Perspectives in Responsible Sourcing

The Vulnerable Dispatched Employees in China

In March, Bloomberg reported that according to estimates by the All-China Federation of Trade Unions, “[o]f China’s more than 300 million urban employees, an estimated one-fifth—or 60 million—are labor dispatch workers.” Surprisingly, this represents a doubling in figures since the introduction of the Labor Contract Law in 2008 – a law mandating dispatched employees be given the same benefits as regular employees and requiring the employer to bear liability if the dispatched employee’s rights are violated.

Dispatched employees are persons hired through an employment service agency, who later work at different companies or locations. Originally, the use of dispatched employees was to avoid employer liability and save labor costs, such as social insurance benefits and other benefits provided to regular employees. The Labor Contract Law intended to close this legislation gap, but without success.

In reality, the law does not bring much effective protection to dispatched employees. They now rather serve as temporary employees – under legitimate terms – so production needs during peak seasons can be met. Even though these employees sign labor contracts with the labor dispatch agencies, the law does not mandate a fixed period of service in certain receiving companies. Thus, stable employment is not guaranteed, and workers lose their sense of belonging and perhaps even their sense of loyalty. Given such “temporary” status, the dispatched employees are easily “returned” to labor dispatch agencies receiving no severance compensation.

It is also common to see that dispatched workers are often paid less than regular workers for doing the same work, not to mention the lack of an employee welfare package, such as annual and sick leave. As a result, many dispatched workers feel inferior.

In addition, the dispatched employees are plagued by excessive working hours. Excessive overtime hours are inevitable for the dispatched employees, as they usually make up the majority of the workforce. The lack of social insurance benefits is another big concern. Even though the law requires social security payments to be made by the labor dispatch agency, the reality shows a different picture. That’s why Shanghai, in February 2012, enacted a guiding opinion with the intention of reinforcing social insurance payments for dispatched employees.

The guiding opinion of Shanghai also requires the registration of labor dispatch agencies operating in Shanghai and its use of dispatched employees so as to better monitor the dispatch practice. Following Shanghai, Guangdong province drafted similar Administrative Regulations on Labor Dispatch and is soliciting the public opinion. Nonetheless, other regions with high dispatched worker numbers such as Fujian, Henan, and Anhui, have not taken further actions to streamline the labor dispatch industry through regional legislation.

More attention needs to be paid to the use of labor dispatch in supply chains and the better protection of dispatched employees’ rights. At a minimum, detailed guidance and trainings for suppliers on the sustainable use of dispatched employees should be provided.

Labor Cooperatives –Loophole to Evade Labor Laws

Increasingly, UL Responsible Sourcing auditors are finding labor cooperatives in key apparel sourcing countries such as Colombia, Italy, Mexico, and the Philippines; this trend may continue in additional countries as cooperatives become popular worldwide, which poses an increasing reputational risk to companies who have not formulated a comprehensive protocol for dealing with the specific and significant noncompliance issues uncovered at these workplaces.

In addition, the media, NGOs, and governments have begun to publish reports focusing on abusive cooperatives. For example, as part of the free trade agreement signed into effect on October 12, 2011 between the USA and Colombia, President Miguel Santos declared that 100 more inspectors would be hired to target perpetrating labor cooperatives, known by organizations such as the International Labor Rights Forum as a new face in labor exploitation. Companies operating in Colombia should understand the risks associated with their Colombian suppliers in the face of stepped up government enforcement.

The legal intent of cooperatives is to promote power equality through collective ownership; all members have a say in the operation of the business, thus less power is concentrated in the hands of owners and managers. A number of governments are funding cooperatives and have enacted legislation  exempting cooperatives from restrictive labor laws, such as the minimum wage, overtime, and maximum working hours. In Mexico, for example, cooperatives receive government loans to assist in development and are not governed by the Federal Labor Law.

