ANTI-HUMAN TRAFFICKING

EVERYTHING YOUR COMPANY NEEDS TO KNOW

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TABLE OF CONTENTS

Introduction: Ethical Sourcing Is Important to You & Your Brand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Chapter 1: Federal Acquisitions Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Chapter 2: The United Kingdom Modern Slavery Act 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Chapter 3: California Transparency in Supply Chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Chapter 4: Compliance Program For Anti-Human Trafficking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Chapter 5: About Assent Compliance – Corporate Overview/Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

3ANTI-HUMAN TRAFFICKING: EVERYTHING YOUR COMPANY NEEDS TO KNOW

INTRODUCTION ETHICAL SOURCING IS IMPORTANT TO

YOUR CLIENTS & THEIR BRAND.

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ETHICAL SOURCING IS IMPORTANT TO YOUR CLIENTS & THEIR BRAND.

Amnesty International's report on cobalt mining in the Democratic Republic of the Congo (DRC) has once more drawn attention to the ethical sourcing practices of someof the world's largest tech and automotive companies. The report has linked these companies to cobalt mined by children in the DRC. This child labor, albeit not a direct violation of anti-human trafficking regulations, does highlight the importance of implementing due diligence processes throughout the supply chain to eliminate the risk of these kinds of activities.

The Federal Acquisition Regulation (FAR) was recently amended by an Act of Congress (EO 13627) which requires government contractors to have policies and programs in place for anti-human trafficking, and companies should also be aware of the California Transparency In Supply Chains Act. The United Kingdom has also recently enacted a similar law known as the UK Modern Slavery Act 2015.

The Amnesty International report is the latest in a string of recent developments that have exposed the extent to which human trafficking, slavery and child labor pervade major supply chains.

As compliance specialists, it is often your responsibility to navigate regulatory hurdles and ensure that your company has policies in line with the various ethical sourcing legal requirements, in addition to implementing efforts to mitigate any risk to reputation.

The goal of this eBook is to give readers a broad overview of the various global laws and provide practical insights as to what actionable steps can be taken to meet the requirements and mitigate risk, while keeping company margins in tact. If compliance activities are considered a tax, the goal of this eBook is to ensure you are in line with the metaphorical “tax code” while minimizing costs as much as possible.

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Assent is the trusted compliance partner for thousands of customers and suppliers globally.

OUR CLIENTS

Approximately 30 percent of S&P 500 companies, and hundreds of global companies use Assent software and services in the following areas:

» Ethical sourcing

» Materials and restricted substancelist compliance

» Inspections

» Data collection and custom surveys

ABOUT ASSENT

Companies face a growing and changing set of regulatory and compliance challenges. These challenges range from compliance with restricted substances lists to ethical sourcing, supplier data procurement and validation, inspections, deploying and collecting custom surveys, and much more. Assent creates a cloud-based enterprise software solution that automates processes, reduces manual workload, increases efficiencies and, ultimately, helps companies dramatically save on compliance costs. Assent also partners with companies who need additional data collection and program support.

THE REGULATORY LANDSCAPE SURROUNDING ANTI-HUMAN TRAFFICKING:

There are three main legal jurisdictions that legislate on the topic of anti-human trafficking. The newest of these is the amendment to the Federal Acquisition Regulation in the United States. The other two are California's Transparency in the Supply Chain Act and the UK Modern Slavery Act 2015.

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CHAPTER 1 FEDERAL

ACQUISITIONS REGULATION.

ANTI-HUMAN TRAFFICKING: EVERYTHING YOUR COMPANY NEEDS TO KNOW

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The amendments follow the January 29, 2015 publication of a final rule implementing Executive Order 13627, entitled "Strengthening Protections Against Trafficking in Persons in Federal Contracts," and title XVII of the National Defense Authorization Act of 2013, entitled "Ending Trafficking in Government Contracting."

Human trafficking is defined as the use of force, fraud, or coercion for the purpose of obtaining labor. According to the U.S. Department of Labor, nearly 21 million people around the world are the victims of forced labor.

