Your compliance program and human trafficking…

Now is the time for the compliance professionals at large retailers and manufacturers to start planning ahead for the January 1, 2012, effective date of the California Transparency in Supply Chains Act of 2010 (the Act). This Act relates to human trafficking in the supply chain and requires every retail seller and manufacturer doing business in California to disclose their efforts to eradicate slavery and human trafficking from their direct supply chains for goods they offer for sale.  The Act does not apply to smaller retailers and manufacturers having less than $100 million in annual worldwide gross receipts (but is something, nevertheless, for them to consider).

The US Department of Labor released a report in September 2009 that named 122 goods from 58 countries that were believe to have been produced through forced labor or child labor in violation of international standards.  The Act recognizes that consumers and businesses are inadvertently promoting and sanctioning these crimes through the purchase of goods and products in the supply chain.  So, the Act endeavors to ensure transparency between large retailers and manufacturers with consumers by providing detailed information regarding efforts to eradicate slavery and human trafficking from their supply chains, and to educate consumers on how to purchase goods from companies that responsibly manage their supply chains to prevent slavery and human trafficking.  Implicit in this is that California residents and corporations will choose to buy only from companies that comply with the Act.

Large manufacturers and retailers will be required to post on their homepage Internet Websites a “conspicuous and easily understood link” to the necessary disclosures. In general, and at a minimum, large retail sellers and manufacturers will need to:

  • evaluate and verify risks in their product supply chains to exposure to trafficking and slavery, and whether this verification was conducted by a third party;
  • audit suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains, and whether the audits are conducted by an independent, unannounced auditor;
  • require direct suppliers to certify that the materials incorporated into the product comply with the laws regarding slavery and human trafficking of the country or countries in which they are doing business;
  • maintain internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking; and,
  • provide training, on mitigating risks within the supply chain to human trafficking and slavery, to company employees and management who have direct responsibility for supply chain management.

The Act emphasizes that consumers need to access this information in their buying decisions. The Act does not currently have a fine or other penalty associated with it, but does provide for enforcement through the Attorney General for unspecified injunctive relief — so there is a big bat out there.

In nine months, many large corporations will need to ensure compliance with this California law.  What should you consider doing now if you’re not already prepared? Here are a few thoughts — certainly not an exhaustive list nor in any particular order:

  • If you don’t have a written policy concerning slavery and human trafficking in the supply chain, now is the time to write one.  Consider this policy for its applicable internal and external uses (including use with suppliers as well as dissemination to consumers, investors, etc.);
  • Determine whether any corporate supply contracts need to be revised to reflect new policy compliance;
  • Analyze your corporate exposure — what do you really know about the supply chain, how far do you drill down to get the real picture, and how much further do you need to drill?;
  • Develop a training program;
  • Consider whether your corporation will need third parties (such as certification organizations, accounting and auditing firms) to assist developing compliance programs or in enforcement or auditing; and
  • Ensure your corporate board is apprised of compliance to this new law.

Some corporations have already built their corporate social responsibility policies looking toward compliance with the international SA 8000 standard and, in particular its requirements concerning child labor, forced and compulsory labor, and human trafficking.  This standard is published by Social Accountability International (SAI), a global standard-setting non-governmental human rights organization.  For those looking toward certification to SA 8000, Social Accountability Accreditation Services (SAAS), a spin-off of SAI, provides this.  SAAS provides a complete list of “Accredited Certification Bodies” (namely third party organizations) who can perform the auditing work to achieve certification.  Of course,most of these organizations can also perform work to your company’s own specification outside the SAI/SAAS certification process.

So, don’t forget, the California Transparency in Supply Chains Act of 2010 will be effective on January 1, 2012 — use the time wisely!