However, cooperatives are often abused for precisely the reason that they are founded; with government aid and the benefit of not falling under the general labor law, individuals establish  cooperatives in order to reap the benefits. Workers join these labor cooperatives because they have little choice or understanding. For example, the Philippines and Colombia are both known to have “anti-union” governments, giving workers few opportunities for improvement, whereas a surge in asylum seekers in Italy is creating a desperate situation for those seeking work, thereby making them especially susceptible to this type of organizational structure.

Thus, major issues exist where “Member Owners” (the organizers) take decision-making powers and “Member Workers” find themselves agreeing to fall outside the scope and benefits of general labor laws.  As a result, it becomes a liability for companies when “Member Workers” in their supply chains are not guaranteed employee benefits, the minimum wage, and other minimum protections. In all countries mentioned above aside from Colombia, cooperatives are exempt from labor law provisions and free to decide on what constitutes “fair and equitable” conditions for their working members. Factories with internal labor cooperatives are not obligated to maintain employment documentation such as: employment contracts, wage registers, time sheets, and training records. In fact, in Italy factory owners do not have the right, due to privacy laws, to monitor employee working conditions for such cooperatives. This creates a heightened risk for brands when the factory does not maintain employment documentation for internal cooperative workers.

Italy has sought to balance the competitive advantage of labor cooperatives’ loose regulations with the need for increased protection of workers from exploitation. This is done on the one hand by administrative requirements for a cooperative’s registration, and on the other by creating substantive collective agreements providing baseline requirements for worker protection. However, this balance still leaves situations where working conditions established in collective agreements can still  have potentially negative exposure for companies.

Cooperatives pose a risk for companies that do not include noncompliance issues particular to cooperatives within their auditing scope. As cooperatives become more prevalent around the world due to their progressive nature and government aid, they become a greater concern. In order to mitigate the risk that cooperatives pose, we can help companies understand and combat their concerns by providing practical solutions during the auditing process. For further information please contact Emily Brennan or Daphne Guelker today.

When is 'Conflict-free' really conflict-free?

When the Kimberley Process (KP) was launched in 2003 with the backing of the UN there was a feeling that something was finally being done to address the atrocities committed in connection with the diamond trade and that through the efforts of this tripartite system blood diamonds would soon disappear from global markets.

Nevertheless, last week the BBC’s Panorama uncovered the existence of torture camps in Zimbabwe’s Marange diamond field and the subsequent surfacing of diamonds from there on international markets. Of equal concern is the European Union’s push to legitimise trade of Zimbabwean diamonds under the KP despite questionable connections to the Mugabe regime and reports of police and military action against miners over recent years.  Similarly, the KP has come under criticism for failing to prevent trade of conflict diamonds from countries like Côte d’Ivoire and Venezuela.

These developments beckon the question: What is going wrong? Is there any guarantee that diamonds on the market now have been sourced ethically? Dealers appear to believe not.

It has certainly become evident that the KP lacks the capacity to investigate complaints or performances in individual cases and a widely held view is that the process was never designed to prevent human rights abuses in connection with the diamond trade in the first place. In addition, the makeup of member States to the KP with strong interests in the diamond trade and the requirement for consensus decision-making will unlikely bring about any rapid change to KP standards or enforcement.

So what can players in the industry do? After all, films such as ‘Blood Diamond’ and associated campaigns have made consumers conscious of the issue and there is a growing demand for ethical stones. 

Industry commentators argue that one of the best approaches is to join an industry-wide standard and initiative providing ethical certification such as the Responsible Jewellery Council (RJC). The RJC looks to certify supply chains in the gold and diamond industry – from mining to retail – in the areas of business ethics, human rights and social responsibility, environment and management systems.

Those who would point out that the RJC itself relies on the KP as part of its certification scheme will be interested to learn that the body is currently developing its own Chain of Custody certification which should be launched in 2012. This would be a valuable addition to securing conflict-free diamonds and hopefully be a more effective vehicle for consumers and traders to know that their purchase really is conflict-free.

