Regardless of your annual sales, you may also need to be prepared to comply with the information requests contained in the regulation IF:

1. you sell to a retailer in the state of California, and
2. that retailer has global sales of $100 million or more.

In this case, the retailer may require specific supply chain information from all of its suppliers in order to meet its obligations under the law.

The regulation requires companies to disclose their efforts, if any, to ensure that their product supply chain is free from slavery and human trafficking. Note that the law does not require specific measures to be in place. However, if you have made no efforts to ensure your supply chain is free from slavery and human trafficking, you must disclose that fact.

The required disclosure must appear on your corporate website, with a “conspicuous and easily understood link to the required information” located on your home page.

The required information includes, at a minimum, your answers to the following five questions:

1. Does your company have policies in place to evaluate and address risks of human trafficking and slavery?
2. If so, does your company conduct audits of its suppliers to evaluate their compliance with your policies? If so, are those audits conducted by an independent third party? And are the audits unannounced?
3. Does your company require its direct suppliers to certify that materials incorporated into their products come from sources that comply with the laws regarding slavery and human trafficking in whatever countries those sources are located?
4. Does your company maintain internal accountability standards and procedures for employees or contractors who fail to meet your company’s standards regarding slavery and human trafficking?
5. Do you provide employees and management who have direct responsibility for supply chain management with training on slavery and human trafficking, particularly with regard to mitigating risks within the supply chain?

Failure to provide the answers to these questions can result in an action brought by the California Attorney General. There are no monetary penalties for failing to comply. However, the consumer advocacy groups that pushed for the legislation are expected to be watching closely and publicizing any failures to comply. Federal legislation based on the California rule has also been introduced.

This Member Advisory is not legal advice. There is no guidance from the State of California on this Act. All information provided above comes directly from the language of SB 657 and AHFA’s August 9, 2011, webinar featuring Susanne Gebauer, a corporate social responsibility expert with UL Responsible Sourcing. The information slides from the August 2011 webinar are attached for your convenience, as is the actual text of SB 657.

AHFA will soon release the industry’s first Responsible Sourcing Manual. This guideline (available in PDF format only) will help companies define a Corporate Social Responsibility program if they do not already have one in place. A Corporate Social Responsibility program is a comprehensive approach to addressing a wide range of social responsibility issues, among them the California Transparency in Supply Chains Act.