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In California, Companies Struggle to Combat Human Trafficking, Slavery In Compliance With Transparency in Supply Chains Act: Report

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Wednesday, November 4, 2015
Source: International Business Times
By Morgan Winsor
A report released Monday is shining a spotlight on how big corporate earners in California are complying with the first U.S. disclosure law
addressing human trafficking and slavery within the global marketplace. The study  assessed the degree of corporate disclosure
compliance with the California Transparency in Supply Chains Act of 2010 and found that some affected companies are struggling to
obey the compliance regulations, let alone combat labor abuses.
"Our study shows that many companies are going at this law with an attack-is-the-best-defense mentality, and their disclosures clearly
demonstrate not only compliance command but also good faith effort. Others, judging from their compliance score, still have some work
to do in order to live up to the letter of the law," said Chris Bayer, principal investigator at Development International, a Germany
nonprofit, who co-authored the report.
The California Transparency in Supply Chains Act of 2010  was signed into law Oct. 18, 2010, by former Gov. Arnold Schwarzenegger
and enacted Jan. 1, 2012. The law, the first of its kind in the nation, requires every retail seller and manufacturer doing business in
California that exceeds $100 million in yearly worldwide gross receipts to disclose an annual statement detailing efforts to eliminate
slavery and human trafficking from their direct supply. By forcing retailers and manufacturers to file these disclosures, the act aims to
encourage companies to responsibly manage their supply chains and thus improve the lives of victims of human trafficking and slavery.
The risk of human trafficking and slavery is prominent in supply chains, many of which start on a farm and cross into various countries.
Supply chains, in which a raw material such as cotton from India goes into an end-product like bedsheets at an American hotel, are often
complex and have many tiers, making it difficult to track, trace and monitor production. The California act requires, at minimum,
disclosure of what actions the company is taking – if any – to stop labor abuses. The required disclosures are to be posted on the
company’s website with a “conspicuous and easily understood link” to the required information.
“Traffickers can target vulnerable workers anywhere to fill labor shortages everywhere along a supply chain,” the U.S. State Department
said in its 2015 Trafficking in Persons Report . “The sheets in a hotel may be made with cotton harvested by forced labor."
The state of California cannot legally disclose  which companies are covered by the act. But researchers from Development
International  identified 2,126 potentially qualifying companies, of which 1,325 – or 62 percent – had a pertinent statement. Because
some companies’ subsidiaries or brands each had a statement, the researchers evaluated a total of 1,504 individual disclosures to
determine their corporate compliance score. They also determined an "affirmative conduct" score for each qualifying company
by assessing the relevant efforts made to confront human trafficking and slavery-like practices. It's the first comprehensive report and
compliance evaluation on the California Transparency in Supply Chains Act, according to co-author Bayer. The companies the study
looked at earned an estimated combined $17 trillion per year.
Overall, the study revealed that "disclosure compliance" with the California law varies greatly among companies, with an average score
of 60 percent, while the average affirmative conduct score of companies with pertinent statements was just 31 percent. The report
indicated there are slightly more perfectly compliant companies than perfectly non-compliant companies; but only six companies scored
100 percent on both compliance and affirmative conduct: ASO LLC, Guitar Center Inc., Bath & Body Works Direct Inc., Quidel
Corporation, Recreational Equipment Inc. and Sun-Maid Growers of California.
Meanwhile, American supermarket chain Whole Foods Market scored 100 percent on disclosure compliance and 70 percent on affirmative
conduct. General Motors, the world’s third-largest  automaker that was entangled in a recall scandal last year, earned a compliance
score of 92 percent and an affirmative conduct score of 70 percent. Apple Inc., the most profitable company in the world, scored 83
percent on disclosure compliance and 60 percent on affirmative conduct. Hipster retailer Urban Outfitters scored 25 percent on
compliance and 30 percent on affirmative conduct. Tech giant Microsoft was toward the bottom of the list, scoring 8 percent on
disclosure compliance and 10 percent on affirmative conduct. None of these five companies stated that it was currently developing a
certain standard, system or function to combat human trafficking and slavery.
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“Many affected companies still have a lot of work to do before living up to the letter of the law,” the report concluded.
Some of these companies have already been in the hot seat over alleged labor abuses in their supply chains. The labor practices of
Apple’s suppliers in China came under intense scrutiny in 2010, when more than a dozen workers at a Foxconn factory in Shenzhen
committed suicide. Most recently, a report  relying on findings from an undercover worker cited a number of unsafe and apparently
illegal labor practices, including forced overtime, at a major Apple supplier in Shanghai, which is operated by the Taiwanese electronics
company Pegatron. The report was released in October by China Labor Watch, a New York-based watchdog, and Future in Our Hands, a
Norwegian environmental group. Apple did not respond to International Business Times' request for comment at the time of the report's
release.
The California Transparency in Supply Chains Act has influenced similar legislation and initiatives. The United Kingdom recently passed
 a law modeled after the law called the Modern Slavery Act of 2015. U.S. President Barack Obama said his administration this year
will focus in particular on human trafficking issues in supply chains.
“We have to keep striving to protect the rights of our workers; to make sure that our supply chains are sourced responsibly,” Obamasaid
in January during the U.S.-India Business Council Summit in New Delhi.
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In California, Companies Struggle to Combat Human Trafficking, Slavery In Compliance With Transparency in Supply Chains Act: Report

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