Remedy: An Intersection between State and Business Duty within the UN Guiding Principles on Business and Human Rights

To continue our series of blogs reviewing the Ruggie Framework I’d like to explore the intersection between the State’s Duty to Protect with the Enterprise’s Duty to Respect; both having independent, yet complementary roles addressing adverse human rights impacts.

While the framework lays out a States’ obligation to protect against human rights violations by taking appropriate steps to prevent, investigate, punish and redress abuses; it also requires companies to address adverse human rights impacts by taking adequate measures to prevent, mitigate, and where appropriate remediate. Within this balance of responsibilities, there is room to strengthen remedial measures by all.

The Guiding Principles first task business with identifying where they are causing or contributing to adverse impacts, and then providing or cooperating in legitimate mitigation and remediation processes. States similarly have a duty to provide effective remedy and redress. However, the framework interestingly calls upon States to consider also ways to provide access to effective non-State-based grievance mechanisms to deal with business related human rights harms.

The framework endorses the possibility for grievances to be addressed early and remediated directly by companies at the operational level. These mechanisms can be established by businesses alone, with stakeholders, industry associations, or multi-stakeholder groups.

Operational-level grievance mechanisms perform two key functions:

• As part of due diligence, they help identify adverse human rights impacts by providing a channel for those directly impacted to raise concerns when they believe they are being or will be adversely impacted. Businesses can also identify systematic problems by analyzing complaint trends.

• Once identified, these systems make it possible for grievances to be addressed and remediated early and directly, preventing harm from compounding and escalating.

In order to ensure their effectiveness, the Principles recommend grievance mechanisms should be legitimate, accessible, predictable, equitable, transparent, rights-compatible, a source of continuous learning, and based on engagement and dialogue.

Look for our next post further exploring the Ruggie Framework soon.

Bipartisan Bill to Fight Human Trafficking: Business Transparency on Trafficking & Slavery Act (H.R. 2759)

On August 1, 2011, the Business Transparency on Trafficking & Slavery Act was introduced into the legislative process by Congresswoman Carolyn Maloney (D-NY) as H.R. 2759.  The bill received co-sponsorship by Rep. Christopher Smith (R-NJ) – current Chairman of the U.S. House Subcommittee on Africa and Global Health and a very outspoken Congressman on the issue of human trafficking and modern-day slavery.  His passion for this pressing issue is reflected in a session by the Subcommittee with regards to fighting human trafficking, and a public panel discussion on human trafficking organized by ATEST and the CNN Freedom Project.  Further co-sponsors are Jackie Speier (D-CA), and Jim McGovern (D-MA).

In many ways, this bill resembles The California Transparency in Supply Chains Act – SB 657.  It too, focuses on public disclosure of companies with regards to the extent of their activity in areas of best practice within a supply chain to eradicate human trafficking and slavery.  There are, however a few differences between the Business Transparency on Trafficking & Slavery Act and SB 657 that should be highlighted:

• Being a federal bill, it shall apply to any entity with worldwide global receipts in excess of $100,000,000 that is a) publicly-traded or b) a private entity required to submit any annual report to the U.S. Securities and Exchange Commission (SEC).
• An applicable entity shall report annually on its measures to “identify and address not only conditions of slavery and human trafficking, but also of forced labor and the worst forms of child labor within the entity’s supply chains.  Definitions of “forced labor, slavery, human trafficking, and the worst forms of child labor” as well as “supply chain” are provided in the bill.
• The bill mandates additional disclosure topics:

• Existence of actual policies,
• ­Outcome and methodology of verification activities,
• Assessments of management and procurement systems of suppliers,
• Auditing of labor recruiters and the results of such audits, and
• Remediation in cases of identified forced labor, slavery, human trafficking, and the worst forms of child labor.  The definition for remediation is provided.

It also covers all the disclosure requirements of SB 657, but again with a focus not only on slavery and human trafficking, but also on forced labor and the worst forms of child labor.  These requirements are engagement in 1) 3^rd party verification (definition provided), 2) independent and unannounced audits, 3) supplier certification, 4) training to those with direct responsibility for supply chain management, and 5) maintenance of internal accountability standards.