Forced labor can occur in any industry. It is especially prevalent in industries that require low-skilled labor or jobs that are hidden from public view, including agriculture, mining, and domestic service. The dynamics of global production have increased worker vulnerability to forced labor. For instance, buyer pressure on suppliers to keep prices low and to complete orders quickly can lead them to rely on excessively long schedules and, in some cases, forced overtime. Prompted by the United States' extensive diplomatic, defense, and development activities around the world, the government has sought to reduce the risk that government contractors will engage in activities that promote or allow human trafficking, such as utilizing labor recruiters who charge placement and/or other fees to foreign workers.

FEDERAL ACQUISITION REGULATION

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1. Minimum DisclosuresContractors and subcontractors are prohibitedfrom using misleading or fraudulent practicesduring the recruitment of employees or offeringof employment. Such practices include failingto disclose the key terms and conditions ofemployment — including wages, benefits, thelocation of work, living conditions, housing,significant costs, and hazardous working condi-tions — in a language the employeecan understand.

2. Limitations on RecruitersContractors and subcontractors may not userecruiters who do not comply with local laborlaws or who charge recruiting fees.

3. Return TransportationAt the end of employment, contractors andsubcontractors generally must reimburse the

To ensure adherence to these requirements, the amendments mandate contractors notify their employees and agents of the government's anti-trafficking policy and the penalties for non-compliance with that policy, which include removal from the contract, reduction in benefits, and termination of employment. The amendments also require contractors to cooperate fully with any trafficking-related investigations and immediately notify the contracting officer and appropriate agency inspector general of any "credible information" regarding violations by an employee, subcontractor, subcontractor employee, or subcontractor agent. The regulations define "agent" to include independent contractors.

cost of return transportation for employees who are not nationals of the country where they are working, and who were brought to that country for the purpose of working on a U.S. government contract or subcontract.

4. Housing StandardsWhen contractors and subcontractors provideor arrange housing for their employees, unitsmust meet the host country's housing andsafety standards.

5. Written AgreementsContractors and subcontractors must provideemployment contracts, recruitment agreements, and other required work documents, in writing,in a language the employee understands.These documents must include certaininformation about the employee's wages,work, and rights.

REQUIREMENTS FOR ALL CONTRACTORS:

The amendments alter FAR 22.1700 and FAR 52.222-50 to impose the following employment-related requirements on all contractors and subcontractors:

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COMPLIANCE PLAN & CERTIFICATION REQUIREMENTS FOR CERTAIN CONTRACTORS

1. Awareness ProgramContractors and subcontractors must informtheir employees about the government's policyof prohibiting trafficking-related activities,what actions are prohibited, and the penaltiesfor violations.

2. Reporting ProcessContractors and subcontractors must create aprocess whereby employees can report, withoutfear of retaliation, any activities that violate thegovernment's anti-trafficking policy.

3. Recruitment and Wage PlanPlans must only allow the use of recruitingcompanies that have trained employees,prohibit employee recruitment fees, and ensure

that wages meet the host country's legal requirements. The regulations do not specify what type of training is required.

4. Housing PlanIf the contractor or subcontractor providesor arranges for employees' housing, plansmust ensure the units meet the host coun-try's housing and safety standards.

5. Procedures to Prevent Agents &Subcontractors from Engaging in TraffickingPlans must outline procedures for monitoring, detecting, and terminating any agents orsubcontractor employees who engage intrafficking activities.

Compliance plans must be "appropriate" to the size and complexity of the contract, and the nature and scope of the activities to be performed for the government, including the number of foreign citizens to be employed and the risk that the contract or subcontract will involve supplies or services susceptible to trafficking. Beyond the minimum requirements outlined above, the regulations provide no guidance to aid contractors and subcontractors in determining what qualifies as an "appropriate" compliance plan. Contractors and subcontractors must post the contents of their compliance plans at the workplace and on their websites by the contract’s start date.

