In a warning to multinational employers, Canada’s corporate-ethics watchdog has announced new probes into allegations that global brands are taking advantage of forced labour from China’s ethnic minority Uyghurs.

The investigations into Walmart, Hugo Boss, and Diesel were announced last Thursday by the Ottawa-based Canadian Ombudsperson for Responsible Enterprise (CORE), following accusations that the companies were using Chinese suppliers engaged in modern slavery in Xinjiang.

The original complaints were made in June 2022 by a coalition of 28 civil society organisations. The three companies have denied the allegations but refused to participate in a preliminary assessment of the claims, according to CORE.

Similar probes by CORE have been launched into global clothing brands Nike and Ralph Lauren, as well as Canadian mining firms Dynasty Gold and GobiMin.

“As mediation between the parties is not currently an option, we will be launching investigations into the allegations outlined in these reports,” said Sheri Meyerhoffer, the lawyer in charge of CORE.

“The investigations will provide all three companies with an ongoing opportunity to provide further relevant information and mediation of the allegations remains open,” she added.

“We are hopeful that the investigation findings will provide the companies with information to support their ability to strengthen their due diligence practices.”

In a statement, a spokesperson for Hugo Boss said the allegations are without merit, and that CORE’s probe was launched on the basis of a supplier relationship that was terminated last year.

“Hugo Boss does not source any goods in its direct supply relationship that originate from the Xinjiang region. As a matter of principle, we do not tolerate forced or compulsory labour or any form of modern slavery,” they said.

“We believe it is wrong to launch an investigation based on an alleged supplier relationship which no longer exists,” the spokesperson added.

Also responding to the probe, Walmart Canada said it doesn’t tolerate forced labour of any kind in its supply chain. Diesel also denies the allegations, stating it has reviewed its supply chain and that it is not involved with any human rights abuse, nor does it purchase material from the Xinjiang region.

CORE criticism

CORE was established in April 2019 to investigate suspected corporate ethics and human rights violations, with a particular mandate in the mining, petroleum, and garment industries. But by May 2023, the office was facing criticism for having not filed a single report to the International Trade Ministers.

In July CORE finally launched its first two probes, which also centre on allegations of Uyghurs used as forced labour, against Nike Canada and Dynasty Gold.

The decision by Ombudsperson Meyerhoffer to launch the investigations followed the completion of CORE’s initial assessment reports relating to two out of 13 admissible complaints about the overseas operations of both companies. The complaints were filed by a coalition of 28 civil society organisations in June 2022.

Nike reportedly told CORE that it no longer has ties with Chinese firms linked with Uyghur forced labour and provided the watchdog with information on its due diligence practices.

In a statement, the global sportswear brand said that it does not source products from Xinjiang and that its has verified with its suppliers that they do not use textiles or yarn from the region.

Dynasty Gold, which operates in Canada, China, and the US, said it does not have operational control over the mine from which the allegations stem and that the allegations arose after the company left the region.

Despite the office being created at the urge of human rights groups, many of those groups have reportedly advised against filing complaints with CORE, citing concerns over the office’s lack of independence and lack of the power to properly investigate wrongdoing, an investigation by the Globe and Mail found in May.

Lorraine Swift, executive director of the charity group Change for Children, told the newspaper that, despite holding out hope for the office, CORE is failing.

“We see now, four years in, that the CORE is actually a completely ineffective body that is just wasting our tax dollars and providing absolutely no adequate response for the communities that are being affected,” she said.

In a statement following the announcement of the Nike and Dynasty Gold probes, Meyerhoffer said: “It is our mission to resolve human rights complaints in a fair and unbiased manner in order to help those impacted and to strengthen the responsible business practices of the companies involved.”

Supply chain crackdown

CORE’s ramping up of investigations into global brands forms part of a wider effort by Canada to protect human rights abroad and crack down on forced labour in global supply chains.

Coming into effect in January 2024, the new Fighting Against Forced Labour and Child Labour in Supply Chains Act requires all companies operating in Canada to publicly report on their corporate structure and supply chains, as well as any measures taken to avoid the use of child and forced labour.

This includes listed companies; those that have a place of business in Canada, do business in Canada, or have assets in Canada; and firms that have at least CA$20m in assets, generate at least CA$40m in revenue, and employ at least 250 employees.

Failure to comply with law can result in a penalty of up to CA$250,000.

The legislation has proved controversial with legal experts warning that the law does not specifically state that companies have to be based in Canada. Foreign companies with small Canadian operations are also subject to the law even if the size of their local operations falls below the above thresholds.

Indeed, in an email to CORE last August, lawyers for Ralph Lauren Canada’s US-parent company stated that subsidiary businesses are not responsible for decision-making or oversight of operations abroad. The fashion brand’s counsel argued that CORE, therefore, did not have jurisdiction over the matter.

The human rights watchdog, however, chose to proceed with its investigation.

Industry lobbyists have also argued that a perceived lack of clarity in the rules could prevent critical goods from entering the country.

“We are not arguing or disputing the principles of what the bill is trying to achieve, or the specifics of what this bill is including,” said Mining Association of Canada Vice-President Ben Chalmers, earlier this month.

“We just want time to be able to do a better job when we start reporting, that is why we are seeking a one-year extension.”