• Not only shall the disclosure be made public through SEC channels, but applicable entities shall also disclose the information on their Internet homepage with a link labeled “Policies to Address Forced Labor, Slavery, Human Trafficking and the Worst Forms of Child Labor.”

Another significant difference between SB 657 and the Business Transparency on Trafficking & Slavery Act is private sector support for the bill.  Missing at the introduction of SB 657, the new federal bill has received public support from Compass Group, a food-services firm and the “11th-largest private employer in the world” according to the press release from Rep. Maloney’s office.  

It will remain to be seen whether the bill comes to pass, but with bipartisan and private sector sponsorship, and SB 657 at its back, this federal bill already stands on solid ground. 

For more information on Supply Chain Transparency visit our Responsible Sourcing California Transparency page.  Also note that STR Responsible Sourcing is hosting two vendor-targeted seminars on slavery and human trafficking in Hong Kong and Shanghai. To receive future communication on this topic and weekly news on corporate social responsibility sign up for The Responsible Source.

Upping the Ante on Corruption: The Bribery Act

As of July 1st, the global effort to fight corruption will be enriched by a new tool: the UK's Bribery Act 2010. The law raises the bar in global anti-corruption measures and companies worldwide should be sure to implement appropriate responses as it applies not only to UK citizens, residents and companies but also to any companies conducting business in the UK. Most internationally operating bodies are already familiar with the US Foreign Corrupt Practices Act (FCPA) and many have implemented corporate programmes to meet its requirements. However, what may be deemed adequate practices under the FCPA may not meet the Bribery Act’s standards.

What the Act does

The Act creates the following four offences:

1. Active bribery, i.e. the promising or giving of a bribe
2. Passive bribery, i.e. the requesting or receiving of a bribe
3. Bribery of a foreign public official
4. Failure of a commercial organisation to prevent bribery committed by an associated person

Notably bribery is not limited merely to the bribery of public officials but also extends to bribery within the private realm. Equally important is the Act’s strict reading of the term ‘bribery’ – there are no exceptions such as made under the FCPA, for example for facilitating payments.

The Corporate Offence...

The Bribery Act makes clear that an ‘associated person’ extends beyond traditional employees and agents and is any person performing services for or on behalf of the organisation – regardless of his capacity and the nature of the relationship. Importantly, there is also no requirement that they be acting on the company’s instructions: the mere fact that they commit an offence under the Act suffices to trigger a company’s liability. 

Nevertheless, under section 7(2) companies can invoke a defence that they had in place adequate procedures designed to prevent bribery by associated persons.

...and defence

So what are adequate procedures?

In its Guidance, the Ministry of Justice refuses to give a cookie-cutter, one-size-fits-all answer. Instead it emphasizes the importance and individuality of each company’s unique circumstances. This will range from considerations like nature of business and countries of operation to type of associates engaged and size of the company itself.

Helpfully, the Guidance does identify 6 principles it suggests should underpin a company’s procedures:

1. Proportionate Procedures and Policies

• Commitment to bribery prevention
• General approach to mitigation of bribery risks
• Strategy overview of implementation 

2.  Top-level Commitment

• Top-level management should foster a culture in which bribery is not accepted
• Depending on company size engagement may vary but at all times

3. Risk Assessment

• Proportionate to the size, structure, nature, scale and location of operations
• Oversight by top-level management
• Appropriate resourcing
• Identification of information sources to assess risk
• Due diligence enquiries
• Accurate and appropriate documentation of assessment and its conclusions

4. Due Diligence

• Due diligence procedures applied that take a proportionate and risk-based approach in respect of persons who perform or will perform services for or on behalf of the organisation
• communication should be clear that bribery is a zero-tolerance issue

5. Communication (incl Training)

• Communication ensures all associated persons (internal and external) are aware of bribery prevention
• Communication should convey ‘tone from the top’
• Training can be general but also sector-specific considering relevant identified risks

