For manufacturers wanting to be in compliance with the California Transparency in Supply Chains Act, the devil is in the "where-to-disclose" details.
Under the California Transparency in Supply Chains Act of 2010 (effective January 1, 2012) all manufacturers (and retailers) with annual worldwide gross receipts over $100 million who "do business" (a low threshold) in California must disclose on their websites what efforts they have taken to eliminate forced labor and human trafficking from their worldwide supply chains.
Although the California Act's basic goals and mechanics are now generally understood by supply chain and compliance professionals, a visit to your favorite manufacturer or retailer's homepage will likely reveal a surprising level of confusion over a basic requirement, namely, where the disclosure must be announced.
How Do Companies Fail to Comply?
Many companies subject to the California Act -- and particularly those that are public-facing -- provide at least the basic disclosures required by the law. But most do not comply with the lesser-known requirement to include a "conspicuous and easily understood" link to the disclosures on the company homepage. After all, California Senate Bill 657, Section 3(b) explicitly provides that:
"The [required] disclosure ... shall be posted on the retail seller's or manufacturer's Internet website with a conspicuous and easily understood link to the required information placed on the business' homepage."
An informal review of websites reveals that most companies presently fail to post the required homepage link, let alone a link that is "conspicuous and easily understood." Many, moreover, either fail to address the specific disclosures set forth in the Act, and/or overpromise on what they will do to eliminate the scourge of human trafficking from their supply chains.
What seems like a minor mistake can have major consequences. Without a link from the homepage, no matter how extensive the disclosure, a company is out of compliance with the California Act's most basic (not to mention explicit) requirement.
Failure to comply with the Act can lead to:
- Court-ordered injunctive relief by the California Attorney General;
- Consumer group boycotts;
- Advocacy group pressures and "naming & shaming" campaigns;
- Federal Trade Commission Action;
- Class action lawsuits.
