Nathan's Statement on California Transparency in Supply Chain Act Disclosure Statement (SB 657)

A. INTRODUCTION

“Human Trafficking is a crime against humanity. It involves an act of recruiting, transporting, transferring, harbouring or receiving a person through a use of force, coercion or other means, for the purpose of exploiting them.” – United Nations Office on Drugs and Crime

“If we want to make a significant change in the lives of the 21 million men, women and children in forced labour, we need to take concrete and immediate action.” “That means working with governments to strengthen law, policy and enforcement, with employers to strengthen their due diligence against forced labour, including in their supply chains, and with trade unions to represent and empower those at risk.” – The ILO Director General

1.    Human Trafficking Background

Human trafficking is the second most prevalent form of illegal trade in the world, just after the illicit drug trade and equal to the sale of illegal arms. Sometimes referred to as modern day slavery, it is also the fastest growing illegal business in the world.

According to International Labor Organization (ILO) data, there are nearly 21 million forced labor victims and 9.1 million human trafficking victims worldwide. Men are affected, but women and children are particularly vulnerable.2 These crimes affect nearly every country in the world, and are unbounded by industry or sector.

Human trafficking in any industry is a result of poverty and a lack of education, government action and political will. It’s often thought of as a problem in the illegal sex trade, but human trafficking can be found in garment factories, fabric and trim mills, and farms in the supply chain. Factories that use third-party labor brokers or unmonitored subcontractors are particularly susceptible. Even in the United States, where foreign migrant workers may seek employment through third-party brokers, factories sometimes employ human trafficking victims.

2.    Cal. Civ. Code § 1714.43 (SB 657) - California Transparency in Supply Chains Act (“the Act”)

Beginning January 1, 2012, the Act “require(s) all retail sellers and manufacturers doing business in the state to disclose their efforts to eradicate slavery and human trafficking from their direct supply for tangible goods offered for sale.” The Act helps consumers make informed purchasing decisions by providing them with information on the efforts that companies are taking to ensure their products are not made under slavery or trafficking conditions.

The Act applies to all retailers or manufacturers doing business in the state of California with greater than $100 million in annual worldwide gross receipts, and affects thousands of businesses with operations in the state. It is important to note that the act does not regulate a company’s labor practices, but instead requires businesses to disclose practices in five distinct areas: Verification, Audit, Certification, Internal Accountability and Training.

United Sports Brands, as a California business, is required to disclose our efforts. We are committed to sharing the practices we use to detect, mitigate, and remediate forced labor and human trafficking in our business operations.

This statement was written following The California Transparency in Supply Chains Act – Resource Guide published by the State Attorney General.

3.    United Sports Brands

United Sports Brands is a portfolio of leading, category-defining sporting goods brands, each rich in heritage and authenticity. Shock Doctor, McDavid, Cutters, and NATHAN products are sold at top retailers in more than 65 countries around the world. With global headquarters in Southern California, United Sports Brands also has regional offices in Belgium, Japan and Canada.

4.    United Sports Brands Policy on Forced Labor

United Sports Brands prohibits forced labor and human trafficking in all of its forms in our supply chain. When we evaluate potential new factory partners, we will not place purchase orders if we find forced labor. If we find forced labor in one of our existing partners’ factories, that factory is subject to our escalation policy, including a remediation plan to demonstrate commitment to eradicating the practice at issue. In all cases, where a factory is a part of United Sports Brand’s supply chain, incidences or conditions contributing to slavery or human trafficking are grounds to end business relations if not eliminated.

We fully support the efforts of a growing number of anti-slavery activist groups, nongovernmental organizations (NGO’s), and our state and federal government to shed light on human trafficking, slavery, and child labor in the supply chain. We are hopeful that these and other human rights concerns will continue to receive attention and analysis in the public and private spheres.  

B. DISCLOSURE of UNITED SPORTS BRANDS PURSUANT TO THE CALIFORNIA TRANSPARENCY IN SUPPLY CHAINS ACT

Focusing on the five topic areas covered in the California Transparency Act, our statement discloses how we monitor our supply chain for child labor and all forms of forced labor, including slavery and human trafficking.