6. Monitoring and Review

• Monitoring should be constant
• Reviews should consider any necessary changes that should be made

External verification and assurances of the effectiveness of anti-bribery procedures by third parties

Many readers will probably find that much of this is common sense. And that is the intention. The Bribery Act does not mean to create new onerous requirements likely to interfere with business. Of course, many businesses will undoubtedly find the need for a change of culture, especially when operating in corrupt countries where small payments are a normal part of business. However both the Guidance and the Secretary of State have repeatedly reiterated that the purpose is “not to bring the full force of the criminal law to bear upon well run commercial organisations that experience an isolated incident of bribery on their behalf [… but ] to encourage commercial organisations to put procedures in place to prevent bribery by persons associated with them.”

That is not to mean that compliance with the legislation should be deemed negligible. Bribery has no place in business and the Bribery Act is a step toward more competitive and fair practice by creating an international level playing field. Everyone agrees bribery is wrong and that rules need reform. As the Secretary of State for Justice explains: "In implementing this Act, we are striking a blow for the rule of law and growth of trade." Any responsible company should embrace the Act’s implementation as an opportunity to enhance their own procedures against bribery and help progress the eradication of corruption.

2011 Trafficking in Persons Report Rates Countries' Risk

This week the US Department of State, Office to Monitor and Combat Trafficking in Persons, released the 2011 Annual Trafficking in Persons (TIP) Report. This report is a tool used by the US government to facilitate communication with other governments about human trafficking.  Essentially, it is a compilation of best practices, country specific risks and updates, and other key resources to inform about human trafficking in the twenty-first century.  

The TIP report provides an annual update on the global picture of human trafficking and the actions taken by governments to eradicate it.  The report is used by governments and nongovernmental organizations to work together in implementing the “3-P” paradigm of prevention, protection, prosecution. The report is also used to identify strategic targets for funding and resources. 

The State Department categorizes countries into one of three tiers in the report. The rankings are based on governments’ efforts to meet the “minimum standards for the elimination of trafficking” found in Section 108 of the TVPA.

This year’s report includes 23 upgraded rankings for countries that have made progress, and downgrades for 22 countries lacking adequate victim protections, inconsistent implementation, or insufficient legal systems. 37 countries were ranked Tier 2 Watch List in 2010, of these, 13 made sufficient progress to move up to Tier 2; while 10 countries were downgraded to Tier 3. The other 13 countries received a waiver from automatic downgrade by the Secretary of State after being on the Tier 2 Watch List for two consecutive years.

The TIP report calls for “a Decade of Delivery” as it celebrates progress made, and looks to deliver more advancement over the next ten years.  This progress includes the adoption of anti-trafficking laws by 130 countries, and ratification of the UN’s Palermo Protocol by 150 countries. The State Department’s report increased reporting by 7 countries to a total of 184 this year. There are 23 Tier 3 countries in this report, versus 13 in 2010.  The TIP report is responsible for bringing best practices to a world-wide network, inspiring legislation, policy implementation, program funding, protection mechanisms, prosecution, and better understanding of the issue. 

To increase understanding of human trafficking risks in supply chains, the TIP report provides additional best practices including: procurement guidelines for anti-trafficking clauses in government contracts; optimal regulatory approaches for labor recruiting by private recruitment agencies; the seven core principles of the Athens Ethical Principles and Luxor implementation guidelines; how social media can be a resource for the fight; and the value of partnering with NGOs.

One particular area of best practice outlined in the report is guideline measures to incorporate mandatory “zero-tolerance” anti-trafficking clauses into all government contracts in order to hold governmental supply chains more accountable by prohibiting forced labor and human trafficking.

As one of the world's largest consumers, the US government can have a significant impact on eradicating slavery by employing means to reduce the exploitation of vulnerable populations down their supply chain. On July 12^th ResponsibilityWorks, an executive roundtable working to improve transparency in the US government supply chain, will meet in Washington, DC to explore how corporate responsibility data can inform government and contractor buying and decision-making.

