Apparel Companies Fall Short of Trafficking Disclosure Requirements

By Stephen Miller, CEBS May 2, 2012

One-quarter of apparel makers are flouting a California law by not disclosing their efforts to combat human trafficking, a University of Delaware (UD) study, published in April 2012, found.

The California Transparency in Supply Chains Act, which took effect Jan. 1, 2012, requires companies doing business in California topost onlinewhat they are doing to prevent human trafficking in their supply chains.

After studying 86 online disclosures of what apparel companies are doing to comply, Marsha Dickson, professor and chair of UD's Department of Fashion and Apparel Studies, found that apparel companies can still do more to improve their online information about these efforts.

“We could not find disclosures for one-quarter of the companies,” Dickson said. “Half of the statements were far from obvious—requiring consumers to delve deeply into the companies’ websites through inconspicuous links” such as “about us,” “investor relations” and “library.”

Another common shortcoming was whether companies require their direct suppliers to certify that the materials used in the products are made in accordance with laws on human trafficking and slavery. “Most companies referenced their contractual purchase orders with direct suppliers,” Dickson said, “but those would infrequently extend to materials suppliers, as those suppliers would contract only with the company assembling the end product.”

Lagging companies should follow what some industry leaders are doing in this area, Dickson advised. She pointed to The Jones Group, whose brands include Jones New York, Anne Klein, Rachel Roy and Nine West, as its disclosures not only addressed all elements of the required disclosure but also contained supporting evidence for each of its statements.

Online Disclosures

The California law requires retailers and manufacturers with more than $100 million in annual revenue doing business in the state to disclose on their company websites “with a conspicuous and easily understood link to the required information.”

These disclosures must include to what extent, if any, the business engages in verification of product supply chains to evaluate and address risks of human trafficking and slavery, conducts audits to evaluate supplier compliance with company standards for trafficking and slavery in supply chains, and provides company employees and management who have direct responsibility for supply chain management with training on human trafficking and slavery.

Best Practices

A report providing examples of best practices by companies in meeting—and exceeding—these requirements has been published by the Interfaith Center on Corporate Responsibility (ICCR), a coalition of activist shareholders who support policies that promote social justice and economic sustainability. The report, Effective Supply Chain Accountability: Investor Guidance on Implementing the California Transparency in Supply Chains Act and Beyond, is meant to serve as a guide for others, whether or not they are subject to the California act.

“Company awareness of these risks and knowledge of the ways that traffickers may use a company’s products, services [and] workplaces in connection with their trafficking activities can help companies avoid negative publicity, business interruptions, potential lawsuits, public protests and a loss of consumer trust, all of which can impact shareholder value,” according to the report. “Monitoring suppliers, contractors and sub-contractors and tracing to raw materials can help companies to ensure that measures are in place throughout the company’s entire supply chain,” ICCR advised.

According to the Rev. David Schilling, ICCR’s program director for human rights and resources, “It’s next to impossible to completely eradicate the exposure to human rights violations from multilinked supply chains, but the best companies understand that it’s better to confront this issue head-on. They actively look for and report on these violations every day and have strong remediation policies in place to address them … and that’s what sets them apart from their competitors.”

Among the best practices cited in the report:

  • Gap has charted the elements of its supply chain and the state of working conditions at various levels within its supply chain and determined its levels of influence within each. Gap adopted a Code of Vendor Conduct that covers the core standards of the International Labour Organization (ILO), including on child and forced labor, and has an extensive global monitoring program and strong stakeholder engagement component. The company developed a human rights policy in 2010 that guides the company’s respect for fundamental human rights as defined by the UN's Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social, and Cultural Rights.

  • Hewlett Packard explained and depicted its risk-based four-phase supplier management system, which provides a framework for suppliers. The company evaluated risks posed by supplier activities and assesses each supplier in that regard.

  • Adidas described its due diligence process and how it manages its supply chain, and it defined its expectations of suppliers. The company outlined the key factors it seeks to assess in its audits, the number of factories utilized, the main countries where its products are manufactured and how it works with suppliers.

  • Levi Strauss & Co.’s Social and Environmental Sustainability Guidebook noted five verification methods that can provide a comprehensive evaluation of compliance at its factories: visual, records review, factory management interviews, gathering information from workers and gathering information from external sources. For each instance of noncompliance and corrective action, the verification methods that will be used are depicted visually. The guidebook stated that factories must have written grievance procedures in that protect employee privacy, protect against retribution and permit workers to report unfair treatment to someone other than their supervisor.

  • Verité has created training programs on supply chain responsibility for major brands and retailers focused on improving performance. Verité’s Fair Hiring Toolkit provides practical resources for companies to address trafficking and slavery.

  • Nucor, the largest steel manufacturer in the United States and the biggest buyer of Brazilian pig-iron, requires its top-tier pig-iron suppliers to join the Citizens’ Charcoal Institute (Instituto Carvão Cidadão). The institute conducts monitoring of the supply chain to ensure that forced labor is not present.Nucor has committed to publishing annual progress reports on implementation.

Stephen Miller, CEBS, is an online editor/manager for SHRM.


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