Corporate Compliance with the California Transparency in Supply Chains Act of 2010

This study shines a spotlight on the first disclosure law addressing human trafficking and slavery within the global marketplace - the California Transparency in Supply Chains Act of 2010 (“CA-TISCA”).

CA-TISCA requires human trafficking- and slavery-pertinent disclosure statements from large corporate earners operating in the state.

Disclosure law in international business – requiring more symmetry of information in the marketplace – is a brave new world.

Five years after CA-TISCA’s signing on October 18, 2010, and almost four years since CA-TISCA’s disclosure provisions went into effect on January 1, 2012, a first benchmarking study is in order.

We systematically evaluate the degree of corporate disclosure compliance with CA-TISCA by individually assessing qualifying companies’ statements as disclosed against eight (8) compliance criteria based on the law’s core requirements, resulting in a compliance score, and seven (7) indicators regarding affirmative conduct, yielding an affirmative score. In addition, the study collected 19 additional data points of interest.

Scrutinizing all available corporate disclosures provides a first macro perspective not only of the compliance landscape but also the efforts companies are making to confront human trafficking and slavery-like practices.

In total we identified 2,126 potentially qualifying companies, of which 1,325 (62%) had a pertinent statement. As some qualifying companies’ subsidiaries or brands each had a statement, in all we evaluated 1,504 individual disclosures.

This study reveals that, overall, compliance performance greatly varies between companies. The average disclosure compliance score was 60%. Forty-one (41%) percent of companies were found to have a corporate disclosure score on or above the 70% mark. Thus, many affected companies still have a lot of work to do before living up to the letter of the law.

In order to ascertain the extent of corporate-driven action relevant to CA-TISCA, we also assessed the reported degree of affirmative conduct. The average affirmative conduct score of companies with statements was 31%. Fourteen (14%) of companies were found to have an affirmative corporate conduct score on or above the 70% mark. Fifteen (15%) percent of companies also noted that they were still working on one or more CA-TISCA-relevant items.

The average divergence between a company’s disclosure compliance and affirmative conduct scores for must-disclose themes was 27 percentage points.