Understanding the California Transparency in Supply Chains Act & How to Comply

Modern slavery and human trafficking remain widespread problems in global supply chains, especially in industries like manufacturing, agriculture, and electronics. Many workers are exploited through debt bondage, withheld wages, or threats, often deep within supply chains where oversight is weak.

As such, organizations are under growing pressure to be transparent about how they manage the risks of human trafficking and forced labor in their supply chains. The California Transparency in Supply Chains Act is one of several laws worldwide that require companies to publicly report on their efforts and increase visibility into forced labor risks by requiring disclosure of policies and practices.

Here, we’ll explore what the California Transparency Act requires, how it impacts your business, and what steps you can take to comply. It also covers best practices for training, supplier oversight, and risk management so your business can strengthen its supply chain practices while meeting legal obligations.

What is the California Transparency in Supply Chains Act?

The California Transparency in Supply Chains Act (CTSCA) mandates large businesses to disclose their company standards and actions aimed at preventing human trafficking and forced labor within their product supply chains. It applies to retailers and manufacturers generating over $100 million in global revenue and conducting business in California. Even if you already have ethical sourcing policies in place, the Act necessitates that these efforts are documented and made publicly accessible.

The goal of CTSCA is to provide consumers and investors with visibility into how organizations address labor risks. Businesses must publicly report on five key areas: supply chain verification, supplier audits, certifications, internal accountability, and training programs. These disclosures must be easily accessible on an organization’s website.

The CTSCA is not a law that forces organizations to take specific actions. Rather, it requires transparency. This means businesses can choose how they handle labor risks, but they can’t hide weak or non-existent efforts. If an organization does nothing, it must state that publicly.

CTSCA is part of a broader trend. Governments are increasing supply chain oversight, and consumers expect clear, honest reporting. Organizations that take transparency seriously reduce legal risks, avoid reputational damage, and build trust with customers and investors. These laws don’t just affect compliance; they shape customer and investor expectations. Many organizations are now asked to go beyond simple disclosure and take meaningful action to improve labor conditions.

CA Transparency Act: The Five Areas of Disclosure

California businesses that fall under the scope of CTSCA must disclose their efforts to combat human trafficking and forced labor across five key areas. These disclosures must be publicly available on the organization’s website, providing clear and honest reporting on supply chain policies and practices.

1. Supply Chain Verification

CTSCA requires organizations to disclose whether and how they verify their supply chains for risks related to human trafficking and forced labor. This includes:

Identifying high-risk regions and industries where forced labor is more common
Using data and third-party risk assessments to evaluate supplier practices
Working with human rights organizations or supply chain experts to improve oversight

CTSCA does not require organizations to conduct risk assessments, but if they do, they must disclose how these assessments are performed.

2. Supplier Audits

Organizations must report on whether they audit their suppliers for compliance with anti-slavery policies. If audits are conducted, they should disclose:

Who performs them, such as internal teams or independent third parties
Whether they are announced or unannounced. Unannounced audits are often more effective
What happens if suppliers fail audits, such as corrective actions or termination of contracts

Audits are a key tool for identifying forced labor risks, but CTSCA does not require them. Organizations must simply state whether they conduct audits and how they are performed.

3. Supplier Certifications

Organizations must disclose whether they require direct suppliers to certify compliance with applicable labor laws. This could include:

Contractual clauses that require suppliers to follow specified regulations
Verification processes to check whether certifications are accurate
Formal statements from suppliers confirming that their materials and labor practices comply with applicable local and international laws

This requirement is designed to hold suppliers accountable, but it does not guarantee ethical sourcing. The onus is on organizations to actively monitor and enforce compliance.

4. Internal Accountability

Organizations must explain how they enforce anti-trafficking policies within their operations. Examples of how this might be achieved include:

Consequences for employees or contractors who violate supply chain policies
Whistleblower protections that allow workers to report unethical practices without retaliation
Clear enforcement mechanisms, such as internal investigations or disciplinary actions

Organizations that lack clear accountability structures may struggle to detect and respond to labor abuses. CTSCA requires businesses to outline what actions they take when violations occur.

5. Training Programs

As we’ll explore in more detail below, the CTSCA requires organizations to report whether they provide training for employees and management responsible for supply chain oversight. Training typically covers:

How to recognize forced labor risks in supplier operations
Steps to mitigate trafficking risks, including ethical recruitment practices
Internal reporting procedures for suspected violations

Effective training helps procurement teams identify warning signs of forced labor and take action before issues escalate. While CTSCA does not mandate specific training content, organizations must disclose whether they provide education and what it includes.

