What is the California Transparency in Supply Chains Act?
The California Transparency in Supply Chains Act (SB 657) is a key regulation that became effective in 2012 that requires certain businesses to disclose their efforts to address human trafficking and slavery within their supply chains.
Understanding this Act is crucial for procurement and supply chain professionals to ensure compliance and uphold ethical practices.
Why Was the California Transparency in Supply Chains Act Created?
With human trafficking being among the world’s fastest growing criminal enterprises, the Act was established to address the growing concerns about human trafficking and slavery in global supply chains. It seeks to:
- Increase Transparency: Require companies to disclose their efforts in combating human trafficking and slavery.
- Encourage Ethical Practices: Promote better labor practices and ethical supply chain management.
- Protect Workers: Ensure that businesses take steps to prevent exploitation and abuse in their supply chains.
Who has to comply with the California Transparency in Supply Chains Act?
The Act applies to:
- Retailers and Manufacturers
- Companies with annual worldwide gross receipts of over $100 million
- Companies that do business in California
- Companies with an extensive supply chain that may include overseas operations
While the Act applies to businesses meeting the revenue threshold, it is advisable for smaller businesses to adopt similar practices to ensure ethical supply chain management as they scale.
What Are the Requirements for Compliance?
To comply with the California Transparency in Supply Chains Act, businesses must:
- Disclose Efforts: Publish a clear and concise statement on their website detailing the steps taken to address human trafficking and slavery in their supply chains. The statement must include information on how the company addresses human trafficking and slavery, including its verification process, audit procedures, employee training and an annual update.
- Risk Assessment: Conduct and document assessments of their supply chains to identify risks related to human trafficking and slavery.
- Policies and Procedures: Develop and implement policies and procedures to mitigate identified risks and prevent human trafficking and slavery.
- Supplier Engagement: Engage with suppliers to ensure they are aware of and adhere to the company’s ethical standards.
What are the penalties for non-compliance with the California Transparency in Supply Chains Act?
The Act requires businesses to conduct highly intentional ethical operations, including carefully choosing their business partners and suppliers.
- Legal Action: Lawsuits from consumers or advocacy groups seeking to enforce compliance.
- Reputational Damage: Negative publicity and damage to the company’s brand image.
- Regulatory Scrutiny: Potential investigations by the California Department of Justice or other regulatory bodies.
Action Plan for Complying with the California Transparency in Supply Chains Act
- Conduct a Supply Chain Audit: Assess your supply chain for risks related to human trafficking and slavery.
- Develop a Disclosure Statement: Create a comprehensive statement detailing your efforts and practices related to human trafficking and slavery.
- Implement Policies: Establish and enforce policies to address and mitigate identified risks.
- Engage Suppliers: Work with your suppliers to ensure compliance with ethical standards and practices.
- Monitor and Report: Regularly review and update your compliance efforts and disclosure statement.
How can Craft help?
Craft’s supplier risk management solutions offer valuable support in complying with the California Transparency in Supply Chains Act:
- Identify risky suppliers with in-depth company profiles and easily scalable due diligence
- Continuously monitor your supplier network for changes and potential violations.
- Document your efforts for proof of compliance
- Collaborate and share information across teams for faster risk mitigation.
Related Regulations
- UK Modern Slavery Act 2015
- Australian Modern Slavery Act 2018
- EU Directive on Modern Slavery
- Anti-Slavery Australia
- International Labour Organization (ILO) Standards
Understanding and complying with the California Transparency in Supply Chains Act is vital for procurement and supply chain professionals. Craft’s solutions can streamline compliance efforts, enhance risk management, and ensure your operations align with the latest regulatory requirements.
For an overview of regulations affecting the global supply chain, visit our compliance hub.