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Before receiving a contract award, and annually thereafter, the contractor must certify they have implemented a compliance plan that meets the minimum requirements outlined above. Additionally, after conducting due diligence, contractors must certify that neither the contractor nor its agents, subcontractors, or subcontractors' agents, are engaged in trafficking-related activities and that the contractor has taken appropriate remedial and reporting actions if it has discovered any such activities. In turn, contractors must obtain such certification from their subcontractors. This includes subcontractors that provide supplies for use in the performance of the prime contract, if the subcontractors acquire those supplies abroad, the value of the supplies exceeds $500,000, and the supplies are not commercially available, off-the-shelf items.

The new anti-trafficking regulations apply only to new solicitations as of March 2, 2015, and indefinite-delivery/indefinite-quantity contracts if future orders are anticipated. Contractors and subcontractors should ensure they adhere to the amendments' anti-trafficking safeguards when they recruit, hire, and terminate employees. To comply with the amendments' notification requirements, employers should update their employee handbooks to reflect the government's anti-trafficking policy and the penalties for non-compliance.

Contractors awarded contracts to provide supplies acquired abroad, or perform services abroad that

are valued over $500,000, must develop plans to comply with the anti-trafficking regulations and certify their compliance on an annual basis. Contractors that are not required to do so should still consider implementing a compliance plan or awareness program. Doing so allows them to take advantage of mitigated penalties in the event they are found to have violated the regulations.

Contractors should exercise due diligence to uncover violations of the anti-trafficking regulations and immediately report any misconduct.

NEXT STEPS

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CHAPTER 2 THE UNITED

KINGDOM MODERN

SLAVERY ACT 2015.

ANTI-HUMAN TRAFFICKING: EVERYTHING YOUR COMPANY NEEDS TO KNOW

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and the steps it has taken to assess and manage that vulnerability.

» Its effectiveness in ensuring that slaveryand human trafficking is not taking placein its business or supply chains, measuredagainst such performance indicators as itconsiders appropriate.

» Slavery and human trafficking trainingavailable to its staff.

» The organization's structure, its businessand its supply chains.

» Its policies in relation to slavery andhuman trafficking.

» Its due diligence processes regardingslavery and human trafficking in its busi-ness and supply chains.

» The parts of its business and supply chainsvulnerable to slavery and human trafficking,

THE UNITED KINGDOM MODERN SLAVERY ACT 2015

The United Kingdom recently enacted the Modern Slavery Act 2015, the first law in Europe aimed at eliminating modern slavery and human trafficking from supply chains. The Act takes effect in October 2015.

ANNUAL STATEMENT REQUIRED

This Act requires companies to produce a "slavery and human trafficking statement" each financial year, disclosing their efforts (or lack thereof) to ensure their supply chains are free from slavery and human trafficking. The statute suggests the statement include information about:

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WHAT ORGANIZATIONS ARE COVERED?

The requirement to create a slavery and human trafficking statement applies to large companies and partnerships that meet the £36 million threshold, that carry on any business or part of a business anywhere in the United Kingdom. The threshold applies to global turnover, not just turnover in the UK, so a U.S.-based company that meets the turnover threshold based on global operations could be covered, even if it conducts only a small amount of business in the UK. The Act is broader than its California version, the Transparency in Supply Chains Act of 2010, which took effect in 2012. The Transparency in Supply Chains Act applies only to retail and manufacturing companies, while the UK Act applies to businesses that supply either goods or services.

WHAT IS REQUIRED?

If a covered business has a website, it must publish the slavery and human trafficking statement on that website and include a link to it in a prominent place on the homepage. If the company does not have a website, it must provide a copy of the statement within30 days to anyone who makes a written request.

WHAT ARE THE CONSEQUENCES?

If a business fails to produce a slavery and human trafficking statement for a particular financial year, the Secretary of State may seek an injunction through the High Court requiring the organization to comply.

Failing to comply with the injunction will place the organization in contempt of a court order, which is punishable by an unlimited fine.

