligence approach would apply to all forms of businesses that have operations abroad and that are (1) incorporated in Canada, headquartered in Canada or have their principal place of business in Canada and (2) that have a minimum of $40M in annual worldwide revenue or an average of at least 250 employees worldwide. The regime would also apply to federal government departments and crown corporations.

Rationale: This proposed approach captures the higher end of medium-sized and large enterprises (similar to the Supply Chains Act) and federal government departments and crown corporations, holding the government to the same or similar standard as the private sector. Capturing foreign businesses that conduct business within Canada would align with the approach undertaken across several other supply chain legislation regimes. Capturing businesses according to their employee count and revenue thresholds is also common practice.

Alternative options:

• Option 2: Due diligence obligations would only apply to large entities (e.g., 500+ /1000+ employees and more than $40M/80M/100M/120M/160M in annual worldwide revenue) and transparency obligations (similar to the current reporting obligations under the Supply Chains Act) would apply to entities that have a minimum of $40M in annual worldwide revenue or an average of at least 250 employees worldwide (matching the existing Supply Chains Act threshold).
• Option 3: A regulation making authority would allow for flexibility to include or exclude certain types of businesses (i.e., exclude certain types of industries which may not be relevant to cover and/or extend application to businesses operating in “high-risk” sectors that are not meeting the revenue and/or employee thresholds).

Due diligence and reporting obligations

Why this matters

Due diligence obligations establish the actions regulated parties must take to identify, prevent, mitigate, and address labour rights risks. The design of these obligations will influence both the effectiveness of the regime in protecting workers and the extent of the administrative burden placed on businesses and government institutions.

Option 1: A regulated party would be required to:

• Embed due diligence in its policies and practices.
• Identify and assess any adverse impacts in its operations abroad and its international supply chains (all upstream activities and certain downstream activities)^{Footnote 5} (applies to “entities” only)
• Identify and assess any adverse impacts in the international supply chains of any products and services that they procure (applies to federal government and crown corporations)
• Prioritize adverse impacts according to their level of severity;
• Address (cease, mitigate or prevent) adverse impacts according to and in proportion to the regulated party’s level of involvement (whether it has caused or contributed to the adverse impact or is connected to the adverse impact through its business relationships);
• Take measures, tailored to the circumstances, to remediate the damages caused by any actual impacts to which the entity has caused or is contributing;
• Monitor, assess and improve the effectiveness of the measures taken to address and remediate adverse impacts.
• Establish a communication process that enables any person or organization to submit information about a suspected adverse impact in the regulated party’s operations abroad or international supply chains and consider this information when identifying and assessing adverse impacts.
• Submit an annual report to the competent authority containing information on its due diligence obligations, organizational structure and any other prescribed information. This report must be made available to the public.

Rationale: These due diligence obligations are in line with international guidelines, including the United Nations Guiding Principles on Business and Human Rights (UNGPs) and OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (OECD Guidelines for MNEs). The obligations are also similar to obligations in other due diligence regimes, particularly the EU’s Corporate Sustainability Due Diligence Directive (CSDDD).

Alternative options:

• Option 2: While regulated parties would be required to submit a report on the fulfillment of their due diligence obligations, they would only be required to do so on the first year of becoming subject to the legislation and every second year thereafter.
• Option 3: Regulated parties would be required to conduct due diligence in their operations abroad (only applicable to entities) and their international supply chains, capturing only upstream activities.

Compliance and enforcement

Why this matters

Effective compliance and enforcement mechanisms help ensure that due diligence obligations lead to meaningful action rather than simply becoming administrative requirements. The enforcement framework must provide appropriate incentives for compliance, support consistent application of the law, and maintain public confidence that labour exploitation risks are being addressed.

Option 1: A competent authority would be responsible for the administration and enforcement of the due diligence obligations. This authority could be held within a federal department and would have the power to issue orders, and administrative monetary penalties (AMP) with revenues earmarked for grant-based activities to assist victims of labour exploitation, publish the names of regulated parties that are deemed to have committed a violation, assess complaints and conduct inspections.

The competent authority would be required to:

• provide guidance to regulated parties;
• review annual reports;
• publish and maintain a registry of the annual reports;
• report annually to parliament on the administration and enforcement of the regime.

