A new California law will force retailers and manufacturers to disclose how they guard against slavery and human trafficking throughout their supply chains, ratcheting up scrutiny of some of the largest U.S. corporations.
Beginning today, about 3,200 major companies doing business or based in California, a list that includes Apple and Gap Inc., will be required to disclose steps they take, if any, to ensure their suppliers and partners do not use forced labour.
Companies risk getting sued by the state attorney general if they flout that law. But experts say the real pressure will come from the court of public opinion: consumers who care about ethical working conditions and take an interest in how their favourite brands get made.
The heightened scrutiny expected under the law, which applies to retailers and manufacturers in the state with more than $100 million in global sales, is already spurring companies to take a closer look at practices they follow, and in some cases improve them, lawyers say.
A drive to slash costs has quickened in tandem with global trade and industry competition in past decades. Increasingly complex supply chains that criss-cross the world make it harder for executives to scrutinize all the companies that have a hand in producing their products.
Under the new law, companies are required to describe the extent to which they verify risks of human trafficking and conduct independent and surprise audits of their suppliers.
They also have to disclose whether they force suppliers to certify the materials they use comply with laws regarding human trafficking and slavery, and whether employees receive training to reduce the risk of slavery.
Keith Bishop, a partner at law firm Allen Matkins, said he advised companies directly affected by the new law, and then received a second wave of inquiries from many of those companies' suppliers. They wanted to know what measures to take to meet their customers' requirements.
"The act, rather ingeniously, specifically regulates relatively few companies, but impacts a very large number of companies," Bishop said.
Adapted from “California cracks down on global slave labour - Law forces firms to check supply chains,” Calgary Herald, 2 January 2012.
The California State Senate provides the full text of the California Transparency Supply Chain Act.
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