The Michael Scott Explanation of the California Transparency in Supply Chains Act

The California Legislature last year enacted the California Transparency in Supply Chains Act, a new law that has received relatively little attention in the press.  All California companies and many companies outside of the state that do business in the state should be aware of the requirements of the statute. 

We begin with the Michael Scott Explanation of the law.  If I were to explain this to the former Manager of Dunder Miflin, I’d say it something like this. 

The California Legislature is concerned not just that products are safe and business practices fair to consumers but also that good and legitimate business in the state are not taking advantage of less fortunate individuals, especially children, in other parts of the world.  The lawmakers recognize that many consumers also do not want to buy products that have been manufactured in slave labor or human trafficking or in deplorable factories in third world countries. 

With these concerns in mind, the Legislature is now requiring companies to inform the public of what they are doing to eradicate slavery and human trafficking.  Basically, you have to let the public know what (if anything) you are doing to make sure that the products you are having manufactured in a foreign country are not being made in sweatshops or through slave labor.  There is a whole list of things that you need to certify but that is the basic idea.

There are two ways that this information can be provided: (1) in a statement on the company’s website; and (2) if the company doesn’t have a website, by responding in writing to any inquiries.

It should be understood that the law does not actually prohibit the use of slave labor or otherwise prohibit any related business practices.  Like many other laws such as Prop 65, the California Transparency in Supply Chains Act is simply an “informed consent” rule that requires business to provide information to consumers.  Thus, a company could theoretically comply with the law by stating on its website that it uses slave labor in third world countries and that this is how it keeps costs down.  (I can imagine Michael Scott doing something like that as a tastelesss joke.)  The idea is that no company that wants to succeed in attracting the business conscientious consumer would make such a statement and the law requiring disclosures will result in companies voluntarily doing the responsible thing.

A WORD TO THE WISE . . .

There is much more to understand about the law.  The first thing to determine is whether your company is required to comply with the Act (which is covered by another post here). Then it might be a good idea to consider what potential litigation may flow from this new law (which is discussed here).