New Year’s Day 2012 was something of a high water mark in corporate responsibility related legislation.
Why?
Well a short, snappy piece of State of California legislation came into force. Even the new law’s title is snappy (by legal standards). It requires firms with a global income in excess of US$100m to disclose “their efforts to eradicate slavery and human trafficking from their direct supply chains for tangible goods offered for sale”.
The California Transparency in Supply Chain Act of 2010 even with all the necessary legal mumbo-jumbo barely fills three sides of A4 paper. Yet one only has to conduct a google-search to see the widespread impact that it has had already.
Three features of the Act have boosted its reach.
It is short.
The legislators set aside their usual prolixity. They tersely describe the issue the Act is seeking to address. In half a page, and building on definitions already a part of California law, they outline which businesses it will apply to. In five short clauses they lay out precisely what firms are required to report on. Bingo! Job done!
It requires not substantive achievement but transparent disclosure.
As far as the law is concerned it is fine if the firm simply states: “Checking our supply chain for human trafficking and slavery? We can’t be bothered.” The likely reaction to such a statement doesn’t bear thinking about, but it would be compliant with the law.
It is a California statute.
Legislators in Rhode Island could well have passed a similar statute, but it is the size of California’s economy that gives the statute teeth.
Will it make a difference? It is too soon to say.
Irwin Seltzer, resident sage of the ultra-free market Hudson Institute, devoted part of his Sunday Times column on New Year’s Day to attacking the new law: burdening industry with heavy costs etc, etc. That may or may not be true of the processes companies devise to protect and enhance the integrity of their supply chains. It is clearly not true about the simple disclosures that the Act requires.
In terms of transparency the Act is a step forward. Whether it materially curtails the evils it is designed to combat is a much more open question.
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