On June 11, Representative Carolyn Maloney (D-NY) introduced H.R. 4842, the Business Supply Chain Transparency on Trafficking and Slavery Act of 2014. The bill, if passed, would require companies to file annual reports with the Securities and Exchange Commission (“SEC”) disclosing their efforts to identify and address specific human rights risks in their supply chains.
The proposed federal legislation, co-sponsored by Representative Chris Smith (R-NJ), would only apply to companies with annual worldwide gross receipts exceeding one hundred million dollars. If enacted, the legislation would require the SEC to issue regulations requiring companies to disclose whether they have taken any measures to identify and address the risks of forced labor, slavery, human trafficking, and the worst forms of child labor throughout their supply chains.
The bill was originally introduced in 2011 and is modeled after the California Transparency in Supply Chains Act. Unlike the state statute, however, the proposed federal legislation is not limited to retailers and manufacturers. If enacted, the legislation would be applicable to any publicly-traded or private company currently required to submit annual reports to the SEC, as long as the company meets the annual gross receipts threshold.
The bill begins with a statement of findings, including the observation that the U.N. Guiding Principles on Business and Human Rights:
affirm that business enterprises have a responsibility to respect human rights, and that States have a duty to ensure these rights are protected. Such Guiding Principles also clarify that the duty to protect against business-related human rights abuses requires States to take the necessary steps to prevent and address human rights abuses to workers through effective policies and regulation.
If enacted, the legislation would require companies to disclose to what extent, if any, they:
- Maintain policies to identify and eliminate risks of forced labor, slavery, human trafficking, and the worst forms of child labor within their supply chains, and actions that they have taken pursuant to, or in absence of, such policies;
- Maintain policies prohibiting the employees and “employees of entities associated with its supply chain” from engaging in commercial sex acts with minors;
- Evaluate and address the risks of forced labor, slavery, human trafficking, and the worst forms of child labor within their product supply chains;
- Ensure that audits of suppliers within their supply chains are conducted to investigate working conditions and labor practices and to verify whether suppliers have systems in place to identify risks of forced labor, slavery, human trafficking, and the worst forms of child labor within their own supply chains;
- Require suppliers to attest that the manufacture of products and the recruitment of labor is carried out in compliance with applicable laws regarding forced labor, slavery, human trafficking, and the worst forms of child labor;
- Maintain internal accountability standards and procedures for employees or contractors that fail to meet company standards regarding forced labor, slavery, human trafficking, and the worst forms of child labor;
- Provide training to employees and personnel with direct responsibility for supply chain management on forced labor, slavery, human trafficking, and the worst forms of child labor;
- Ensure that labor recruitment practices comply with corporate policies or efforts to eliminate practices that contribute to forced labor, slavery, human trafficking, and the worst forms of child labor; and
- Ensure that remediation is provided to those who have been identified as victims of forced labor, slavery, human trafficking, and the worst forms of child labor.
The bill also calls on the Secretary of Labor to publish a list of the companies required to comply with the legislation and a “Top 100” list of companies “adhering to supply chain labor standards as established under relevant federal and international guidelines.” The list is to be generated “in consultation with the Secretary of State and other appropriate federal and international agencies, independent labor evaluators, and human rights groups.”
A coalition of socially responsible investors immediately issued a statement welcoming the introduction of the bill, stating that:
[i]n our analysis of companies, we seek to understand how they are addressing human and worker rights challenges in their global supply chains and expect evidence of their due diligence on these issues. The disclosures required in H.R. 4842 will provide investors with the information necessary to adequately evaluate risks within their portfolios.
The bill has been referred to the Committee on Financial Services and the Committee on Education and the Workforce for consideration. Given the current Congressional climate, the ultimate passage of H.R. 4842 is unlikely, but its introduction reflects a broader trend towards regulated transparency with regard to corporate efforts to address human rights-related risks.