The Office of Federal Procurement Policy within the Office of Management and Budget (OMB) will lead a discussion on how the government can more responsibly leverage its purchasing power. The advisor for Public Sector Procurement with the Ethical Trading Initiative (ETI) in Norway will speak about other European government initiatives bringing ethical criteria to public sector purchasing.  The event will bring together government executives, policy makers, corporate leaders and procurement professionals to determine a course of action on how to evolve corporate responsibility across the government supply chain. Harnessing this procurement power will make a real impact on the fight against modern slavery and laobr related human trafficking of labor.  

Snapshot of Domestic Human Trafficking in China

Recent front page news on multiple human trafficking and slavery incidences within China has shocked the Chinese people.

• On April 30, Xinhua News Agency reported that twelve mentally retarded persons from Sichuan province were lured to Xinjiang province to work in a green building chemical plant in Kumishi Toksun County. These mentally-retarded persons were treated in an inhumane way, such as high-intensity work all day long and no remuneration.
• On May 12, AFP covered the story of 22 trafficked children from Yunan province who were rescued by local policemen in Fujian province.
• On May 13, local police rescued 14 workers, from an illegal brick kiln in Guangdong province. According to a Chinese news source, the victims originated in Hunan province, were bought from an illegal agency at the price of RMB 400 per person and only earned RMB 5 (USD 0.77) for a total of 3 months.

It is common to see people or children from inland or rural areas of China trafficked to more developed areas. As mentioned in the above news, the origin places of human trafficking were Sichuan, Yunan and Hunan. Also, in most cases, victims of human trafficking are not aware of their rights under the law.

Currently, there is no dedicated legislation on human trafficking in China. The applicable laws to be cited for such crimes are the law articles from PRC Criminal Law (amended 2011).

In the just released Trafficking in Persons Report 2011 from the U.S. Department of State, China is still identified as “a source, transit, and destination country for men, women, and children subjected to forced labor and sex trafficking.” The report also notes that trafficking “is most pronounced among China’s internal migrant population,” as reflected in the recent news articles.

When retail sellers and manufacturers are doing business in California and thinking of how to respond to the SB 657, they should certainly take a closer look at their supply chains in China. 

 

Reactions to The California Transparency in Supply Chains Act (SB 657)

During the open dialogue sessions of our STR Responsible Sourcing Multi-stakeholder Roundtables on the implementation of The California Transparency in Supply Chains Act, some interesting topics came up that we would like to share with you:

1. Best practice case of Brazil combating forced labor in cooperation with non-governmental organizations
2. Legislation on human trafficking – how to adapt the audit protocol

Best practice case of Brazil combating forced labor in cooperation with non-governmental organizations
In Brazil, the Pastoral Land Commission (PLC) and Reporter Brasil have been working together with the government to address slavery. Victims will seek sanctuary from the PLC and the PLC will report human rights violations to law enforcement. Reporter Brasil will then accompany law enforcement on their raids of facilities/ farms, publicize the footage gathered and investigate the entire supply chain to identify exactly where the product arrives at the end of the supply chain. Reporter Brasil will then meet with the brand or brands involved in the supply chain and inform them about the “tainted” products, giving the brand the opportunity to create change. See more information on the Free the Slaves website.

Furthermore, together with the International Labor Organization, Ethos Institute and Reporter Brasil, the Brazilian government regularly publicizes the so-called “laundry list” – a list of all employers and/or their middleman who exploit people through slave labor in Brazil.

The U.S. should look to Brazil for an example of how slavery can be tackled effectively.

Legislation on human trafficking – how to adapt the audit protocol
Fact is: Slavery is illegal everywhere. However, when it comes to human trafficking, legal standards and definitions may differ from country to country. It is important to know the local laws. The Department of State Trafficking in Persons Report is a good resource on country laws on human trafficking and their enforcement. The ranking by country gives a concise overview.