1. Verification

Requirement: “[D]isclose to what extent, if any, [the company]...[e]ngages in verification of product supply chains to evaluate and address risks of human trafficking and slavery. The disclosure shall specify if the verification was not conducted by a third party.”

a. Verification Protocols
United Sports Brands is committed to fair labor practices within our supply chain. We are a member of Sedex (Supplier Ethical Data Exchange), a global membership organization dedicated to driving improvements in ethical and responsible business practices in global supply chains. The purpose of this organization is to provide tools, services, and a community network to help companies improve their responsible and sustainable business practices and source responsibilty. Sedex convenes the Sedex Stakeholder Forum (SSF) that manages the ongoing development of SMETA (Sedex Members Ethical Trade Audit, one of the most widely used social audit procedures in the world).  
United Sports Brands instructs certain suppliers to obtain an audit from a United Sports Brands approved third-party social compliance audit program.  United Sports Brands currently accepts audits from internationally recognized third-party programs, including:

·         Best Aquaculture Practices (BAP)
·         Business Social Compliance Initiative (BSCI)
·         Better Work
·         Electronic Industry Citizenship Coalition (EICC)
·         International Council of Toy Industries CARE
·         Sedex Members Ethical Trade Audit (SMETA)
·         Social Accountability International (SA8000)
·         Worldwide Responsible Accredited Production (WRAP)

United Sports Brands and its Licensors also requires certain factories to also perform the Fair Labor Association (FLA) audit. The purpose of this organization is to improve working conditions in factories worldwide. The FLA Code of Conduct requires suppliers to prohibit any forms of forced labor, human trafficking, or child labor in the supply chain.

To maximize the reach of this program and to ensure checks-and-balances, we engage with third-party audit companies to conduct social compliance audits.  These skilled and experienced auditors identify abuses during audits, including interviews with workers and management, observational tours of the factory, documentation review and geographic and industry risk assessments. The approved audit programs include a robust section on child labor and migrant workers with specific questions that look for indications of human trafficking.

b)    Frequency
The frequency of social compliance audits varies depending on the previous audit results and risk assessment from the audit. United Sports Brands tracks and records its direct suppliers and material manufacturers on an ongoing basis. In many cases United Sports Brands identifies the source factory that our finished goods factories must use.  New and existing suppliers submit mapping documents that their supply chain and are required to keep United Sports Brands abreast of any changes. United Sports Brands uses this information to identify sites that will be monitored throughout the duration of our relationship with the supplier.

All new factories undergo a pre-sourcing screening and only when a factory is able to satisfactorily meet our standards can orders be placed.

c)    Labor Brokers
The use of labor brokers to hire migrant workers increases the risk of human trafficking and forced labor. In recognition of this, we have taken concrete steps to improve identification of the presence of labor brokers in our supply chain through our social audit programs. Our social audits includes sections devoted to uncovering and understanding labor broker participation while our worker and management interview protocol covers questions on the recruitment process that would reveal whether a labor broker was involved and any fees paid to the labor broker(s) in the sending and receiving country which could contribute to a human trafficking situation.

2. Supplier Audits

Requirement: “[D]isclose to what extent, if any, [the company]... [c]onducts audits of suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains. The disclosure shall specify if the verification was not an independent, unannounced audit.”

a)    Audit Methodology
United Sports Brands currently accepts audits from the internationally recognized third-party programs listed in Section 1A. These programs have clear and specific standards to prevent the occurrence of forced labor and child labor. These standards relate to ethical recruitment, labor broker due diligence, human resource policies, record inspection and tracking.
In all social audits, we employ a triangulation method for detecting and substantiating findings which consists of:

1.    Interviews with management and a diverse set of workers from various departments. We will also interview migrant workers in their native language and labor brokers in the destination country, as applicable.

2.    In-depth review of documents that may signal forced labor or debt bondage such as proof of age, payroll, time records, production records, disciplinary notices, grievances, employment contracts, human resource policies and personnel files.

3.    Visual observations throughout the audit and particularly during the factory tour and health and safety walkthrough.

b)    Audit Statistics

Pre-sourcing
United Sports Brands conducts prescreening audits for all new finished goods factories prior to initiating purchase orders.

Sourcing
Our third-party audits are conducted by independent third-party audit companies predominantly by appointment with the factory. We use this approach as it conveys our desire to build trust and an equal partnership. To identify problem factories, we rely on the professional skills, extensive experience and expertise of third-party auditors; the robustness of internationally recognized third-party programs methodologies; and our factory pre-screening process. Depending on the outcome of risk assessments and/or audit planning, prior notice of the audit may or may not be given.

c)    Auditor Information
United Sports Brands monitors suppliers using professional third parties.
If human rights abuses are detected, the problems will be escalated internally, and immediate action is taken. In these cases, our independent third-party auditors conduct a root cause analysis to uncover the underlying cause(s) of the violation to determine the best course of corrective action.

