File 01 · Why we watch
Self-reporting is not evidence. These are the verified numbers behind Bill S-211, and the children the law exists for.
The trust gap
Supply-chain due diligence has shifted from voluntary to statutory. The instruments buyers rely on today, questionnaires, attestations, ESG scores, collect what suppliers say about themselves. The public record is where the truth lives, and almost nobody is checking it systematically.
Canada's Fighting Against Forced Labour and Child Labour in Supply Chains Act came into force January 1, 2024. Reporting entities must show real diligence, with fines up to $250,000 per offence and personal liability for directors.
Thousands of Canadian entities filed first-year reports into Public Safety Canada's public catalogue, a brand-new, searchable public record of supply-chain claims that almost no buyer independently verifies.
Since 2022, U.S. Customs has detained billions of dollars in goods for forced-labour review under the UFLPA. Enforcement is real, and the burden of proof sits with the importer, not the accuser.
MIT's Aggregate Confusion Project found the average correlation between major ESG ratings is roughly 0.61, versus ~0.99 for credit ratings. Scores built on self-reported data diverge because they measure opinions, not evidence. A score is not a source.
The EU Corporate Sustainability Due Diligence Directive (2024/1760) begins applying to the first wave of companies in 2028, joining Germany's LkSG, the UK and Australian Modern Slavery Acts, and S-211. Every regime converges on the same question: can you substantiate what your suppliers told you?
The AI systems now being pointed at supplier due diligence are documented to hallucinate, generating plausible claims with no traceable source (Ji et al., 2023, ACM Computing Surveys). Karat is built as the anti-hallucination layer: a verdict is accepted only if it is backed by at least one real, cited public source. No source, no claim. That contract runs end to end.