top of page

Executive summary and noteworthy points

 

The work undertaken for this inaugural Due Diligence Report has sought to “embed responsible business conduct into the policies and management systems” of each of the businesses reported upon, and on an initial and exploratory basis to “identify and assess actual and potential adverse impacts” associated with the operations, products, or services of each such business.[1] These are gatekeeping steps which reflect “the importance of establishing a common understanding on due diligence, in particular for small and medium-sized enterprises”[2]. A due diligence approach inherently prevents and reduces the “risk that forced labour or child labour is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity”, as required by and within the meaning of section 11(1) of the Act. More to the immediate point, the due diligence work undertaken in support of this inaugural report has not resulted in any known or quantifiable risk of forced or child labour actually being identified within the supply chain of any affected business.

 

One of the businesses reported upon, Cocoa Community Confections, uses cocoa products in its manufacturing operations, and the risk of child labour, including the worst forms of child labour, is endemic in the world’s cocoa supply, especially in West Africa. However, this particular supply-chain risk has been exhaustively studied and proactively addressed by the business: see https://cococochocolatiers.com/pages/sustainability. Through its commitment to certification programs and also more recently its payment of voluntary “living income” premiums for cocoa products, Cococo has not just controlled against the risk of child labour in its supply chain, but it has also helped remediate both child labour and the associated loss of income to vulnerable families via such payments and its related advocacy efforts.

​

Five other businesses reported upon here—Calcana, ELRUS, Fiberbuilt, Hydra-Tech, and MAF—use various metals in their manufacturing operations, and the extractive mining industries that introduce such metals (including aluminum) into the supply chain are associated with force labour risks as a general matter. Scoping investigations to date have not identified any known risks, but in some cases further investigation is clearly warranted. Among other things, while some suppliers have responded positively to due-diligence inquiries by sending letters and emails, or by providing helpfully completed questionnaires or surveys, at the same time there has often been a lack of best-practices transparency in behind such responses.

​

Much the same is true where businesses reported upon—Calcana, ELRUS, and Fiberbuilt—import and use electronics in their manufacturing operations. Here again, investigations have not identified any known risks, but in some instances further investigation is warranted in future.

​

Introduction

​

This Due Diligence Report is authored by G.L. Black Holdings Ltd. (GLBH). GLBH is a privately owned holding company. It provides a narrow range of professional and management services to its subsidiaries and affiliates, but otherwise does not itself directly conduct any active business. Having regard for the profile of its various subsidiaries and affiliates in Canada, GLBH has identified itself as being an “entity” as that term is defined in section 1 of the Act.[3]

​

Each of the constituent businesses for which GLBH now assumes a consolidating reporting obligation (each, a GLBH Business) is a small- or medium-sized enterprise (each, an SME). The employee count within the reported-upon businesses ranges from a low of two to a high of 94. Including in consideration of the limited scale of each SME’s operations, no GLBH Business today employs any person whose role entails creating corporate social responsibility (CSR) policies or undertaking the sort of monitoring and reporting that can often occur based upon such policies. This inaugural Due Diligence Report therefore reflects the starting-point diversity of capabilities of, and the starting-point limitations inherent within, each of the GLBH Businesses as an SME.

​

The best approach for purposes of this inaugural report has been to have each GLBH Business, as an SME, engage in its own due diligence. The results have been gathered and considered. Future efforts can be aimed toward systemizing the approach for each SME, including so that reportable metrics and objectives can be defined. The best result of all will be the instilling of such work into corporate cultures.

​

Entities reported upon

​

The entities whose activities are being reported upon, and their respective fiscal periods, are as follows (in alphabetical order):

​

This report addresses, as is required by section 11(1) of the Act, the “previous financial year” of each entity as listed above. Owing, however, to both the consolidated nature of this reporting and also to the multiplicity of financial periods of the entities as noted, the themes reported upon here do not neatly fall within watertight financial-year compartments. Much of the information supporting this report was gathered only recently and has a significance that is not just retroactive in relation to the financial years noted, but that also has both current and prospective significance as well. GLBH’s ability to report in a more focused way upon the specific financial period of each GLBH Business can no doubt be improved upon in future years, now that a baseline understanding is established via this report.

