Tag Archives: California

IPC Alert – California’s Human Trafficking and Slavery Law Takes Effect January 1, 2012

As a member of IPC, we get information alerts from time to time.  We received this one today with important information for many companies and clients.

 

IPC Alert logo
REMINDER: California’s Human Trafficking and Slavery Law Takes Effect January 1, 2012

On January 1, 2012, companies doing business in California that have annual gross global receipts in excess of $100 million will need to comply with California’s Human Trafficking and Slavery Law. The law requires companies to publicly disclose efforts to ensure their supply chains do not support human trafficking or slavery. The bill will have unintended consequences on the electronics industry as the entire supply chain will be questioned and audited regarding their social responsibility practices.

Although the law only directly impacts larger companies, the supply chain will need to provide substantial information and undergo extensive audits. If you think that your company is not impacted because your company doesn’t sell products in the State of California think again. Your current and potential customers in California will most likely request information from your company on efforts to eradicate human trafficking and slavery. Because most companies will likely choose to continue conducting business in California, the world’s 8th largest economy, it is expected that the entire electronics supply chain will be impacted. While the disclosure requirements only apply to companies with annual gross global receipts in excess of $100 million, there will be broader implications for the entire electronics supply chain.

The law states the disclosure requirements for companies. Companies must disclose to what extent, if any, they are doing the following:

  • All information on a company’s efforts, if any, to eradicate slavery and human trafficking must be on the company’s webpage. The link to this information must be easy to understand and conspicuously located on the homepage.
  • Performs verification of product supply chains to evaluate and address risks of human trafficking and slavery, including disclosing whether the verification was conducted by a third party.
  • Conducts audits of suppliers to evaluate supplier compliance with company standards for human trafficking and slavery, including disclosing if the audit was not independent and unannounced.
  • Requires direct suppliers to certify that materials incorporated into the product comply with human trafficking and slavery laws of the country or countries in which they are doing business.
  • Maintains internal accountability standards and procedures for employees and contractors failing to meet company standards regarding human trafficking and slavery.
  • Provides company employees and management, who have direct responsibility for supply chain management, training on human trafficking and slavery, particularly with respect to mitigating risks within supply chains.

IPC held a webinar “Disclosure Requirements That Will Impact the Electronics Industry: California’s Human Trafficking Law” that provided an overview of the requirements, how you will be impacted and what you can do to ensure compliance. This presentation is available to IPC members free of charge. For more information, please visit IPC’s webpage on corporate social responsibility (CSR) at www.ipc.org/CSR.

Social Network

Revision to SICMAP℠ Tool for Conflict Minerals, OECD Incorporates California Supply Chain Law

The Elm Consulting Group International LLC has released a new revision to the Self Implemented Conflict Minerals Audit Preparation Tool.  The update, Revision 1.33, incorporates

  • Minor changes in response to feedback obtained from the late June EICC Extractives Supply Chain Workshop VI in Washington DC;
  • Further clarifications on the OECD framework, its relationship to SICMAP℠  and SEC auditor standards; and
  • Related elements of California Transparency in Supply Chains Act of 2010.

Lawrence M. Heim, CPEA, is leading the firm’s conflict minerals services and SICMAP℠ development:

In our discussions with various companies and workshop attendees, we obtained feedback on a few minor changes and clarifications to improve the tool.  In addition, we decided to incorporate the new California law as there are many similarities between those mandates and the conflict minerals requirements.

The video introduction and overview of SICMAP℠ can be viewed here.

Guest Perspective: Is the Dodd-Frank Act Conflict Minerals requirement the next Proposition 65?

Ed. note:  We are fortunate to count Mark Schaffer as an Elm Affiliate.  Mark is located in Austin, Texas and runs Schaffer Environmental, providing a range of supply chain, sustainability and product content consulting support to the computer, technology and electronics industries.  Mark submitted the following piece on conflict minerals from his perspective on other product content matters.

