California Transparency in Supply Chains Act: What it is and who it impacts

California’s Transparency in Supply Chains Act of 2010 (CTSCA) was one of the first key pieces of legislation focused on modern slavery and human trafficking in supply chains. This law is aimed mainly at companies and ensuring transparency from companies to their consumers.

When the Act passed in 2010, California set a precedent with state-level legislation on eradicating modern slavery and human trafficking.

Since then, similar laws have passed in Europe, including the UK Modern Slavery Act, the German Supply Chain Due Diligence Act and Norway’s Transparency Act, to name a few. New legislation has also been introduced in the US, like the Uyghur Forced Labor Prevention Act of 2021.

California’s Transparency in Supply Chains Act differs from some of these laws in that it focuses on ensuring companies are transparent and open to their consumers about the potential of modern slavery being used to create their products. The law does not mandate that businesses implement new measures to ensure that their product supply chains are free from human trafficking and modern slavery. It only requires companies to make the necessary disclosures, even if they do little to safeguard their supply chains.

Background

The catalyst behind the Transparency in Supply Chains Act was that Californians lacked access to information on human trafficking and modern slavery used to produce the goods they purchased. Therefore, they could not make well-informed decisions on the products they bought. Many consumers were blindly complicit in funding modern slavery and human trafficking crimes.

California passed this Act to give consumers visibility into the businesses they support so that they have the option to buy from companies actively working to eradicate modern slavery.

In addition to providing visibility to consumers, the Act encourages businesses to be proactive about responsible sourcing.

Who does it apply to?

This law does not solely apply to businesses located in the state of California. The Transparency in Supply Chains Act applies to all retailers and manufacturers doing business in California with annual gross revenue exceeding $100,000.

It can apply to businesses throughout the US and the world if they sell products within California.

Requirements of the California Transparency in Supply Chains Act

The California Transparency in Supply Chains Act forces companies to publicly disclose their efforts to eradicate modern slavery within their supply chain.

Eligible retailers and manufacturers must publish annual reports detailing their efforts to eradicate human trafficking and modern slavery in their direct supply chains. The disclosures must include the company’s efforts in the following areas:

1. Verification: Evaluating and addressing risks of human trafficking and modern slavery within a product’s supply chain.
2. Audits: Conducting supplier audits to evaluate compliance with the company’s standards on human trafficking and modern slavery.
3. Certification: Direct suppliers certifying that the creation of a product complies with human trafficking and modern slavery laws of the US and the country of the direct supplier.
4. Internal accountability: Establishing internal standards and procedures for employees and contractors who fail to meet company standards on human trafficking and modern slavery.
5. Training: Providing human trafficking and modern slavery training for employees that oversee supply chain management.

How Sedex can help:

With Sedex’s tools and services, you can respond to the requirements of the California Transparency in Supply Chains Act.

• Gain complete visibility into your supply chain by mapping your suppliers on our platform and assessing the risks of human trafficking and modern slavery within your supply chain.
• Use our leading social audit, SMETA, to assess your suppliers for modern slavery and human trafficking risks.
• Establish solutions, remedy and corrective action plans for suppliers not complying with company standards on human trafficking and modern slavery.
• Our expert Consulting services can help you establish best practice systems and procedures to follow to minimize the risk of modern slavery within your supply chain.
• Use our reporting tools to publish your efforts and make the disclosures.

References:

State of California on the CTSCA: https://oag.ca.gov/SB657

Forrester statistics on ethical marketing: https://www.forrester.com/blogs/ethical-marketing-helps-brands-differentiate-and-build-trust/