Non-compliance is defined as failing to produce a statement, publish it on a website, or not taking appropriate steps during the relevant financial year. This can include takingno steps, or only beginning investigations into reports of modern slavery within the organization or its supply chain.

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require a certain standard be met. Although a generic statement that the organization does not participate in an anti-human trafficking or slavery program is perfectly legal, it is not be the best approach and may even miss a competitive opportunity.

• Consider whether stakeholders – such asleadership, the organization's public relationsteam, marketing, the board, and employeerepresentatives – should be consulted aboutthe approach. In addition, identify whichexternal advisors could contribute to or supportthis approach.

• Consider what due diligence steps might beapplicable in the context of the types of implicatedsupply chains, and what kind of training wouldbe appropriate, if any.

• Appoint someone within the organization tobe in charge of bringing the company intocompliance with the new responsibilities underthis law.

• Determine which parts of the business arecovered. This assessment may not be entirelyclear until the Secretary of State issues regulationsand guidance (e.g. to indicate what the annualturnover threshold trigger will be, and whetherwholly-owned subsidiaries will be covered).

• Analyze who and where suppliers and contractorsare, how they operate, and prioritize thoseinvolving a higher potential risk.

• Define the approach to be taken regardingthe "slavery and human trafficking statement"requirement. The statement’s scope can impactthe business's reputation and may be a competitivefactor with respect to customers, some of whom

RECOMMENDED FIRST STEPS

RECOMMENDED FIRST STEPS

Assuming an organization's global turnover meets the £36 million threshold, some recommendations for initial steps are as follows:

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CHAPTER 3 CALIFORNIA

TRANSPARENCY IN SUPPLY

CHAINS ACT.

ANTI-HUMAN TRAFFICKING: EVERYTHING YOUR COMPANY NEEDS TO KNOW

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CALIFORNIA TRANSPARENCY IN SUPPLY CHAINS ACT

Responding to a stated concern over human trafficking and goods that are produced by forced or child labor, the California Legislature passed the California Transparency in Supply Chains Act of 2010 with the goal of "ensuring large retailers and manufacturers provide consumers with information regarding their efforts to eradicate slavery and human trafficking from their supply chains." This is the first state or federal law of its kind. Since January 1, 2012, every retailer and manufacturer doing business in California, with annual worldwide gross receipts exceeding $100 million, have been required to conspicuously disclose on its website the extent to which it does the following:

• Engages in third-party verification of its supplychains to evaluate and address the risk oftrafficking and forced labor.

• Conducts independent, unannounced audits ofits suppliers to evaluate their compliance withcompany standards for trafficking and forcedlabor in its supply chains.

• Requires suppliers to certify that materialsincorporated into the product comply withlocal laws on trafficking and forced labor.

• Maintains internal accountability standardsand procedures for employees and contractorsfailing to meet company standards regardingtrafficking and forced labor.

• Provides training on trafficking and forced laborissues to employees with direct responsibilityfor supply chain management.

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If the entity subject to the law does not have a website, it must provide a written disclosure within 30 days of receiving a disclosure request.

statute can be the basis of an unfair business practice claim. The law requires the FTB to provide the Attorney General with an annual list of applicable companies by November 30 of the year following the tax year at issue. In other words, it is possible that entities deemed covered by the law in 2012 will not be disclosed to the Attorney General until November 2016.

The law came about in part because of the efforts of actress Julia Ormond, who sponsored the bill following a campaign by a group called Chain Store Reaction. Chain Store Reaction sent questionnaires to various companies asking what tangible actions they take to combat slavery and human trafficking. For example, do the companies require suppliers to follow local laws on slavery?

Covered retailers and manufacturers are those entities reporting their primary business activity on their FTB returns as retail trade or manufacturing. This excludes, for example, wholesalers. Entities doing business in California are essentially those entities required to file tax returns with the FTB. Whether an entity has global gross annual receipts in excess of $100 million is determined by the amount disclosed on its tax return.