It is also important to remember the difference between forced labor and human trafficking. Forced labor can be an exploitative condition in which a victim of human trafficking is trapped, but not all forced labor cases are cases of human trafficking. In some legislation, the element of movement is essential in the existence of a human trafficking case. The UN definition of trafficking underlines movement, whereas in New York State movement is not required if other components of force, fraud and coercion are present. Therefore, clients should first evaluate whether slavery and human trafficking are actually part of their audit scope and second, define what legislation should be followed.

During audits, there may be indicators of human trafficking, but in order to verify an actual case of trafficking, auditors may need to go outside the four walls of the factory and even to the sending countries where the recruitment process took place. Just because a factory passes an audit doesn’t mean there are no human trafficking issues. Organized crime is highly sophisticated.

Recruitment agencies pose a major risk when it comes to human trafficking. Suppliers are at least one step removed from the hiring process, brands are at a minimum two steps removed. Recent reports on the use of agencies and their involvement in labor abuses ranging from wage and hour violations to human trafficking reflect this problem.

Other highlights from our Roundtable discussions can be accessed here. For more information on how to respond to SB 657, please see STR Responsible Sourcing’s California Transparency in Supply Chains Act page.

Problems complying with The California Transparency in Supply Chains Act (SB 657)

In April and May, STR Responsible Sourcing held Multi-stakeholder Roundtables in Los Angeles and New York to discuss the implementation of The California Transparency in Supply Chains Act. During the open dialogue sessions, multiple topics of discussion came up. Here are some of the highlights:

1. The need for clarification of the Act
2. Enforcement of the Act
3. Possibility of score cards issued by advocacy groups based on the disclosure information

Clarification of the Act
Several important questions came up with regards to the implementation of public disclosure:

• What exactly is compliance with the Act?
• How does the information have to be posted on the website in order for it to be conspicuous?
• Does the information have to be organized according to the exact five disclosure points listed in the Act?
• What are the definitions of “slavery”, “human trafficking”, “direct supply chain”, “verification”, “certification”, “contractor”, etc.?
• Will the Attorney General (AG) issue a best practice guide?
• Will the AG work with companies to achieve proper public disclosure, or will she make an example?
• Does the supply chain include licensees of your brand?
• “Tangible goods for sale” worldwide or only those sold in California?

The need for more guidance from the AG is apparent. According to recent information, the AG’s office is interested in brands taking a leadership position and sharing how they plan to disclose. Together with the AG, an exemplary disclosure can be developed by a brand and shared with others in order to facilitate compliance with the Act. As part of her outreach efforts, the AG is planning to hold a multi-stakeholder roundtable in the fall, if the budget permits. This roundtable will hopefully lead to guidance on how to disclose the required information.

Enforcement of the Act
According to the Act, the exclusive remedy is injunctive relief by the AG. The AG will be issued a list of all the retailers and manufacturers who should be abiding by the Act, so detection of those companies not complying with the Act should be easy.

The question came up whether non-governmental organizations (NGOs) would become monitors or even enforcers of the Act. This is not the intention of the Act, but one should certainly expect NGO reaction to disclosures.

Possibility of score cards issued by advocacy groups based on the disclosure information
It was not the intent of the Act to place monitoring activities in the hands of NGOs. However, score cards evaluating company activities in the supply chain already exist. See the Free2Work application introduced by the Not For Sale Campaign and the International Labor Rights Forum. And the information provided publicly by companies complying with the Act next year will no doubt provide valuable material for this score card and others. 

It was brought up, that NGOs should convene to come up with a common, standardized vision of a score card. Perhaps the private sector initiative focused on human trafficking introduced in October 2010 – BCAT, the Business Coalition Against Human Trafficking – in conjunction with other NGOs could take up this idea.

Stay tuned for more highlights from our Roundtable discussions. For more information on how to respond to SB 657, please see STR Responsible Sourcing’s California Transparency in Supply Chains Act page.