Setting the Trend: The California Transparency in Supply Chains Act

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By Sascha Matuszak
Reporter, SCCE|HCCA

There are two major types of legislation targeting slavery and human trafficking in the supply chain. The first requires self-disclosure by companies regarding their efforts to combat human trafficking in their own supply chains, and the second requires companies to undergo audits and be certified. Today, we are going to talk about the California Transparency in Supply Chains Act (2010), which is a premier example of the former. The Supply Chains Act requires every retail seller or manufacturer doing business in California with annual worldwide gross receipts that exceed $100 million to disclose on its website its “efforts to eradicate slavery and human trafficking from its direct supply chain for tangible goods offered for sale.”

Disclosures must be conspicuous and easy to read, and they must cover the five following areas:

  • Verification
  • Audits
  • Certification
  • Internal accountability
  • Training

The California Office of the Attorney General released this helpful guide with recommendations for how to package and present this information, including templates and examples of acceptable and unacceptable disclosures. The guide was accompanied by a consumer alert and informational letter from California Attorney General (AG) Kamala Harris, which notifies consumers of the law, lets them know what to look for, and provides a contact for reporting violations.  Here are two examples from Johnson & Johnson and Hewlett Packard.

The Supply Chains Act does not require companies to take specific action to address forced labor in their supply chains, only that they disclose what they have done, if anything. Although the AG does have the right to file for an injunction against those in violation of the Supply Chains Act, the idea is to rely on consumers, third parties, and NGOs to enforce compliance with the act through buying power, public shaming, and lawsuits if necessary. Indeed, the Supply Chains Act does not “limit [other] remedies available for a violation of any other state or federal law.”

As Daniel H. Aiken, Carol F. Trevey, and Brendan P. McHugh write for DrinkerBiddle:

“Some plaintiffs have therefore attempted to rely on violations of the Supply Chain Act as predicates for liability under California’s consumer protection statutes, the Unfair Competition Law (UCL), CAL. BUS. & PROF. CODE § 17200 et seq., the False Advertising Law (FAL), CAL. BUS. & PROF. CODE § 17500 et seq., and the Consumer Legal Remedies Act (CLRA), CAL. CIV. CODE § 1750 et seq.

The Supply Chains Act has influenced several other regulations targeting human trafficking, most notably the UK Modern Slavery Act, and has become a benchmark for companies and consumers worldwide. Several regulations, both state and federal, tie into the Supply Chains Act, including legislation against recruitment fees and legislation creating special visas for trafficking victims. One of the more far-reaching effects of the Supply Chains Act could be the Business Supply Chain Transparency on Trafficking and Slavery Act of 2015, which has been introduced into the House of Representatives but has not yet passed into law. This act would expand the requirements of the Supply Chains Act to all companies with worldwide gross receipts of more than $100 million, not just those doing business in California.

In the words of KnowTheChain’s project director, Kilian Moote:

“California’s landmark supply chain transparency law set a global legislative trend in motion, a trend corporate supply chains cannot afford to ignore.”