In 2010 California took the lead in supply chain transparency with The California Transparency in Supply Chains Act. The law set out to provide consumers with an abundance of information about the efforts and accomplishments companies have made to remove unethical sourcing and labor from their supply chains.
According to a resource guide on the law created by Kamala D. Harris, California's Attorney General, the law came out of a desire for well-informed purchasing choices from California consumers. Previously, companies were less open about where and how their products were sourced. The law does not insist upon sustainable sourcing within supply chains but rather demands that companies are upfront about how their products are created and distributed.
The law requires companies to release information pertaining to five distinct topics.
- Verification: This requires companies to reveal the extent to which they work to determine and evaluate risks of human trafficking within their supply chains and their verification methods for this process.
- Audit: Companies must disclose whether or not they audit suppliers to assure they are keeping up with company requirements regarding illegal sourcing and human trafficking.
- Certification: Businesses are compelled to state whether they require their suppliers to certify that all company materials are free of illegal slavery and trafficking via international and country-specific laws.
- Internal accountability: This statute ensures that companies reveal whether or not they have a system in place for determining if all relevant employees are following company rules regarding human trafficking.
- Training: The training topic requires businesses to divulge the existence or lack of a training program for employees involved in supply chain management about how to decrease the risk of unethical sourcing in the chain.
California starts a trend
Back in 2010, California was the only state with a supply chain transparency law in place. However, in recent years these efforts have reverberated across the U.S. and even extended to parts of Europe.
While some companies that base themselves in states or countries without these laws in place may be reluctant to take measures towards transparency, the risks associated with a lack of transparency are considerable.
According to Sustainable Brands, a lack of supply chain transparency can have a negative impact on shareholder confidence, overall consumer loyalty and the general business performance of a company.
With the continued rise of technology it is increasingly hard to hide unethical sourcing from consumers. In a different article from Sustainable Brands, founder of the Tronie Foundation Rani Hong noted the increased push towards sustainable sourcing due to this consumer knowledge.
"In the 21st century with digital transparency - no one can hide any longer. Many more companies are looking at human rights violations. And there's an increase in consumers asking the question - who is making my [products]? WalkFree, a research partner, found that 66 percent of U.K. and U.S. consumers would be willing to switch if they knew a brand were involved with human slavery," said Hong.
The case for transparency
Whether or not its state of operations has laws or guidelines regarding supply chain transparency, companies should recognize that reviewing their current policies can improve many aspects of their business. Moral implications aside, ensuring that there are no forms of illegal or unethical sourcing within a businesses' supply chain can boost overall sales and business image.
In a world of global sourcing and increased international supplier interaction it can be difficult to weed out every form of unethical sourcing. However, it is well worth the resources to give it a try. With consumers consciously seeking out ethical brands for their purchases, the time and effort can come back to your company in the form of increased revenue and customer retention.