​

Supplementary information

​

The table in the downloadable report summarizes the “structure, activities, and supply chains” (section 11(3)(a) of the Act) of each GLBH Business (extensive backup information exists beyond that which can be captured here), and also identifies where there could be “risk of forced labour or child labour being used” (section 11(3)(c) of the Act). That being said, in respect of all items so identified below, all have been assessed currently as presenting low- to medium risk; often they are identified only because of current non-transparency in relation to post-intermediary sources of supply (including as to places or companies of origin). Reporting intermediaries have generally reported positively on due diligence being undertaken by them in respect of forced labour risks. No high risks or known examples of forced labour or child labour been identified in the supply chain through self-reporting or otherwise, but not all suppliers have responded to requests, either; future work will be required where gaps exist. (Other supplementary information as contemplated by section 11 of the Act is addressed in later sections of this report.)

​

​

Embedding responsible business conduct into policies and management systems

​

All GLBH Businesses today operate under the same Code of Conduct. Although an earlier version of the Code had been published for some GLBH Businesses, including in view of the Act’s requirements and evolving sensibilities as regards CSR, the Code has now been standardized and applies across the board to all GLBH Businesses. Importantly, the Code speaks to forced labour concerns in the following statements:

​

This Code reflects the Company’s commitment to conduct its business lawfully and in keeping with the highest ethical standards.

 

All of our business activities should be conducted in a manner that preserves and enhances our integrity and reputation. It is our strict policy to avoid illegal or unfair practices in dealings with Third Parties.

​

We work diligently to ensure that our business is conducted in all material respects in accordance with applicable laws, rules, and regulations. This includes compliance with laws, rules, and regulations regarding income and sales tax, competition, privacy, employment standards, human rights, occupational health and safety, and environmental matters.

 

We strive to foster a business environment that promotes integrity and that deters unethical or illegal behaviour. All Employees who know of or who suspect a violation of this Code, another policy, or of any law or rule affecting our business, must report the violation to a supervisor. If an issue concerns or implicates a supervisor, then as may be considered reasonable or appropriate in the circumstances, the required report can instead be made directly to the Company’s most senior manager, to G.L. Black Holdings Ltd. (including by email to CorporateSecretary@glbh.com), or through any whistleblowing procedure that we make available from time to time. The Company will respect and preserve the anonymity of such reports to the greatest extent possible.

​

By its nature, the Code of Conduct also addresses many topics distinct from issues of forced labour and child labour. However, the overriding importance of the Code as regards these labour issues is that it places fundamental issues of CSR—ethical standards, the integrity and reputation of each business, compliance with laws, human rights, and a duty to report violations—at center stage. By doing this, the Code sets out the basic standards against which all other activities are measured, and it is a foundation upon which all other policies and procedures can be based.

​

Building upon the Code of Conduct, and in specific response to the Act, GLBH has also promulgated a Policy to Fight Against Forced Labour and Child Labour in Supply Chains.

​

The work done in support of this Due Diligence Report has furthermore identified the need for GLBH to develop and promulgate a Business Partner Code of Conduct, with the plan being for that policy to be in place before the next Due Diligence Report is published. Too many GLBH Business suppliers, when questioned about issues of forced labour and child labour, reply with a formalistic questionnaire or “check-the-box-type” response. One extreme example (in an email from a supplier in China, and in response to a sophisticated question) read simply: “We never use child labor my friend.” A Business Partner Code of Conduct can help tackle the problem of simplistic communications and the need to promote transparency in behind ready-made policy-type proclamations. It will not be a sufficient response by itself, but its detail will be required in order for the Code of Conduct to operate meaningfully as regards vendors and suppliers.

