As we all know managing a supply chain isn’t as easy as it sounds. Sourcing, planning, manufacturing, distribution and customer service are all important aspects of it. Each has their own business processes and issues to contend with daily. If orchestrated correctly the supply chain delivers goods that bring more revenue for the company, at a decent profit and customer satisfaction. If not, businesses can take a hit in some or all areas such as the business brand and reputation, products, and revenue and profitability.
With the introduction of new legislation by U.S. Representatives Carolyn Maloney (D., N.Y.) and Chris Smith (R., N.J.), businesses with over $100 million in global gross receipts are required to report to the SEC as part of their annual filings what policies they have in place to ensure their supply chains are free of slavery and human trafficking. Disclosures will need to be prominently posted on SEC and company websites for public access.
The bill was introduced following the publication of the State Department’s 2015 Trafficking in Persons report, which stressed the need for governments to “set clear expectations for businesses on human rights issues and adopt policies that promote greater transparency and better reporting on anti-trafficking efforts in supply chains.” The Wall Street Journal reported , “the bill came hours after the release of the State Department report, which upgraded Cuba and Malaysia’s status but left Thailand at the lowest level after it received a downgrade last year. Governments in the lowest tier could see the U.S. government withhold non-humanitarian, non-trade-related foreign assistance. These countries could also see the U.S. oppose giving them aid through international financial institutions like the World Bank.”
Representative Maloney noted “there is no question that many goods being sold to American consumers are produced with slave labor, and we have a moral obligation to do something about it. This legislation simply requires businesses to publicly disclose what actions they have voluntarily undertaken to remove labor abuses from their supply chains. It is a good first step we can take to improve reporting and transparency so that we can enforce existing laws against labor abuses and allow consumers to make more informed decisions.” Representative Smith noted “some companies may participate knowingly in human trafficking to pad the bottom line; others are willfully ignorant of where and how their inexpensive products are made; and still others simply do not know.”
What It Means
Supply chains will now have to prove they have preventative measures for human trafficking, slavery and child labor in their supply chains. The law does not dictate how companies do business but does require disclosure. The disclosure requires outlining practices employed to avoid use of slavery in supply chains in the annual report to SEC. Supply chains must be transparent and maintain internal accountability standards, supply chain management and procurement systems, and procedures for employees or contractors failing to meet the company standards regarding forced labor, slavery, human trafficking and the worst forms of child labor.