Companies increasingly face expectations that they will “know and show” that they are taking appropriate steps to manage the human rights impacts associated with their business activities. New transparency requirements on issues ranging from conflict minerals to investments in Burma reflect this trend.
With respect to human trafficking, existing statutes such as the California Transparency in Supply Chains Act and proposed statutes such as the Business Supply Chain Transparency on Trafficking and Slavery Act require companies to report on their efforts to conduct due diligence on their supply chains in order to identify the risks of human trafficking. Companies that contract with the U.S. government need to assess proposed amendments to the Federal Acquisition Regulation that would require many contractors to conduct due diligence on their supply chains in order to certify that neither the company nor its subcontractors are engaged in trafficking activities.
In assessing preparedness to comply with these emerging requirements, what should companies be thinking about?
Disclosures re: Corporate Management Systems
Companies will be expected to demonstrate that they have the policies and procedures in place to assess the risks of human trafficking. Regulators will also expect companies to demonstrate that they have conducted due diligence on their operations, including their supply chains. Corporate stakeholders will also expect companies to reference the incorporation of corporate policies on trafficking into vendor contracts and guidelines and the establishment of programs to provide appropriate training on human trafficking to relevant personnel.
In thinking how to respond to disclosure requirements, companies should not expect that one company’s disclosures will be equivalent to another company’s. Each company’s efforts — and its description of those efforts — should be appropriate to the nature and scope of their operations. Companies should consider which areas of their operations present the greater risk. For each individual company, this could include a review of:
- The countries in which the company and its suppliers operate and the extent to which those countries have taken steps to address human trafficking;
- The products in its supply chain, and whether those products are known to be associated with forced labor; and
- The extent to which the company and its suppliers use labor recruiters.
In establishing strong management systems to address trafficking, companies may also wish to consider the extent to which existing compliance mechanisms and risk-mitigation efforts already address trafficking-related risks. For example, existing anti-corruption programs may provide a solid foundation for more expansive efforts to identify aspects of the company’s operation that may be at risk for human trafficking.
Beyond Disclosures: Addressing the Risks of Human Trafficking
Ultimately, companies will need to view efforts to comply with new disclosure requirements as more than a compliance exercise. For many companies, robust due diligence efforts are likely to uncover a range of supply chain challenges. Companies will need to consider how best to respond to the reality that forced labor is unfortunately found in a range of industries including apparel, mining, logging, and fishing. Responding to this challenge will require concerted effort, consultation with stakeholders, and a commitment to addressing the issue as more than a rote compliance exercise.
When responding to specific instances of forced labor, companies will need to carefully how best to respond in order to ensure that victims of trafficking are provided with appropriate support and not subject to further abuse. Ultimately, companies will be held to greater account for the integrity of their responses to supply chain challenges than for the content of their written disclosures.