Corporate Social Responsibility: Why Doing the Right Thing is Now a Legal Impera?ve

Transcription

1 Corporate Social Responsibility: Why Doing the Right Thing is Now a Legal Impera?ve January 8, Denver University T. Markus Funk, Partner at Perkins Coie mfunk@perkinscoie.com The opinions expressed in this presenta?on are those of the speaker and do not reflect the opinions, prac?ces or policies of the speaker s employers, nor do they cons?tute legal advice.

2 Corporate Social Responsibility What is it? And Why Is it Today s Compliance Hot Topic?

3 Slide Depicts Where Labor Trafficking is Most Prevalent 3

4 Where is Corrup?on Most Prevalent? Transparency Interna?onal Corrup?on Percep?ons Index Scale of 1 (poor reputa?on) to 10 (good reputa?on) 4

5 The Power of Naming and Shaming 5

6 The California Transparency in Supply Chains Act Disclosure Regime

7 The California Act Applies To Objec?ve is to help consumers disfnguish companies or the merits of their efforts to supply products free from threat of slavery and trafficking Applies to: 1) Retail manufacturer/seller of any product; 2) With annual gross worldwide receipts exceeding $100 million; 3) And are Doing business in California (property or salaries in California exceeding $50K) California Franchise Tax Board (FTB) provides list of companies to AG s Office 7

8 The California Act Requires Disclosure of your supply chain verificafon/audit results Disclosures must be on internet homepage Homepage disclosure must be through a conspicuous and easily understood link to full- text document (can t hide it) 8

9 The California Act Specifically Requires Disclosure of what you did to: Maintain internal accountability standards and procedures for those who fail to meet your standards Provide training to those with supply chain responsibility (focus on mifgafng supply chain risks and idenffying trafficking) Verify supply chain to evaluate/address risks of human trafficking and slavery Audit suppliers to evaluate compliance with your standards? Unannounced and through independent auditors? Obtain direct supplier cerfficafon that materials incorporated into goods comply with local anf- trafficking and slavery laws Net impact: ReporFng clean bill of health requires significant supply chain due diligence 9

10 What Can Happen if You Don t Comply? California AG Injunc?on But also Class Ac?ons - Consumers say they wouldn t have purchased a product if they knew it was tainted by trafficking? Consider recent cruelty free class acfon against Avon, Estee Lauder and Mary Kay CosmeFcs Advocacy Group Pressure - Hundreds of advocacy groups around world are targefng businesses Boyco]s Today s consumers are more acfvist Shareholder Proposals and Suits - CSR proposals have been largest class of Shareholder proposals for the last 3 years Federal Trade Commission Ac?on - DecepFve adverfsing theory 10

11 2014 Efforts to Reanimate H.R ( The Business Transparency on Trafficking and Slavery Act )

12 Advocates Pushing for Federal Legisla?on Applying to Companies that: 1) Are publicly traded; and 2) Have annual global receipts in excess of $100 million Annual filing with SEC of report Ftled Policies to Address Forced Labor, Slavery, Human Trafficking and the Worst Forms of Child Labor Disclosure contents largely mirror California Transparency in Supply Chains Act Disclosures Requirement of clean / untainted supply chain mirrors Kimberley Process 12

13 Want a Federal Contract? Join the U.S. Government s Global An?- Trafficking Fight

14 Execu?ve Order on Trafficking in Federal Contracts We re making clear that American tax dollars must never, ever be used to support the trafficking of human beings. We will have zero tolerance. We mean what we say. We will enforce it. President Obama, September 25,

15 Execu?ve Order on Trafficking in Federal Contracts (cont d) Why? Over 20 million men, women and children vicfms Third- party business partners (suppliers, agents, distributors, etc.) are #1 source of compliance liability How and When? Federal AcquisiFon RegulaFons (FAR) amended by October 2013 (today s best esfmate) Zero Tolerance CerFficaFons 15

16 Execu?ve Order on Trafficking in Federal Contracts (cont d) Impacts? Over 300,000 federal contractors and direct subcontractors must report anf- trafficking efforts Compliance also for suppliers and transacfon partners? Mandatory: 1) No trafficking acfvity in supply chain and 2) Agree to self- report and take remedial acfon if idenffy any acfvifes inconsistent with the ExecuFve Order 16

17 Execu?ve Order on Trafficking in Federal Contracts (cont d) Why Comply? Debarment Business death knell for non- compliance ( ) Imprisonment Knowing and willful false cerfficafon is a crime. Reckless disregard or conscious avoidance of truth qualify as knowing. Consequences include up to 5 years imprisonment & a $250K fine. False Claims Act Government Fraud (31 U.S.C. 3729) Class Ac?ons DecepFve adverfsing? FTC AcFon? Advocacy Group Pressure Hundreds of advocacy groups around world are targefng businesses. Consumer Boyco]s Few want products made with child or trafficked labor. Trafficking is today s hot topic. 17

18 How Companies Are (Or Should Be) Responding to the Supply Chain Risk Understand and Respond to spectrum of significant risks: governmental intervenfon; consumer boycors; class acfons; advocacy group pressure Root out bad actors through vesng and due diligence Control marginal actors through effecfve and focused training Be able to demonstrate effecfveness of efforts to government(s), consumers, shareholders, and advocates Conduct targeted pre- deal due diligence 18

19 Ques?ons?