Supply chain transparency is the practice of sharing information and conducting business openly, so that consumers and companies know where and how goods are produced. This keeps stakeholders informed and helps companies comply with laws that protect the planet, workers, and human rights. With this kind of information, stakeholders from companies to governments to individuals can make purchasing decisions that align with fair labor practices and sustainable sources.
What is Supply Chain Transparency and Visibility?
Supply chain transparency cannot exist without visibility. Visibility refers to a company’s ability to see activities throughout its supply chain. If suppliers don’t provide information — such as data on production, quality control, material sourcing, shipment location, and compliance with health and safety laws — it reduces visibility.
Visibility is about what companies see, and transparency is about what they do after seeing it. Do they transparently report violations? A company cannot be transparent if it doesn’t see or know what is going on. At the same time, if a supplier is unwilling to be transparent about its operations, it is difficult for the supplier’s customers to have any visibility.
Transparency and visibility are both tricky areas because companies may buy materials or services from thousands of suppliers. For example, if a supplier won’t share data on where it sources minerals, transparency for the companies it supplies becomes impossible. At the same time, many suppliers who are small businesses or farms in poor countries may not have the resources or expertise to report on ethical or sustainability concerns. Leonardo Bonnani, founder and CEO of supply chain mapping company SourceMap, says it comes down to whether “companies have meaningful conversations with their suppliers about secondary and tertiary considerations, such as quality, authenticity, sustainability, and labor conditions.”
As difficult as transparency and visibility can be, they come with a number of benefits, such as legal compliance, enhanced customer loyalty, risk management, better operational efficiency, and stronger partnerships with suppliers and partner companies. When companies have a clear understanding of who their suppliers are and how they operate, they can lower their operational risk; for example, international shipments without origin documents can be turned away at ports of entry. Transparency can also strengthen trust and create a culture in which companies work together to solve problems. Additionally, more supply chain knowledge and open communication make for more efficient operations by revealing bottlenecks, quality issues, and potential disruptions that can be averted.
United States National Legislation
Under the United Nations Guiding Principles on Business and Human Rights, businesses have a responsibility to protect human rights and avoid contributing to negative human rights outcomes by being open and transparent with their supply chains. Many US laws and regulations concern responsible business conduct to prevent human rights abuses such as trafficking and forced labor, primarily through supply chain transparency and reporting requirements. Examples include:
- The Tariff Act of 1930, which states that goods “mined, produced, or manufactured wholly or in part” by convict, forced, or indentured labor are prohibited from entering the US.
- Executive Order 13126: Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor (1999), which requires the Department of Labor to publish a list of products produced by forced or indentured child labor and their countries of origin. The list ensures federal agencies do not procure any goods made with such labor practices.
- Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010), which directed the Securities and Exchange Commission to issue regulations requiring companies that manufacture products that are reliant on certain minerals – conflict minerals, which are known to be part of exploitative trade by armed groups to help finance conflict – to report on their corporate supply chains
- The Federal Acquisition Regulation Rule Combating Trafficking in Persons (2015), which implements anti-trafficking safeguards in Executive Order 13627: Strengthening Protections Against Trafficking in Persons in Federal Contracts, which expressly prohibits federal contractors, contractor employees, subcontractors, and subcontractor employees from engaging in specific types of trafficking-related activities. It also requires contractors to take action against employees who violate the prohibitions.
State Laws: California Transparency in Supply Chains Act
Although these laws are an important start, there is no single, all-encompassing supply chain transparency law in the United States at the national level. For this reason, states may take matters into their own hands. The California Transparency in Supply Chains Act, passed in 2010 and in effect as of 2012, is one of the most scoping pieces of legislation targeting human trafficking and slavery in supply chains. The goal of the law is to ensure that large retailers and manufacturers provide consumers with information regarding efforts to remove human trafficking from their supply chains and educate consumers on how to determine if companies are responsibly managing their supply chains.
The law requires companies who are subject to the law to disclose, on their websites or in other written records, information regarding efforts to eradicate human trafficking and slavery within their supply chains. Companies subject to the law are retail sellers or manufacturers who do business in the state of California with annual worldwide gross receipts totaling more than $100,000,000.
Specifically, companies must take five steps:
- Engage in the verification of product supply chains to address risks of human trafficking and slavery
- Conduct audits of suppliers to evaluate supplier compliance with these standards.
- Require direct suppliers to certify that materials incorporated into the product comply with laws regarding human trafficking and slavery in the countries in which they operate
- Maintain internal accountability standards and procedures for employees and contractors
- Provide company employees and management who have direct responsibility for managing supply chain training on human trafficking, slavery, and how to mitigate the risks of these crimes in supply chains.
Looking Forward
In spite of these legislative efforts, there is still work to be done to end forced labor and human trafficking in supply chains. Researchers at the Re:Structure Lab, a collaboration between the Stanford University Center for Human Rights and International Justice and the Yale University MacMillian Center, note that transparency legislation can be “largely cosmetic,” with companies appearing to be committed but not actually being held accountable. According to Jessie Brunner, director of human trafficking research at the Stanford center, even with the California Transparency in Supply Chains Act, “There seem to be no real consequences,” since the law does not go much beyond a disclosure requirement.
Countries around the world, from China to the Congo, have been found to use forced labor, and others are still importing risky goods, resulting in billions of dollars annually spent on products associated with forced labor. Brunner adds that everyone has a role to play, “whether in how we vote at the polls, with our wallets as consumers or as a shareholder — by pushing policymakers and business leaders to do better.” As heightened consumer and investor awareness of labor rights continues to grow, consumers will have more power — their purchasing power — to support brands that demonstrate ethical practices.
- Research brands you frequently shop from to compare their labor practices
- Look for fair trade certified and B Corp products to support ethical companies
- Familiarize yourself with countries and products associated with forced labor, and make sure to do your due diligence before making purchases
- Visit Stop Modern Day Slavery for more research and information on actions you can take to help eradicate human trafficking
Originally from New Jersey, Corinne has always loved learning about different cultures and her family’s ancestral roots across Europe. She earned her Bachelors in International Studies at the College of New Jersey and recently received her Masters in International Relations in Madrid. She currently works for an international organization at the UN in New York, and hopes to continue working on important global issues and their intersections with gender equality. In her free time, Corinne is likely to be on a hiking trail, at the gym, in the kitchen baking and listening to music, or on the couch with a good book.