Privately, companies have long self-regulated supply chains to prevent human trafficking, forced labor, and child exploitation. Meanwhile, governmental efforts have lagged in the public sphere. But the past few years have shown a marked change. California, the United Kingdom, France, and Australia have enacted legislation requiring companies to publicly disclose the steps they are taking to eradicate slavery and human trafficking in their operations and supply chains for each financial year. Canada is currently considering similar legislation.

If at first you don’t succeed….

While the US government has not yet passed a comparable law, it is not for lack of trying—the Congressional Human Trafficking Caucus has introduced disclosure legislation at least five times since 2011—most recently this past October. The prior legislation, like its predecessors, uses the Securities Exchange Act as the lever to require all public companies with annual worldwide revenue over $100 million to disclose prescribed information to the SEC. In addition to this information being public via the SEC, the prior legislation would also require covered companies to publish the information on their websites. The disclosures would include all policies and measures a company is taking to identify, address, and remedy human trafficking, forced labor, and child exploitation occurring within its supply chain, including whether a company:

• Maintains policies to identify and eliminate these practices within its supply chain
• Requires downstream and upstream contractors to attest that the materials and labor used to manufacture its products are in compliance with laws and corporate standards regarding these practices
• Implements any internal accountability standards and supply chain reporting procedures to address violations within the supply chain
• Offers training to contractors within its supply chain
• Verifies contractor compliance with relevant laws and corporate standards
• Takes remedial actions if it becomes aware of a violation, and what those actions might be

Borrowing from existing law

The bill is strikingly similar to California’s Transparency in Supply Chains Act. The California law requires website disclosures of efforts to eradicate slavery and human trafficking from its direct supply chain, including information on verification, auditing, internal accountability, and training. California’s law is more limited in scope than the federal efforts, as it applies only to retailers and manufacturers doing business in California with annual worldwide revenue over $100 million—rather than any public company.

We expect that a similar bill will be introduced in the House this year, with its new Democratic majority. While the last iteration of the bill was dead-on-arrival in the lame duck Congress, the ushering in of a new session—and importantly a new Democratic majority—makes it far more likely that a similar version of this bill may become law within the next two years. Getting out of the House may be all that is needed to finally push this bill into law, as the prior efforts have all had bi-partisan co-sponsors.

Such a vast expansion of mandatory corporate disclosures would create not only additional legal obligations for covered companies, but could also have significant implications on social responsibility efforts, public relations campaigns, and corporate bottom-lines. Due to the public nature of the disclosures, covered companies can count on NGOs poring over their disclosures.