​

Adjacent to a Business Partner Code of Conduct can also be enhanced processes of supplier qualification. Cococo, whose operations are impacted by food safety considerations, has operated using a Supplier Approval Questionnaire procedure for some years (e.g., “Are you certified against a Global Food Safety Initiative recognized program or other accredited body (BRC, SQF, etc.)?”; “Do you manufacture these products, or do you act as an Intermediary Source? If you are an Intermediary Source, can you please indicate the country of origin of the products (if not indicated on the Product Specification Sheet?”; etc.). ELRUS, as part of its Due Diligence Report response, similarly has developed in draft form a “Supplier Qualification Process – Forced or Child Labour” with three stated goals: “Goal 1 – Understand the Supply Chain”; “Goal 2 – Risk Assessment”; “Goal 3 – Identify Potential Responses”. The draft process document addresses the need to consider various factors when assigning risk levels to supplies and suppliers, and incorporates by reference the OECD due diligence guidance as regard sector, product, geographic, and enterprise-level risks. The result is a Risk Assessment Matrix tool that can be used to prioritize and guide remedial work.

​

The 2024-25 period will focus upon the implementation of supplier policies and procedures across all GLBH Businesses.

​

Identifying and assessing actual and potential adverse impacts

​

In support of this Due Diligence Report, all GLBH Businesses undertook at first a process of scoping and supply chain mapping. In order that available SME resources would focus upon the most important issues (and therefore be aimed toward securing the maximum available remedial benefit), each business was instructed for the purpose of this inaugural exercise to analyze its supply-chain inputs in quantitative (dollar) and strategic terms, from highest to lowest, and to focus upon defining the inputs which collectively define the business in its essential character. There was no artificial or pre-set limit placed upon what this would mean (i.e. no “top 10” expectation, no specific dollar threshold). Instead, the idea was to utilize each business’s subject-matter expertise to best advantage, focusing expert attention where it can do the most good. “You know your businesses; focus upon the inputs that define them.” Any business can and ought to be an expert about the issues that matter most to it. If experts focus upon rooting out problems in areas they are motivated to understand well, the most positive impact can be achieved.

​

A variety of work was undertaken by the different GLBH Businesses after preliminary supply chain mapping was first undertaken. The most common follow up activity involved researching the published policy statements of identified key vendors (public companies especially), as supplemented by surveys and/or question/answer communications aimed at specific targets. A very wide variety of reactive behaviour was encountered from vendors in response to such questioning, with many businesses simply opting to issue, or to cross-reference, blanket corporate policy statements against forced labour and/or child labour. Rare was the business that would self-identify a known problem in its supply chain and that might choose to say anything specific about such problems and about the viability of remedies and alternatives. There is clearly a very large challenge ahead in relation to clear communication and corporate transparency.

​

Remedial measures; training

​

Insofar as the supply chain mapping and scoping work undertaken for this Due Diligence Report did not identify any known risks of forced labour or child labour in the supply chains of GLBH Businesses, the question of remedial measures and employee training remains somewhat open-ended today. A natural tendency for any employee faced with the assignment of investigating forced labour and child labour in the supply chain is to want there to be no problem associated with their work at all, and to be temperamentally prepared to rely overmuch upon the statements of others (vendors) to the effect that there is, in fact, no problem.

​

There are likely cognitive biases at play (cognitive dissonance; egocentric biases; confirmation biases). How can one best overcome the natural tendency of SME employees to resist having their work associated with unpleasant global complexities and an overriding sense of lack of control?

​

Maybe there is no satisfactory answer to such a question, but the approach recommended here is for leadership to lean hard into the concept of due diligence, a concept that underpins not just the Act but also many similar CSR actions being undertaken around the world today. The idea of fully discharging an obligation to be duly diligent is ultimately a freeing idea. To be duly diligent is to have done what is necessary in proportion to a problem or challenge presented. Defining that which is duly diligent is very dependent upon the facts of case, upon the capabilities of the person doing the work, and the circumstances faced. Framed positively, the challenge is to do one’s best:

​

“Due diligence’ is simply the exercise of “reasonable care”. It is something more than “specious” or “unbelievable” reasons or “excuses” … “due diligence” relates to how one deals with factual circumstances; it will not enable mistake of law or ignorance of the law …

