California Transparency in Supply Chains Act

California Transparency in Supply Chains Act is a landmark state law in the United States designed to combat human trafficking and slavery in corporate supply chains. Enacted in 2010, it mandates that large retailers and manufacturers doing business in California disclose their efforts to eradicate these abuses. The law aims to empower consumers and investors with information, fostering corporate accountability and ethical sourcing practices globally.

Background and legislative history

The impetus for the legislation grew from increasing global awareness of severe labor abuses, documented by organizations like the International Labour Organization and Human Rights Watch. Investigations into sectors such as the Ivory Coast cocoa industry and electronics manufacturing in Southeast Asia revealed widespread use of forced labor. In Sacramento, State Senator Darrell Steinberg introduced the bill, which received bipartisan support. It was signed into law by then-Governor Arnold Schwarzenegger in September 2010, following advocacy from groups like the Alliance to Stop Slavery and End Trafficking and the Coalition to Abolish Slavery and Trafficking. The law built upon earlier state efforts like the California Corporate Criminal Liability Act and reflected growing consumer activism for ethical goods.

Requirements for covered businesses

The act applies to retailers and manufacturers with annual worldwide gross receipts exceeding one hundred million dollars that are also engaged in business within California. Covered entities must post a conspicuous disclosure on their website regarding five specific areas of effort: verification of product supply chains to evaluate risks of slavery and human trafficking; conducting audits of suppliers; requiring direct suppliers to certify compliance with anti-slavery laws; maintaining internal accountability standards for employees and contractors; and providing training for company personnel on human trafficking. A company that does not undertake any of these efforts must explicitly state so. The disclosure mandate is modeled on transparency principles seen in frameworks like the United Nations Guiding Principles on Business and Human Rights.

Compliance and enforcement

Primary enforcement authority rests with the California Attorney General, who may seek an injunction against a non-compliant company. The California Department of Justice can also issue warnings and demand corrective action. Notably, the law does not create a private right of action for individuals, limiting lawsuits to the state. Compliance is monitored through the public availability of disclosures, with non-governmental organizations like KnowTheChain and the Business & Human Rights Resource Centre actively evaluating and reporting on corporate statements. Penalties for violation are not monetary fines but court-ordered injunctions, placing significant reputational pressure on firms to comply. This approach mirrors enforcement mechanisms in other California consumer statutes like the California Consumer Privacy Act.

Impact and reception

The law has significantly influenced corporate behavior and broader ESG reporting standards. Major corporations such as Apple Inc., Nike, Inc., and The Coca-Cola Company have expanded their supply chain due diligence and published detailed statements. It served as a model for the subsequent United Kingdom Modern Slavery Act 2015 and influenced provisions in the European Union’s proposed Corporate Sustainability Due Diligence Directive. Critics, including some human rights advocates, argue the law lacks stringent verification requirements and binding due diligence mandates, a point highlighted in reports by Amnesty International. However, proponents credit it with elevating supply chain transparency into mainstream corporate governance and investor relations, impacting ratings from agencies like MSCI Inc..

Related legislation and context

This act is part of a broader legislative trend toward supply chain accountability. At the federal level in the U.S., it informed debates around the Business Supply Chain Transparency on Trafficking and Slavery Act and complements the Tariff Act of 1930, which prohibits importing goods made with forced labor. In California, it aligns with other ethical consumption laws like the California Conflict Minerals Act. Internationally, it shares objectives with Australia’s Modern Slavery Act 2018 and the French Corporate Duty of Vigilance Law. These laws collectively represent a shift from voluntary corporate social responsibility initiatives toward mandated disclosure regimes, often referenced in forums like the World Economic Forum and the Organisation for Economic Co-operation and Development.

Category:California statutes Category:2010 in American law Category:Human rights law in the United States Category:Supply chain management