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September 17, 2010
Investors Call for Passage of California Legislation Addressing Human Trafficking
    by Robert Kropp

Governor Schwarzenegger has until the end of September to sign SB 657, which requires companies operating in California to disclose policies addressing human trafficking in supply chains.


Joining the nongovernmental organizations Alliance to Stop Slavery and End Trafficking (ASSET) and Coalition to Abolish Slavery & Trafficking (CAST), a coalition of investors led by Christian Brothers Investment Services (CBIS) has called on Governor Arnold Schwarzenegger of California to sing into law SB 657, the California Transparency in Supply Chains Act of 2010.

Sponsored by Senate Pro Tempore Darrell Steinberg, and co-sponsored by ASSET and CAST, the law, which was passed by the California State Senate in January, would require companies with revenues of more than $100 million that do business in California to publish on their websites the policies they have to address slavery and human trafficking in their supply chains.

The bill also requires companies to disclose whether they use third parties to verify whether their policies are enacted by their suppliers, and whether they conduct unannounced audits of suppliers to ensure compliance. If signed by the Governor, the law is expected to affect 3,200 global companies. The Governor has until the end of September to either sign the bill into law or veto it. If he does sign the bill, the reporting requirement begins in 2012.

The investor coalition led by CBIS includes 32 signatories with a total of $40 billion in assets under management. The signatories include investment research firms, institutional investors, and faith-based investors, including members of the
Interfaith Center on Corporate Responsibility (ICCR).

On September 10, the investor coalition sent a
letter, stating, "This innovative and influential bill reflects the realities of the marketplace, which increasingly requires that companies be sensitive to social and ethical issues, including labor and supply chains, and create human rights policies, as well as processes to evaluate, monitor and strengthen them."

"Given trends in globalization and growing concerns regarding working conditions, labor issues, human trafficking and slavery, investors and other stakeholders will increasingly call for information from companies related to their supply chains," the letter concluded.

SocialFunds.com spoke with Julie Tanner, Assistant Director of Socially Responsible Investing (SRI) at CBIS, about the investor coalition's advocacy for the signing by the Governor of the bill into law.

Tanner told SocialFunds.com that the legislation was brought to her attention by ASSET and the
Sisters of St. Joseph of Orange, a California-based signatory to the investor letter.

"The bill is so appropriate to the work that socially responsible investors do," Tanner said. "It addresses disclosure and transparency, and supports our efforts to combat human trafficking."

Signatories to the bill also include
Calvert Asset Management, Boston Common Asset Management, Sustainalytics US and MMA.

"The signatories even include a couple of groups from the UK,
Henderson Global Investors and EIRIS," Tanner said. "It's a strong coalition that's interested in this. We hope that through the letter that we can encourage the Governor to support this, because we need this kind of disclosure from companies."

Addressing concerns from some companies that the law would be onerous and too difficult to implement, Tanner referred to apparel companies such as Gap and Levi Strauss as examples of corporations that include extensive supply chain management polices and practices on the websites.

"There are a lot of best practices out there already, and the legislation merely requires disclosure of their policies," Tanner said. In other words, companies are not required to have policies, but to disclose whether or not they do, and if so to make them publicly available; that is, comply or explain.

"I think this is a great opportunity for companies to start a process, tell their story, and form multi-stakeholder initiatives to create risk management plans that are going to be robust and substantive," Tanner said.

"It's really important that companies look at their supply chains and start providing stakeholders with information about their risk management policies and practices, to ensure that there is no slave labor or human trafficking in their supply chains," she continued.

Since the 3,200 companies that would be required to disclose whether they have policies addressing human trafficking in their supply chains are headquartered throughout the world, subsequent efforts to enact such legislation in other states would have a much more thorough example of best practice. In fact, as Tanner told SocialFunds.com, ASSET is already exploring the possibility of sponsoring similar legislation in other states besides California.

Founded by Julia Ormond, an actress and former UN Goodwill Ambassador Against Slavery and Human Trafficking, ASSET "helps companies understand that making a comparatively tiny investment to eliminate slavery from their supply chains offers a competitive business advantage with incalculable long-term rewards," according to its website.

Calling for the passage of the California legislation, Ormond said, "Today’s supply chains are extremely complex. This bill is a small but crucial step, enabling the consumer and investor to support companies who are doing what they can."

Tanner said, "When you have legislation like this that will affect many companies, legislative advocacy makes sense. Adding the investor voice helps protect companies, and make them stronger."

"It's in the best interest of companies to do this," she added, "To protect their reputations and to ensure that there are no protests or fines, or legislative and regulatory risks."

 

 
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