Global Sustainability Regulations & How Your Business Can Comply
Key Global Sustainability Regulations
- As the world becomes more conscious, sustainability regulations that affect global businesses will only grow in prevalence, strictness, and consequence.
- Keeping up with these regulations - especially for multinational companies - can feel like a moving, but necessary target to protect and grow their business.
- We’ve created a quick “too long, didn’t read” (TL;DR) look at current, proposed, and upcoming regulations worldwide that may affect how you conduct business.
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Major US & EU Regulations
SEC Climate Reporting Proposal
TL;DR
The SEC Climate Reporting Proposal is a set of proposed rules (announced May 31, 2022) by the U.S. Securities and Exchange Commission that would enhance and standardize companies’ climate-related disclosures to investors.
Who would it affect?
All public companies in the United States.
How will companies comply?
In-scope companies will have to disclose emissions they are directly responsible for, as well as emissions from their supply chains and products, in addition to how they account for their GHG emissions, environmental risks they face, and actions they’re taking in response to their impact.
Uyghur Forced Labor Prevention Act (UFLPA)
TL;DR
The Uyghur Forced Labor Prevention Act (UFLPA), signed into law on December 23rd, 2021, and effective as of June 22nd, 2022, prohibits the importation of any goods produced fully or partially in the Xinjiang Region of China.
Who does it affect?
- Any business importing goods into the US.
- High-risk products include cotton, tomatoes, and polysilicon (found in solar panels and batteries)
How can companies comply?
- If goods suspected of whole or partial production from Xinjiang are detained at the border, companies have 30 - 60 days to show verifiable proof of provenance before their goods are discarded and any fines are imposed.
California Transparency in Supply Chains Act
TL;DR
- The California Transparency in Supply Chains Act requires large retailers and manufacturers doing business in California to disclose and annually report on their efforts to eradicate human trafficking and slavery from their direct supply chains publicly on their company websites.
Who does it affect?
- Retail sellers or manufacturers doing business in the State of California with annual worldwide gross receipts in excess of $100,000,000.
How can companies comply?
- In-scope companies must publish an annual report - publicly available on their website - that includes information on their efforts to:
- Evaluate and address risks of human rights abuses in their supply chains;
- Conduct supplier audits to evaluate compliance throughout their supply chains;
- Ensure internal accountability by establishing internal standards and procedures to handle non-compliance; and
- Provide internal training on human trafficking and modern slavery for supply chain employees.
Corporate Sustainability Reporting Directive (CSRD)
TL;DR
The Corporate Sustainability Reporting Directive (CSRD) - going into effect January 2024 - requires in-scope companies to disclose information on their sustainability practices and their impact on the environment and society. Germany, however, has begun enforcing this rule a year earlier.
Who will it affect?
Applies to large companies based in the EU or with an annual turnover of above €150 million in the EU.
- Companies meeting at least two of the following three conditions will have to comply with the CSRD:
- €40 million in net turnover
- €20 million in assets
- 250 or more employees
How will companies comply?
Providing more detailed reporting on sustainability issues, including environmental, social, and human rights. Reports must be certified by an accredited independent auditor or certifier and published in the company’s public reports.
Regulation on Deforestation-free Products
TL;DR
The Regulation on Deforestation-free Products requires companies sourcing coffee, cocoa, palm oil, soy, beef, and wood commodities (or derivatives of these commodities) to conduct due diligence on their supply chains to identify, prevent, and mitigate deforestation and forest degradation.
Who will it affect?
EU and non-EU companies doing business in the EU with over 500 employees AND sourcing commodities and/or their derivatives: Beef/ Leather, Palm Oil, Soya, Coffee, Cocoa/Chocolate, Wood/Furniture.
How will companies comply?
Companies must be able to prove “limited assurance” that their supply chains do not contribute to deforestation by October 1st, 2026, and “reasonable assurance” that their supply chains do not contribute to deforestation by October 1st, 2028.
*For a more in-depth look at all EU sustainability regulations that might affect your business, check out our blog: Business Guide to EU Sustainability Regulations.
