H.R. 3226: New Bill Calls for Transparency on Trafficking and Slavery in Corporate Supply Chains

SlaveryIn late July, Representative Carolyn Maloney (D-NY) introduced H.R. 3226, the Business Supply Chain Transparency on Trafficking and Slavery Act of 2015. 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. Senator Richard Blumenthal (D-CT) is expected to introduce a companion bill in the Senate.

The proposed federal legislation, co-sponsored by Representative Chris Smith (R-NJ), would 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 reintroduced in 2014. The legislation 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.

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 has been referred to the Committee on Financial Services for consideration.  At the time of its introduction, the Interfaith Center on Corporate Responsibility, a coalition of socially responsible investors immediately issued a statement, stating that:

The pervasiveness of trafficking and slavery require effective legislation that moves beyond voluntary disclosures and levels the playing field for all companies. We strongly urge members of Congress to co-sponsor this bill.

Despite such stakeholder support, ultimate passage of H.R. 3226 is unlikely at this time, but its reintroduction reflects a broader trend towards regulated transparency with regard to corporate efforts to address human rights-related risks in their supply chains. Increased attention to the role of governments in promoting such transparency is reflected in the most recent U.S. State Department Trafficking in Persons report, which observes “Governments should 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.” Companies should expect to encounter more and more regulation in this area.

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