The law provides that it can only be enforced by the Attorney General through injunctive relief, but also expressly does not limit remedies available under other state and federal laws. Accordingly, it is possible that private parties could sue for violations under California's unfair competition law, which provides that a violation of any other

Covered entities:

DO BUSINESS IN CALIFORNIA

HAVE ANNUAL WORLDWIDE GROSS RECEIPTS EXCEEDING

$100 MILLION

and are defined by the entity's filings with the California Franchise Tax Board

(FTB).

ARE RETAILERS OR MANUFACTURERS

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Do they participate in pilot programs on responsibly sourced products, or donate to anti-slavery charities?

According to Chain Store Reaction, over 90 percent of the companies contacted never responded to the questionnaire. Most that did respond sent a form letter. This alleged lack of responsiveness led to the efforts to enact the California law.

The background and details of the law are telling – the law only requires disclosure of the extentto which entities perform the listed items. It doesnot require them to actually take such action. Forexample, entities have to disclose whether or notthey engage in third-party verification of supplychains, but they do not actually have to engage in

that verification. An entity could indicate that it does none of these things and be in full compli-ance with the law, although the entity may have subsequent public relations concerns to address.

The law requires the disclosures be accessible through a "conspicuous and an easily understood link" on the entity's homepage, but does not define those terms. This requirement has caused confu-sion – is it acceptable to post the disclosures in a larger corporate social responsibility section of the website? Does the homepage link have to expressly reference the California law? The California Attorney General's Office has provided guidance on this issue in a 2015 release.

CHAPTER 4 COMPLIANCE

PROGRAM FOR ANTI-HUMAN TRAFFICKING.

ANTI-HUMAN TRAFFICKING: EVERYTHING YOUR COMPANY NEEDS TO KNOW 19

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1. Policy CreationCompanies should organize senior management,with the potential involvement of outsidecounsel, and develop a policy on combatinghuman trafficking in the supply chain. Once thispolicy has been developed, it needs to becomea public communication on the company’swebsite and also included in their complianceplan (if required).

2. Awareness ProgramThe policy needs to be clearly communicatedto the company’s employees and supply chain.For due diligence purposes, the awareness pro-gram should include methodologies to capturedata that proves the appropriate individualswithin the supply chain have reviewed andunderstood the issue of human trafficking andhow the policy addresses the issue.

3. Reporting HotlineThe policy needs to ensure that any employeecan report on potential risk or incident of humantrafficking and be completely free from reprisal. The reporting mechanism needs to take intoaccount, if applicable, the language and

technological accessibility of the company’semployees.

4. Supply Chain Risk AssessmentA company needs to continuously assess theirsupply chain for risk of human trafficking.The risk assessment must be consistent andsupported by industry accepted content andsubject matter expertise. The risk assessmentmay lead to further supply chain humantrafficking mitigation activities.

Program implementations to meet the needs of eliminating human trafficking in the supply chain include:

COMPLIANCE PROGRAM FOR ANTI-HUMAN TRAFFICKING

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program. Enforcement authorities will need to see the details of each step taken place by an organization, including the decision process of the organization on how they will manage and report the incident. The Assent incident case manager applies workflow for timely and effective incident management to ensure all corrective actions are implemented.

8. Continuous ImprovementIndustry recommendation is to utilize softwareprograms to efficiently capture all aspectswithin a single platform, thereby making iteasy to manage the complex issues of today’ssupply chains. Utilizing a software platform willprovide clear metrics for program improvementshighlighting training effectiveness, incidentreductions, timely corrective action implemen-tation, and other key performance indicators.

5. Mitigation ActivitiesThe program needs to implement and capture allmitigation activities that have been implementedto reduce the risk of human trafficking identifiedin any risk assessment. This may include, but isnot limited to, auditing, documentation control,training, supplier remediation, and other methodsto reduce the risk of human trafficking.