Training Requirements Under the CA Transparency Act

As we’ve already discussed, the CTSCA doesn’t mandate organizations to provide training. It simply requires that organizations disclose whether they do (or don’t) provide training on human trafficking and forced labor. However, there are obvious benefits to providing training. Training programs help employees recognize forced labor risks, conduct due diligence, and respond effectively to human rights violations. Without proper training, businesses may struggle to identify unethical labor practices, increasing legal and reputational risks.

Who Should Receive CTSCA Training?

CTSCA focuses on employees who are responsible for supply chain management or oversight. This includes supply chain managers but might also include employees on procurement teams, compliance officers, legal teams, and employees involved in corporate social responsibility (CSR). Training should be tailored to each role. For example, procurement teams need practical knowledge on spotting red flags in supplier contracts, while legal teams focus on compliance requirements.

Topics to Cover in CTSCA Training

CTSCA training should equip employees with the skills to identify, mitigate, and respond to forced labor risks in supply chains. Key topics include recognizing human trafficking indicators such as recruitment abuses, withheld wages, restricted movement, false documentation, and excessive overtime.

Employees must also understand due diligence practices, including how to conduct supplier assessments, use independent audits, and apply contractual safeguards that hold suppliers accountable. Training should also cover how to respond when labor violations are found, outlining internal reporting channels, corrective action plans, and legal and reputational risks.

Challenges & Best Practices in CTSCA Compliance

Bringing operations in line with CTSCA requirements is not always straightforward. Many organizations struggle with tracking forced labor risks across complex supply chains, managing supplier relationships, and ensuring their disclosures meet legal and stakeholder expectations. While the law requires transparency, organizations must also take meaningful steps to strengthen ethical sourcing practices.

Common Pitfalls and Challenges

One of the biggest hurdles is the lack of supply chain visibility, especially beyond Tier 1 suppliers. Many businesses rely on subcontractors or multiple layers of suppliers, making it difficult to monitor working conditions at the source. Without full transparency, forced labor risks can go undetected.

Resource constraints pose another challenge, particularly for small and mid-sized suppliers. Many businesses operate with limited compliance teams and budgets. This makes it hard to conduct in-depth audits or implement advanced monitoring tools.

Cultural and legal barriers further complicate compliance efforts. Different regions have varying labor laws, enforcement standards, and social norms around worker protection. Some countries lack clear regulations on forced labor, making it harder for organizations to enforce ethical sourcing policies across global supply chains.

Best Practice Guidance

Organizations can strengthen their CTSCA compliance efforts by adopting tech that improves supply chain visibility. Blockchain tracking, AI-powered risk assessments, and digital supplier platforms help businesses monitor sourcing practices in real time and identify high-risk areas before issues escalate.

Third-party audits enhance credibility by providing independent verification of supplier compliance. Regular, unannounced audits and worker interviews give a clearer picture of labor conditions. Organizations that rely solely on self-reported supplier data risk overlooking hidden labor abuses.

Supplier engagement and incentives encourage compliance at all levels of the supply chain. Businesses can provide suppliers with training, resources, and financial incentives to adopt stronger labor protections. Some organizations integrate compliance into procurement contracts, rewarding ethical suppliers with long-term partnerships.

Legal & Reputational Risks of Non-Compliance

CTSCA does not impose any direct financial penalties for non-compliance, but that does not mean you can ignore it without consequences.

Failing to meet disclosure requirements can lead to legal action, reputational harm, and loss of consumer and investor trust. While there are no financial penalties, the California Attorney General can take legal action against non-compliant organizations in the form of an injunction forcing them to publish the required disclosure. This may seem minor, but legal action can attract unwanted attention from the media and harm your reputation.

Don’t underestimate the power of consumers, either. Boycotts happen, and today’s more socially aware consumers expect the brands they buy from to be transparent about ethical sourcing. If a business is exposed for weak labor policies – or hiding forced labor in its supply chain – it risks losing customer trust. Investors are also increasingly factoring ESG risks into their decisions.

Ensure Supply Chain Transparency with EcoVadis

Identifying and addressing human rights risks in your supply chain requires the right tools and insights. EcoVadis IQ Plus risk management solution helps segment suppliers and pinpoint high-risk areas. Train your team and trading partners on key sustainability topics, including labor and human rights, through the EcoVadis Training Partner program and EcoVadis Academy, and drive supplier improvements with targeted Corrective Action Plans. Monitor supplier performance, track action plans, and streamline reporting using built-in disclosure capabilities.

Take the next step in responsible supply chain management – start with EcoVadis today.