Many have predicted that the sort of social issue-based regulatory disclosures the Securities and Exchange Commission gave birth to with its conflict minerals disclosure rule would eventually expand and that human trafficking was a topic to watch. This week, U.S. Representatives Carolyn Maloney (D-N.Y.) and Chris Smith (D-N.J.) introduced the Business Supply Chain Transparency on Trafficking and Slavery Act of 2015, a bill that would require large public companies publicly disclose measures to prevent human trafficking, slavery, and child labor in their supply chains as part of their annual reports to the SEC.
Maloney first introduced the bill in 2011 as the Business Transparency on Trafficking & Slavery Act (H.R. 2759). Senator Richard Blumenthal (D-Conn.) plans to introduce companion legislation for their latest attempt in the Senate. The current legislative proposal was timed to coincide with the State Department’s 2015 Trafficking in Persons report, which stressed the need for governments to “set clear expectations for businesses on human rights issues and adopt policies that promote greater transparency and better reporting on anti-trafficking efforts in supply chains.”
“Risks are present in the service sector, as well as in the production of goods,” the report says, stressing the need for supply chain due diligence. “The sheets in a hotel may be made with cotton harvested by forced labor, the housekeeper cleaning the room may be exploited in labor trafficking, and the room itself may be used as a temporary brothel by sex traffickers. The international community must both understand the supply chains of the products used to provide a service (hotel sheets, airplane parts, medical equipment) and also examine the risks to those workers who provide them (house cleaners, caregivers, dishwashers).”
H.R. 2759 would amend the Securities Exchange Act to require businesses with over $100 million in global gross receipts to report to the SEC, as part of their annual filings, anti-human trafficking policies and controls. Disclosures would be “prominently posted” on SEC and company websites for public access. The bill does not dictate how companies conduct those efforts, but does seek transparency on internal accountability standards, supply chain management and procurement systems, and procedures for employees or contractors that fail to meet company standards regarding forced labor, slavery, human trafficking and child labor.
This isn't’t the first government action on the issue. In March, new requirements related to human trafficking went into effect for nearly 300,000 government contractors. A rule approved by the Defense Department, General Services Administration, and National Aeronautics and Space Administration, amends the Federal Acquisition Regulation prohibits federal contractors and subcontractors from charging employees recruitment fees or using misleading or fraudulent recruitment practices. Those performing work over $500,000 outside the United States must develop and maintain a trafficking compliance plan and certify that, to the best of their knowledge, neither they nor any of their subcontractors has engaged in trafficking-related activities.