California considers supply chain transparency bill

Organizations throughout California are urging Governor Arnold Schwarzenegger to consider a bill that would make supply chains in the state more transparent and help prevent human trafficking and slavery.

The bill, known as the "California Transparency in Supply Chains Act of 2010," would require companies to publicly disclose what policies they have in place to ensure that their supply chains are free of slavery, trafficking and other human rights offenses. Companies would be expected to conduct unannounced audits of their suppliers, utilize third-party verification to check up on component providers and hold their employees and executives accountable for any and all human rights violations discovered.

"In order for companies to demonstrate respect for human rights, they need to implement 'human rights due diligence processes' that include a policy stating the company's commitment to respect human rights; assessing actual and potential human rights impacts; integrating these commitments into internal oversight systems and monitoring and reporting on performance," said Rev. David M. Schilling, program director of human rights at the Interfaith Center on Corporate Responsibility.

Human trafficking and slavery are two of the most heinous offenses that persist in the modern world, despite efforts by governments, corporations and nonprofit groups to end them. According to statistics from the Polaris Project, estimates of the number of modern-day slaves vary wildly from about 4 million to as many as 27 million worldwide. More precise numbers are not available because most slavery rings are secretive, illegal and difficult to uncover. In addition, between 600,000 and 900,000 people are trafficked illegally across international borders every year. According to the U.S. Department of State, as many as 50 percent of these victims are children - and as many as 80 percent are female.

Some global corporations have knowingly or unknowingly taken part in a system that promotes these activities by demanding the lowest-cost facilities and laborers, regardless of wage, living conditions and employee rights.

"This bill reflects the realities of the marketplace, which increasingly requires that companies be sensitive to social and ethical issues, including labor and supply chains, and create human rights policies as well as processes to evaluate, monitor and strengthen those policies," said Julie Tanner, assistant director of socially responsible investing at CBIS.

The bill would affect 3,200 global companies with annual revenues of more than $100 million each. Not all of these companies are on board with the proposed legislature, however. Some have argued that the bill asks companies to delve further into their supply chains than is possible or reasonable, while others are concerned that uncovering this kind of information will be too difficult and put their companies at risk. Even so, a number of progressive corporations - such as Nike, Gap, Target, Wal-Mart, Disney, Levi's and Tiffany & Co. - already have measures in place that investigate and disclosure this kind of information.

If the realities of human slavery and illegal trafficking aren't enough to motivate a company to begin investigating its supply chain, Tanner reminds corporations that the discovery of illegal acts and human rights violations can have other negative consequences, too - such as business interruptions, negative publicity, boycotting, public protests and a loss of consumer trust, all of which will tank shareholder value and potentially cause a company to fail.

"As shareholders and investment analysts who have worked for many years with corporations to adopt codes of conduct that establish rules for respecting basic human rights in the workplace, the availability of information like that requested in [the bill] is critical to our business and is valuable to our evaluation of a company's risks and opportunities," Tanner said.