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May-June 2012

Vol. 37, No. 3


Investors call for human rights framework

In 2010, the California State Legislature passed a law, the Transparency in Supply Chains Act, which requires every retail seller and manufacturer doing business in California and having annual worldwide gross receipts that exceed $100 million to disclose its efforts to eradicate slavery and human trafficking from its direct supply chain for tangible goods offered for sale. Since January 1, 2012, companies are required to make the disclosures available through a "conspicuous and easily understood link to the required information placed on the business' homepage." Socially responsible investors are working to make sure this is doesn't consist of a superficial checklist that companies fill out.

Human traffickingAccording to the law, the information the company provides must indicate the extent to which the company: 1) verifies supply chains to evaluate and address risks of human trafficking and slavery; 2) conducts unannounced and verified audits of suppliers for trafficking and slavery in supply chains to evaluate compliance with company standards; 3) maintains internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking; 4) trains employees and management with direct responsibility for supply chain management, to mitigate risks within the supply chains of products; 5) certifies that materials incorporated into the product comply with the laws regarding human trafficking of the country or countries in which they are doing business.

Members of the Interfaith Center on Corporate Responsibility (ICCR) want companies to go beyond minimum compliance of the law. There must be evidence of programmatic commitments and public reporting that reflect a holistic human rights framework to address all forms of human trafficking.

ICCR, along with Christian Brothers Investment Services and Calvert Investments, have published a document, Supply Chain Accountability: Investor Guidance on Implementation of the California Transparency in Supply Chains Act and Beyond, to help companies address a wide range of human rights issues. Companies can take a number of steps to demonstrate to stakeholders and shareholders that they are evaluating and addressing key risks in the supply chain. These range from establishing a human rights policy and a human rights due diligence process, to conducting human rights assessments and developing mechanisms for independent and unannounced auditing, verification and traceability.

A human rights due diligence process and human rights assessments could, for example, identify commodities frequently associated with trafficking and areas of the world where trafficking is pervasive. This would enable companies to target key training programs and conduct supplier audits. There are already examples of these efforts: Hewlett-Packard's supplier management system that evaluates risks posed by supplier activities; and the work Gap has done to chart elements of its supply chain and the state of working conditions within various levels of that chain, and determine where Gap has the most to least influence in that supply chain.

Auditing recruitment and hiring practices, such as debts that workers have incurred in order to obtain employment, should be standard practice. A traceability program—the capability to identify the origin of a particular unit located within the supply chain—can be a helpful tool in the auditing and verification process as companies assess their risk beyond first-tier suppliers to include materials and commodities. For example, when serious concerns surfaced about forced child labor in the cotton fields of Uzbekistan, retailers and brands initially had difficulty determining where the cotton in their garments was sourced since cotton can be blended from a number of different countries. Approaches to traceability have been developed by organizations such as Historic Futures, which offers apparel retailers one method of tracking and tracing by uploading receipts on individual components within entire supply chains onto a secure network.

Critical to these efforts are the training of suppliers, vendors, contractors and auditors on company policies, on ways to identify trafficking, on steps to take to report suspected cases and to protect victims, and on workers' rights.

Finding and addressing slavery and trafficking in complex global supply chains will require companies to collaborate. In addition to working with contractors, suppliers, and joint venture partners, there are a wide range of local, national and international external stakeholders with whom a company should consider engaging such as labor ministries, anti-trafficking law enforcement, child welfare agencies, social service and human rights non-governmental organizations, unions, and other civil society groups. §

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