​

What constitutes “due diligence” is case specific, and the standard of care required … depends on the facts of each case, and the particular industry or activity involved. Basically, the greater likelihood of harm, and the greater awareness of the potential danger, the more “due diligence” …

​

Actions amounting to “due diligence may change with time; what might amount to an appropriate solution at one juncture might not meet “due diligence” standards at a future point in time. Thus, “due diligence” includes keeping abreast of technological change …[4]

​

Stated in different and slightly more positive terms:  the requirement to act with due diligence represents an opportunity to be inquisitive. It presents an opportunity to seek out information about business risks; to inform oneself; to conduct research and to become an armchair expert; to advocate for the idea that things could be better; to find purpose in one’s work, even if that purpose might seem to be “off to one side” in relation to the day-to-day challenges of commerce.

​

Translating such “highfalutin” ideas back to the tabletop task of supply-chain analysis, and reflecting back upon the supply chain summary above, this Due Diligence Report makes it obvious that opportunities lie in store for implicated GLBH Businesses to learn what there is reasonably to know about topics such as key metals extraction (aluminum, specifically), about electronics manufacture and distribution (especially from China and Taiwan as countries of origin), and about certain specific food stuffs (hazelnut paste, Brazilian cocoa butter). A resulting training plan for involved employees could look like this:

  1. Review the lessons of this Due Diligence Report.

  2. Educate a task force group of employees about what “due diligence” really means (how exciting and motivating it can be).

  3. Conduct subgroup discussions about specific sector, product, geographic, and enterprise-level risks.

  4. Define research assignments; assign researchers; report results back to the task force.

  5. Define or redefine supplier qualification processes.

  6. Undertake updated due diligence with vendors of concern.

  7. Report on results. Define learnings. Take action.

 

Assessing effectiveness

​

No actions into the supply chain have yet been taken based upon the findings of this Due Diligence Report. Indeed, given the results of the inaugural investigations, it would probably be difficult or even impossible to define today, in a meaningful way, metrics that could assess legitimately the effectiveness of steps now being taken or to be taken to alleviate the risk of forced labour and child labour (section 11(3)(g) of the Act) in the supply chain of GLBH Businesses. In fact, in this inaugural year, the work undertaken has demonstrated a clear risk associated with defining metrics prematurely. Each SME business as an expert first had to explore its own terrain, to understand better its own composition, and to experience how its particular supply chain would respond when questioned.

​

This is the inaugural year for unifying CSR being introduced across all GLBH Businesses. The best measure of progress at this time is a subjective one: it is the measure of cultural change. Do accountable employees come to understand that assessing the risk of forced labour and child labour in supply chains, and then acting to prevent the realization of that risk and/or remediating that risk where it inevitably presents itself, is an exciting activity? One that makes work more interesting and more worthwhile? Most employees prize engagement at work nearly above all other considerations. In the 2024-25 period, GLBH will therefore focus efforts upon measuring subjectively the engagement of employees with the exercise of implementing and living by the Code of Conduct and all related policies and procedures that bear upon the goals of the Act.

​

____________________________________________

 

[1] The words quoted are from OECD (2018), OECD Due Diligence Guidance for Responsible Business Conduct (e.g. at 5).

[2] Ibid. at 3.

[3] GLBH is not “listed on a stock exchange in Canada” but, having regard for the control definitions in section 10 of the Act, GLBH does identify itself as meeting the conditions prescribed by paragraph (b) of the “entity” definition in section 2 of the Act. Specifically, GLBH “has a place of business in Canada”, “does business in Canada”, and “has assets in Canada” and a consolidation of its financial statements for each of the two most recent fiscal years would indicate that “(i) it has at least $20 million in assets (ii) it has generated at least $40 million in revenue, and (iii) its employs an average of at least 250 employees”.

[4]N.J. Strantz, “Beyond R. v. Sault Ste. Marie: The Creation and Expansion of Strict Liability and the ‘Due Diligence’ Defence” (1992), 30 (4) Alberta Law Review 1233, at 1241-42.

bottom of page