The Dodd-Frank Act requires companies regulated by the Securities and Exchange Commission (SEC) to report whether their products contain conflict minerals from the Democratic Republic of the Congo (DRC) and other nearby countries.  These conflict minerals are defined as cassiterite, columbite-tantalite, gold, wolframite and their derivatives (tin, tantalum and tungsten) – though, in the future, more minerals may be added to this list.

These materials are found in a variety of consumer products that we love to use everyday, from computers to cell phones, golf clubs to fishing weights.  So, to the purchaser of these consumer products, what is the real impact of whether the product contains one of these minerals sourced from the Congo?

Currently, the exact reporting requirements are still not established.  The law requires manufacturers sourcing “conflict minerals” to include information on their sourcing in their websites.  The SEC regulations, scheduled to be finalized in third or fourth quarter 2011, will clarify what disclosures will be required within the financial reports to SEC.  Further sourcing disclosure may even end up on the product or the product packaging.

Granted, business-to-business contracts, relationships and purchasing requirements are already being impacted by the supply chain traceability mandates – but what might this all mean to the consumer and the choices they make?

At best, the disclosures will be an awareness point for consumers, but will it truly affect their purchase of the product?  Unless there is a price differential between products, only the most conscientious consumers will be deterred from buying and using products containing DRC-sourced materials.

In addition, consumer confusion is likely to result where companies use/disclose “Non-conflict DRC materials”.  This is material that originates from the conflict areas (DRC and adjoining countries) but is obtained from a legitimate source verified as not funding or contributing to the region’s armed conflict and human right violations.

In a similar fashion, California Proposition 65 requires a notification of the presence of substances that have been determined to be cancer causing and/or damaging to the reproductive system by the State of California.  A warning is often seen printed on the packaging of products or on tags and labels of products indicating the presence of materials in the product that could cause cancer, birth defects or other reproductive harm.

Even this type of warning does not deter the consumer from purchasing the product.  It is likely that a conflict-warning label, if that became a requirement, would have similar negligible effect in product sales.  There will be even less of a measurable impact on sales/revenue if the warning is limited to disclosures within a corporate Form 10-K report.  Placement in a 10-K will raise visibility to investors in the company producing those products but unless there is a clear impact on the bottom-line profits or revenue, will that be enough incentive to change sourcing practices?

The strength of a “notification” regulation lies in a company’s desire to avoid “label shame.”  Manufacturers of products covered by Prop 65 have made changes to the materials they use such that their products no longer need the warning label.   So, even though not all consumers changed their purchasing habits due to the presence of those warnings, manufacturers worked (and still work) to replace those materials with safer alternatives.  The Dodd-Frank Act may ultimately have similar effect in transforming the material choices and sourcing.

At the same time, however, there is growing evidence of consumer “label fatigue,” indicating that consumers are paying less attention to these labels or feel they are not credible, especially where the labels – and their form/content – are not mandated by law.  This is perhaps most prevalent in “green” product labels and certifications.

Recent history tells us that the Dodd-Frank conflict minerals requirements may indeed promote change, though that change is slower than would occur from an outright restriction or ban on the use of those materials.  For example, the most recent impactful “banning” restriction, the EU Restriction on Hazardous Substances (RoHS) went into effect July 1, 2006 after many years of development.  Due to the demand by the electronics industry for parts that could meet the RoHS requirements by that date, the supply chain transformed rapidly using alternative materials and techniques.

 

 

Just Announced: Wal-Mart’s Super-Sized Hazardous Waste Settlement

Media outlets including USAToday and San Diego News Network are announcing an environmental settlement reached by Wal-Mart and environmental regulators.  The settlement is valued at $27.6 million and caps a five-year investigation of the retailer’s management of wastes such as cleaning chemicals, paints and pesticides across 236 stores in California.

While this is one of the largest settlements of its kind in the US, it is unlikely to have any significant impact on the financial condition of the world’s largest retailer, which is ranked #1 on the 2010 Fortune 500 list, posting more than $378billion in revenues and $12.7billion in profit for 2009.