6. Due DiligenceA company needs to show that it has takenappropriate measures in combating humantrafficking. This includes the efforts of thesupply chain. The efficient way to do thisis utilize a supply chain software portal forcollecting survey/questionnaire data from thesupply chain, automating the validation, andcreating appropriate data reporting to capturenext steps in due diligence

7. Incident ManagementIf an incident of human trafficking or potentialhuman trafficking occurs, the entire processmust be managed through an auditable

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Understanding these regulations is the first step in creating a catch-all compliance program. Once companies have completed their regulatory assessment, they can begin work on the creation and implementation of a compliance plan. At this point, industry standards suggest the use of a software platform to manage the large number of suppliers and staff that will be surveyed or have training administered. The platform requires an LMS, survey administration, risk profiles, and a variety of other features that ensure compliance with each of the three anti-human trafficking regulations.

California Transparency in the Supply Chain Act

US Federal Acquisition Regula-

tions, Executive Order 13627

Anti-Human Tra�cking

Compliance Program

UK ModernSlavery Act 2015

Mitigation & Incident

Improvement

Survey Risk Assessment Due Diligence

Policy Awareness

Hotline

http://assentcompliance.com/blog/index.php/compliance-software-vendor-sourcing-guide/

DOWNLOADHERE

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If you’ve determined that compliance automation might be a fit with your company, what are the next steps to take? You should look at assembling an RFP, RFI, or start surveying compliance vendors at a broad level.

WE CAN HELP:

Considering sourcing a compliance vendor for software or services?Then our Complete Guide to Vendor Sourcing is a must read.

At Assent we’ve been through our share of RFP’s, RFI’s—worked with third party consultants through the vendor sourcing maze—and generally have extensive knowledge in the compliance vendor space (mostly because we feel we’re the best one). We’ve assembled this eBook based on industry best practices, client feedback, in-depth research, and decades of compliance experience.

CHAPTERS INCLUDE:

Introduction: The Innovators Dilemma and Your Compliance Vendor

Assent Compliance Corporate Overview

Chapter 1: Planning For Expansion – Getting a solution that scales

Chapter 2: Vendor Sourcing Best Practices – Lessons From Conflict Minerals

Chapter 3: The Pitfalls of Supplier Paid Models

Chapter 4: Compliance and Big Data

Chapter 5: Compliance and Professional Services

Chapter 6: A Business Case For Compliance

Chapter 7: A Competitive Vendor Review

WHAT'S NEXT?

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CHAPTER 5 ABOUT

ASSENTCOMPLIANCE.

ANTI-HUMAN TRAFFICKING: EVERYTHING YOUR COMPANY NEEDS TO KNOW

25ANTI-HUMAN TRAFFICKING: EVERYTHING YOUR COMPANY NEEDS TO KNOW

We’re here to help our clients comply with environmental regulations in the most efficient and cost effective manner possible. This is achieved through SaaS automation of processes and working with our clients to build efficient internal compliance programs that meet global compliance requirements.

Assent delivers SaaS Environmental Compliance Services to companies that must comply with local, national, & global environmental regulations. Our software division is fully supported by a team of highly experienced industry consultants providing our clients with turnkey compliance solutions.

OUR MISSION

WHO ISASSENT

?

Assent Compliance is rated among the top environmental compliance solutions in the world. Not to mention it’s one of the only global solution providers to offer a full service solution from end to end.

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HOW THE ASSENT COMPLIANCEMANAGEMENT SYSTEM WORKS

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OUR CLIENTS

SERVICES WE OFFER

Environmental Compliance Software for Conflict Minerals, REACH, RoHS etc.

Internal Standard Operating Procedure Development

Compliance Outsourcing ServicesCompliance Assessment Services

Compliance Plan DevelopmentIT System Integration

Assent serves clients ranging from Small Business to Fortune 500. In global supply chains companies of all sizes must comply with environmental regulations. Regardless of size, Assent has products and services to help any sized company meet their environmental compliance obligations.

28ANTI-HUMAN TRAFFICKING: EVERYTHING YOUR COMPANY NEEDS TO KNOW

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