Shining Light on Global Supply Chains

Abstract

This Article analyzes the effectiveness of emerging domestic legislation on global supply chain transparency with respect to human rights and labor practices. It draws from a quantitative and qualitative study of the implementation of recent U.S. conflict minerals legislation, section 1502 of the Dodd-Frank Financial Reform Act, which is driving global norms in this area and serving as a guide for comparable domestic legislation abroad. My analysis of section 1502 reveals a due diligence gap among firms, with only about 7% of companies reporting strong due diligence measures in their 2014 Conflict Minerals Reports. I also identify several factors that are inhibiting implementation of section 1502: (i) international norms on supply chain due diligence are in their infancy; (ii) the proliferation of certification standards and in-region sourcing initiatives are still evolving and often competing; and (iii) inadequate local security and weak governance are inhibiting the mapping of the mineral trade and the tracing of minerals in the region. While this Article argues that using domestic law to regulate global supply chains has the potential to significantly shape corporate behavior, the existing due diligence gap suggests that the shift to domestic governance is not going far enough. Given the challenges associated with extraterritorially regulating complex, multi-tiered supply chains, home states need to play a larger role in implementation to facilitate corporate compliance. In addition, companies need to invest in their internal culture to facilitate organizational learning around responsible supply chain management.

Keywords: global supply chains, conflict minerals, Dodd-Frank, corporate accountability, international law, global economic governance