3) Certification
Requirement: “[D]isclose to what extent, if any, [the company]... [r]equires direct suppliers to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking of the country or countries in which they are doing business.”

a)    Certification Requirements
We feel that education and awareness can be the best form of prevention. All our direct suppliers are required to sign a United Sports Brands Supplier Code of Conduct statement (or licensor’s Supplier Code of Conduct statement) that certifies the materials incorporated into their products comply with slavery and human trafficking laws in the country or countries in which they do business. United Sports Brands also shares a summary from the FLA on SB 657 with direct suppliers.

b)    Accountability Efforts
Along with the compliance statement, certain suppliers are expected to be able to demonstrate their compliance as well. Verification of this happens during audits where certain suppliers are asked to present evidence, including, but not limited to: age documents, payroll and time records, production records, disciplinary notices, grievances, employment contracts, human resource policies, personnel files and training records. Interviews are also conducted with management and workers to substantiate the documents reviewed. Audits produce corrective actions in which the factories are required to reply in writing and take action to resolve said corrective actions. Major compliance issues could result in suspension of the factory or complete dismissal.

4) Internal Accountability
Requirement: “[D]isclose to what extent, if any, [the company]... [m]aintains internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking.”

a)    Identification of Policies
United Sports Brands prohibits any form of forced labor, including slavery and human trafficking. If this grave concern was to be found, the factory would be subject to our factory disciplinary policy. Disciplinary actions include immediate remediation and possible termination of business. Aside from serious zero tolerance issues, it is United Sports Brand’s policy to form long-term relationships and work with our contracted factories, in the spirit of continuous improvement.

b)    Worker Protections
Certain factories producing goods for United Sports Brands are required to post the United Sports Brands Supplier Code of Conduct visible to all workers. United Sports Brands also by contract adopts its Licensor’s Supplier Code of Conduct.

5) Training
Requirement: “[D]isclose to what extent, if any, [the company]... [p]rovides company employees and management, who have direct responsibility for supply chain management, training on human trafficking and slavery, particularly with respect to mitigating risks within the supply chains of products.”

Internal Training
Trainings on United Sports Brand’s social and environmental responsibility efforts and the issues affecting our industry are conducted throughout the year. We employ different training and communication methods to educate or update our employees including:

o    On a regular and as-needed basis we will conduct new hire trainings on our corporate responsibility program during employee orientations.
o    We create and distribute Frequently Asked Questions sheets on particular social or environmental issues. We have developed one on migrant worker issues and human trafficking that has been shared with staff who work directly with our suppliers.

External Training
All of our audited factories are informed of the Act as well as United Sports Brand’s Supplier Code of Conduct. United Sports Brands also shares a summary from the FLA on SB 657 with direct suppliers. Certain suppliers also receive education and training through the audit process of the internationally recognized third-party programs.

Personnel Being Trained
We have launched general training on SB 657 and human trafficking and slavery issues Focused and more in-depth training on these issues have been provided to key staff members who are in a prime position to help prevent, detect and/or remediate such issues. These staff members include:
•    The Senior Leadership Team
•    Directors and Managers that are involved in sourcing, product development and procurement who work directly with our suppliers

C. HELPFUL LINKS

Information on the CA Transparency in Supply Chains Act
•    California Transparency in Supply Chains Act - Department of Labor https://www.dol.gov/ilab/child-forced-labor/California-Transparency-in-Supply- Chains-Act.htm
•    California Transparency in Supply Chains Act – Law Language http://www.leginfo.ca.gov/pub/09-10/bill/sen/sb_0651- 0700/sb_657_bill_20100930_chaptered.pdf
•    The California Transparency in Supply Chains Act – A Resource Guide https://oag.ca.gov/sites/all/files/agweb/pdfs/sb657/resource-guide.pdf?

 

Information and Statistics on Human Trafficking - General
•    United Nations Office on Drugs and Crime https://www.unodc.org/unodc/en/human-trafficking/what-is-human-trafficking.html
•    US State Department, Office to Monitor and Combat Trafficking in Persons 2016 Trafficking in Person Report
http://www.state.gov/j/tip/rls/tiprpt/
•    Verité Help Wanted: Hiring, Human Trafficking and Modern Day Slavery in a Global Economy
http://www.verite.org/forced-labor
•    ILO Combating Forced Labor Employer’s Handbook http://www.ilo.org/sapfl/Informationresources/ILOPublications/lang--en/docName-- WCMS_101171/index.htm
•    Know the Chain https://www.knowthechain.org/
•    The Global Slavery Index http://www.globalslaveryindex.org/index/