California is on the cusp of requiring businesses to catalogue how they combat human trafficking, a move meant to crack down on a forced labor epidemic that ensnares millions worldwide -- but which could also impose substantial burdens on companies across America.
The law, passed in 2010, is set to go into effect Jan. 1. It doesn't technically require businesses to stop forced labor. Rather, it requires companies to disclose what efforts they take to "eradicate" slavery and trafficking from their supply chains. And it only applies to retailers and manufacturers doing business in the state that make more than $100 million a year.
But the first-of-its-kind law has national implications for several reasons.
First, as one of the world's largest economies, California plays host to many businesses -- not just those headquartered in California.
In addition, California's legislative experiments often are used as a model for laws elsewhere. Already, California's yet-to-be-implemented trafficking law has been cited in new federal legislation on Capitol Hill.
Perhaps most importantly, the law will affect smaller companies even though it applies directly to those making more than $100 million. That's because the law urges these larger companies to inspect their entire supply chains for signs of forced labor -- meaning the smaller companies that make up that supply chain could be audited and hit up with inquiries about the steps they take to combat trafficking and slavery.
Stephanie Castorina, manager of environmental programs for the Illinois-based electronics organization IPC, said the requirements from the state that is home to Silicon Valley will surely "trickle down" to her group's members -- electronics companies.
"While it doesn't directly impact the supply chain, it will indirectly affect them tremendously," she said.
She said companies remain confused about exactly what steps they should be reporting, and predicted the law would add "substantial" cost to doing business.
"We all agree that ... human trafficking and slavery are awful things that should not be happening," Castorina said, but questioned what this law would achieve and at what cost. "For the majority of businesses within the U.S., it's another added cost where the benefit isn't clear."
While the law does not compel companies to stop forced labor if they find it somewhere in their supply chain, the disclosure requirement is an incentive for companies to take some action.
"Your average company does not want to be out in front with the slogan that they support slavery," Castorina said. "It's just not desirable."
Cracking down on forced labor and trafficking, which is illegal in the U.S., is the ultimate goal.
Alicia Trost, a spokeswoman for bill sponsor and California Senate President Pro Tempore Darrell Steinberg, said the state is looking to change the behavior of companies by airing their practices to consumers.
As for concerns about the requirements, she said: "It's just a sentence on their website. ... There shouldn't be much cost involved in that."
The law is meant to address what recent government studies have cited as a serious problem. A 2011 U.S. Department of Labor study found 130 products from 71 countries were made by forced and child labor -- mostly in Asia, Africa and South America.
According to Steinberg's office, more than 12 million people around the world are in forced labor. About 10,000 of them are working in the U.S. at any given time, according to his office, with California among the top four trafficking destinations in the United States.
The groundbreaking California law was cited this year in proposed legislation on Capitol Hill offered by Rep. Carolyn Maloney, D-N.Y. That bill, which has few co-sponsors and has been in committee since August, would require companies to disclose anti-trafficking steps they take in their SEC reports.
Rep. Chris Smith, R-N.J., a co-sponsor on that bill and the chairman of a House human rights subcommittee, is also behind a separate bill that calls for increased transparency and monitoring of forced labor at the federal level.
"It is critical that we continue United States leadership in efforts to end human trafficking both domestically and abroad," Smith, who supports the California law, said in a statement.
The California law would require companies to post on their websites the efforts they take to stop trafficking and slavery from tainting their products. The information would include steps they take to conduct unannounced audits on suppliers, provide company training on the subject, and hold employees and contractors accountable for falling short of "company standards."
It gives the state attorney general the power to take action against companies that don't comply.
Some companies already have started listing their anti-trafficking efforts online in anticipation of Jan. 1. California-based HP, for instance, has a section on its website detailing everything from supplier audits to the agreements it makes suppliers sign that require them to follow labor laws. HP says it's been working on the issue since 2000.