California's Supply Chain Law has had Global Implications for Business

From Supply Management, Published on 1 September 2015

In 2010, a little known and under-reported supply chain regulation was signed into law in California .

Almost five years later, California’s Transparency in Supply Chains Act (SB 657) is influencing reporting regulations around the world, changing what it means for the private sector to manage and report what they are doing to eliminate human trafficking and forced labor within their global supply chains.

At the time of its introduction, SB 657 was groundbreaking in its ability to embed the need for a corporate response to human trafficking into a regulatory framework. More than 2,600 companies are assumed to need to comply with the law, including Gap , Coca-Cola and Microsoft . Over the years, consumers have become increasingly concerned about buying slavery-tainted goods and governments are now paying attention.

Today, four other supply chain regulations with elements inspired by SB 657 have emerged: The US Executive Order 13627(EO), requiring government contractors to adhere to specific policies set out by the Federal Acquisition Regulation; The EU Directive (2013/34/EU), requiring companies publically traded on an EU member stock exchange to disclose information concerning their management of social, environmental, and governance issues; the UK Modern Slavery Act , requiring companies to disclose their anti-slavery efforts; and the recently introduced Business Supply Chain Transparency on Trafficking and Slavery Act of 2015 , which could require companies with more than $100 million in global gross receipts to disclose all measures taken to prevent human trafficking in their supply chains to the Securities and Exchange Commission.

As this trend continues to grow, corporations should recognize this issue is more than a compliance concern. The risks of selling slavery-tainted goods to a company’s reputation and finances are too significant to ignore. Addressing labor issues may be increasingly important as millennials, who have stated they favor ethical products over non-ethical products, become a larger percentage of the consumer market.

In response, some companies are beginning to adopt practices that go beyond legal compliance. Companies like Apple and HP recently removed recruitment fees from their corporate supply chains because the practice is systematically used to trap workers in debt bondage .

Nearly five years after SB 657 was signed into law, there is a convergence of consumer behavior, public desire for transparency, and legislative engagement. California’s landmark supply chain transparency law set a global legislative trend in motion, a trend corporate supply chains cannot afford to ignore.

For additional reading regarding supply chains, please refer to the following links:
Top Environmental Problems and their Impact on Global Business
The Role of Technology in Sustainability: Innovative Solutions
Sustainability in the Business World