New California Law Combats Human Slavery via Supply Chain Transparency
January is Human Trafficking Awareness Month, a time to educate people that slavery exists today and build support for the fight to stop it. But this January also happens to be the month that a new law in California has come into effect, the first of its kind in the U.S., and one that has the potential to do more than just raise awareness of human trafficking and actually make a real dent in the problem itself.
Human trafficking and forced labor are largely hidden problems, but they persist in just about every country in the world (including in the U.S.) whether it’s in cotton fields that feed our demand for clothing or in factories where our electronics are assembled. As consumers, we are all connected to human trafficking and slavery through the goods we use every day. But a large hurdle in eradicating slavery is how disconnected those final products are from the conditions that produced them.
The supply chains that companies rely on to bring consumer goods to the market have become so fragmented that a grocery or apparel company has no idea — sometimes by design, sometimes inadvertently — that it is enabling the forced exploitation of workers. The retail clothing chain Gap was the target of activist campaigns and got a lot of bad press in the late 1990s for using exploitative child labor in factories that produced Gap clothing. But because stores like Gap outsource labor to factories and do not own them outright (and Gap was never the only one to take this route), they can shirk responsibility for what happens within those facilities.
A new rule in California seeks to put some of that responsibility back into the corporate offices of large businesses, so that it’s no longer enough for a company to say it doesn’t know the conditions in which its products are grown or manufactured. The California Transparency in Supply Chains Act, which was signed into law last year but only went into effect this month, requires companies to disclose, in a prominent place on their websites, what they are doing to combat forced labor and human trafficking in their supply chains.
The law applies to any manufacturing and retail company with $100 million or more in sales that does business in California; one estimate predicted the law would impact 3,200 global companies. To return to Gap as an example — in part because a report tailored to the California legislation, Effective Supply Chain Accountability, said Gap has exhibited several model practices in terms of cleaning up its supply chain — the company created a vendor code of conduct that meets core International Labor Organization standards, followed years later by a human rights policy, and has charted its level of influence over each stage of its supply chain.
Disclosing exactly those types of efforts is what is now required by the new law. A company must indicate the extent to which it: audits suppliers for trafficking and slavery; verifies supply chains to evaluate and address risks of human trafficking, and whether an independent third party is used for the verification process; maintains internal accountability standards; trains employees on this issue; and certifies that materials used in a product comply with human trafficking laws in the countries where business is conducted.
There are still some fuzzy points: certification, for example, has no standard definition. And there is no certifier for slavery-free, the way there is for organic or fair trade. But the law is in effect, companies have started publishing the information necessary to comply — and they have been advised not to make false or exaggerated claims that misrepresent what they’re actually doing. There can be legal consequences.
According to Patricia Jurewicz, director of the Responsible Sourcing Network, the area that needs the most work is the origin of a product’s supply chain: in the fields and mines that supply raw materials like sugar and coltan, a mineral used in just about every gadget in the world.
Power in Numbers
The potential for significantly changing conditions in these areas falls to the number of companies involved in calling for that change.
“One company can’t really impact these challenges,” she said. “Some of what we’re aiming to do is create industry-wide efforts to address the challenges around slavery and trafficking at the raw commodity level.” She said the most egregious practices are hidden, and can stay that way if there is no incentive otherwise. When there is a demand for better practices by more than one player, suppliers have greater incentive to change.
In a way, the California legislation augments efforts already underway by organizations and companies focused on this issue, and could potentially work in the same way. Jurewicz used cotton, and a coalition of companies that have been working to clean up the cotton supply chain, as an example.
“Now that we have this group of over 60 brands saying that practice is unacceptable, we can take that coalition and go to the spinners, to the traders,” she said. That process and those discussions can then serve “as a driving mechanism to reward or support production, or harvesting in this case, that does not use forced child labor and to minimize the demand for the cotton that does use forced child labor.”
Now, initiatives like the one Jurewicz highlighted with cotton are created on a voluntary basis, while the California legislation is mandatory. But the California law doesn’t require a company to change its policies at all; it just requires companies to disclose what they are doing to identify and eliminate human trafficking from their supply chains. If a company is doing nothing and chooses to turn a blind eye, it simply has to say as much on its website.
Organizations like the Responsible Sourcing Network and Christian Brothers Investment Services (CBIS) feel that the negative public image that could result from admitting total inaction will be incentive for a company to start paying attention to this issue.
“Investors will be evaluating how companies are addressing the challenges facing workers in complex global supply chains, seeking evidence that companies are considering the long-term impact of these issues. Non-compliance with SB 657 may lead to certain legal and reputational risks,” said the Effective Supply Chain Accountability report, which was released by CBIS and the socially-responsible Interfaith Center on Corporate Responsibility and Calvert Investments.
“It’s happening in everybody’s factory. That’s why it’s so critical that the companies do this kind of risk assessment,” Tanner said. “Not only for moral reasons and ethical reasons, but as an investor, we’re saying for shareholder value reasons, reputational risk issues — it’s so critical.”
A similar bill has been introduced at the federal level that could make California just the first actor in a series of significant steps requiring companies to not only pay attention to slavery and human trafficking, but to recognize and take responsibility for their involvement in it.