Rationale: This approach is in line with compliance and enforcement mechanisms in other jurisdictions and ensures that there are meaningful consequences for regulated parties that fail to comply with their due diligence obligations. The issuance of orders provides the enforcement authority with a powerful tool to ensure compliance, rectify violations, and protect the interests of affected parties. Granting the enforcement authority the power to conduct inspections is also an important way of verifying entities’ compliance with due diligence obligations. Administrative monetary penalties may serve as an added enforcement measure to ensure compliance and can very well be flexible in nature and tailored to a number of components of an entity that is subject to an AMP: size, type of non-compliance, whether it is a first finding of non-compliance or a repeated instance, and more. The “name and shame” approach of publishing the names of regulated parties that are deemed to have committed a violation serves to further incentivize compliance.

Alternative option:

• Option 2: Implementation would be staggered according to entity size. The regime would apply to larger entities first to allow smaller entities to adapt their procedures before reports are due under the new framework.

Section 2: Civil liability

Why this matters

A key objective of an effective due diligence regime is to prevent labour exploitation and to ensure that workers who suffer harm have access to meaningful remedy. The Government is seeking views on whether a civil liability framework could help address barriers to justice for victims, strengthen incentives for companies to conduct effective due diligence, and complement other compliance and enforcement measures, while remaining fair and proportionate for regulated entities.

International guidelines related to business and human rights highlight the importance of providing remediation for adverse impacts that are found to take place within a business entity’s supply chains. Remediation can take many forms and may include:

• Apologies, restitution or rehabilitation (e.g., reinstatement of dismissed workers, recognition of the trade union for the purpose of collective bargaining);
• Financial or non-financial compensation (for example, establishing compensation funds for victims, or for future outreach and educational programmes);
• Punitive sanctions (for example, the dismissals of staff responsible for wrongdoing); and
• Taking measures to prevent future adverse impacts.^{Footnote 6}

The UNGPs identify grievance mechanisms through which remedy can be sought. Grievance mechanisms are defined by the UNGPs as “[…] any routinized, State-based or non-State-based, judicial or non-judicial process through which grievances concerning business-related human rights abuse can be raised and remedy can be sought.” Civil liability, the principle by which one person has the obligation to repair damages caused to another, falls within what the UNGPs qualify as ‘State-based judicial processes’. Some jurisdictions have adopted or considered civil liability provisions as part of their due diligence regimes, such as France^{Footnote 7} and the European Union.^{Footnote 8}

Under the current legal framework in Canada, victims of forced labour and/or other human rights abuses can file claims in a Canadian court against Canadian entities for damages suffered in a foreign country. However, several barriers exist. For example, while the Supreme Court of Canada opened the door for Canadian companies to potentially be sued in Canada for serious human rights violations committed abroad, based on customary international law (see Nevsun Resources Ltd. V. Araya), Canadian courts have still not explicitly ruled on how a person is found guilty of a customary international law breach or what exact damages look like. Additionally, transnational human rights lawsuits may take several years to reach final resolution, resulting in significant legal and administrative costs for the parties involved. Plaintiffs rarely have the funds to sustain these fights and face hardships in gathering evidence to prove abuses.

Civil liability provisions can also serve as a compliance incentive for companies that may be captured by due diligence legislation, thereby supplementing any form of administrative enforcement provisions.

Option 1: Include provisions in a due diligence regime that would allow victims of forced labour or other types of labour exploitation to file claims for damages in a Canadian court against an entity regulated by a due diligence regime, for failure to conduct proper due diligence.

Rationale: The risk of litigation and reputational harm is one of the most significant deterrents for corporate misconduct. Enshrining such a provision would serve as an incentive for regulated entities to conduct proper due diligence in their supply chains and could help remove some of the barriers that currently exist.

Section 3: Ways to maximize effectiveness and ensure coherence with the forced labour import prohibition

Why this matters

Due diligence requirements and import prohibition measures are intended to work together to reduce labour exploitation in global supply chains. The Government is seeking views on how these regimes could best complement one another, reduce duplication, provide greater certainty for businesses, improve enforcement outcomes, and strengthen Canada’s overall efforts to combat labour exploitation in global supply chains.

Supply chain legislation and import prohibitions are distinct but complementary measures, that form part of a “smart mix” of measures to address forced labour in global supply chains. Canada is the only country in the world to have both transparency-based supply chain legislation (Supply Chains Act) and a forced labour import prohibition.

On June 12, 2026, Bill C-35 An Act respecting the prohibition of the importation of goods produced by forced labour was tabled in Parliament. The Bill introduces new import prohibition measures to provide clarity and predictability for Canadian businesses and enhance the Canada Border Service Agency's (CBSA) enforcement powers.

The bill provides that goods produced by forced labour are prohibited from importation. It authorizes the Minister of Foreign Affairs to establish a list of goods in respect of which there are reasonable grounds to suspect that they are produced by forced labour. It allows several Ministers, including the Minister of Labour (now titled Minister of Jobs and Families), and other prescribed persons to assist the Minister of Foreign Affairs in establishing the list. It provides that a person importing goods on the list must, at the request of a customs officer, provide the CBSA with the required information (to be prescribed in regulations), failing which, the goods are deemed to be prohibited from importation.

The two proposed regimes (due diligence supply chain measures and Bill C-35) should complement each other to maximize efficiency in eradicating forced labour in Canadian supply chains. As no jurisdiction has both a due diligence regime and a forced labour import prohibition in place, coordination and possible interactions between these two regimes need to be carefully considered. For example, a benefit of undertaking the actions prescribed in a potential due diligence regime is that it would assist regulated entities in ensuring they do not run afoul of the forced labour import prohibition. Other ways in which these regimes could interact is through powers to exchange information between the various competent authorities to further target high-risk areas or products, and allowing the relevant authorities to consider annual reports on due diligence when assessing whether certain goods are at-risk of being produced with forced labour.

Annex A: Impacts on businesses and shifts in global trade

Research^{Footnote 9} shows that, while due diligence obligations require entities to undertake work that is likely to involve increased costs, these costs are generally low relative to annual revenues (with the highest percentage of revenue estimate at 0.6 percent) for most entities. However, these costs can vary depending on certain entity characteristics (e.g., entity size, industry, level of existing implementation of supply chain due diligence) and could be higher in certain industries where companies may face considerable transition costs.^{Footnote 10} Therefore, implementation for larger entities and those in higher-risk industries is more significant due to their operating context.

It is important to note that these costs can, to some degree, be offset by benefits to companies applying due diligence measures to their operations. For example, in a study on the EU Conflict Minerals Regulation, respondents stated that they expected significant business benefits from due diligence implementation, such as improved reputation among potential customers and investors, better customer satisfaction and improved investor relationships.^{Footnote 11} Moreover, there are benefits from better supply chain management due to better quality information and reduced risks.^{Footnote 12} The European Commission’s Impact Assessment Report on the CSDDD also noted the possibility of efficiency gains when due diligence processes are set up to cover a range of impacts simultaneously (e.g., the right to freedom of association/collective bargaining, forced labour, child labour, discrimination in respect of employment and occupation, the right to a safe and healthy working environment), rather than addressing those impacts individually.^{Footnote 13}

Addressing forced labour and labour exploitation is seen as both a moral imperative and essential to ensuring a level playing field for Canadian businesses, while supporting more resilient and secure supply chains. When goods produced with forced labour enter global markets, they do so with an unreasonable price advantage. Their inclusion in global supply chains creates several problems. It distorts trade and competition, rewards inhumane and illicit behavior, and disadvantages workers and firms who play by the rules. Addressing forced labour has also been shown to yield considerable economic and social benefits globally.^{Footnote 14} An International Labour Organization (ILO) 2024 discussion paper, assessing the investment requirements and economic benefits of acting against forced labour, estimates that freeing people from forced labour and reintegrating them into the mainstream workforce could lead to a US$611 billion (CAD$857 billion) demand-driven rise in global gross domestic product (GDP). The paper also indicates that ending forced labour is also likely to boost economic growth through several channels, including higher levels of health, skills and innovation, which were not considered in the estimation exercise, meaning that the total economic impact would likely be much higher.

Submit your feedback

We invite you to submit your feedback in writing to:

International and Intergovernmental Labour Affairs / Labour Program
Employment and Social Development Canada
165 Hôtel-de-ville Street
Gatineau, QC, J8X 4C2

Email: EDSC.AIIT.CA-SC.IILA.ESDC@labour-travail.gc.ca