AUSTRALIA
Modern Slavery Act
TL;DR
The Modern Slavery Act 2018 of Australia requires annual reporting by in-scope companies on the risks of modern slavery throughout supply chains, and the actions taken to address such risks.
Who does it affect?
Entities based or operating in Australia that have an annual consolidated revenue of more than $100 million.
How can companies comply?
Publishing their yearly report with supply chain visibility data to disprove any existence of modern slavery in their operations and supply chains.
CANADA
Forced Labor Reporting Law
TL;DR
Canada’s Forced Labor Reporting Law (Bill S-211) will require companies to submit a public annual report detailing the actions they have taken in the previous year to prevent and reduce forced and child labor risks in their supply chains.
Who does it affect?
Any company producing and selling goods in Canada, or importing goods produced outside of Canada into Canada.
How can companies comply?
In-scope companies must provide annual reports - approved by their governing body (i.e. board of directors) - which must include information on the company’s supply chains: policies, training, due diligence processes, and measures taken to manage risks in relation to forced and child labor.
FRANCE
Corporate Duty of Vigilance Law
TL;DR
France’s Corporate Duty of Vigilance Law - enacted in 2017 - requires French companies to publish annual “vigilance” plans.
Who does it affect?
French companies with more than 5,000 employees in the company's direct or indirect French-based subsidiaries, and with more than 10,000 employees if including direct and indirect subsidiaries globally.
How can companies comply?
Companies’ vigilance plans must identify all risks of human rights abuses and environmental impact from their activities, both direct and indirect, including actors throughout their entire supply chains.
GERMANY
Supply Chain Due Diligence Act (LkSG)
TL;DR
The German “Act on Corporate Due Diligence to Prevent Human Rights Violations in Supply Chains (LkSG)” - effective as of January 2023 - requires companies to ensure utmost protection of human rights and the environment along their supply chains. Failure to comply can result in individual and company fines of 800,000 - 400 million euros, or up to 2 percent of the average annual turnover.
Who does it affect?
- 2023 and beyond: All German companies with at least 3,000 employees.
- 2024 and beyond: All German companies with at least 1,000 employees.
How can companies comply?
The LkSG requires that companies prove they have done everything in their power to prevent human rights and environmental-related risks along their supply chains. Companies must also ensure they have an employee responsible for monitoring such risks and actions related to human rights and environmental effects in their supply chain.
NETHERLANDS
Child Labor Due Diligence Law
TL;DR
The Dutch Child Labor Due Diligence Law - enforced since January 2020 - requires companies to put substantive compliance measures and reporting in place to address child labor in their operations.
Who does it affect?
Companies that sell or supply goods or services to Dutch end-users, regardless of where the company is based or registered in its legal form. Failure to comply with the Act exposes a company to the risk of an administrative fine of up to EUR 870,000 or—alternatively—10% of its annual turnover.
How can companies comply?
- In-scope companies are required to: Exercise due diligence to identify “reasonable suspicion” of any child labor in their supply chains
- Develop and execute risk management and reasonable suspicion plans
- Submit a publicly available disclosure statement
Responsible Business Conduct Act
TL;DR
- The Dutch Responsible and Sustainable International Business Conduct Act was submitted on November 2022 and would require companies to map their value chains and address any negative impacts on human rights, the environment, and the climate.
- The bill would oblige enterprises to conduct business with respect for human rights, the environment, and the climate in accordance with the OECD Guidelines for Multinational Enterprises.
Who will it affect?
The bill would affect:
- Dutch, EU, or non-EU businesses engaged in activities or marketing products in the Netherlands
- AND companies that meet two of the three thresholds:
- A balance sheet of at least €20 million;
- Net turnover of at least €40 million; and
- An average of 250 employees during the year (including part-time and agency workers).
How will companies comply?
Companies will be obligated to integrate due diligence into their policies and business processes, investigate potential and actual risks of adverse impacts throughout their entire value chains, address and monitor these impacts, set up a complaints mechanism throughout their supply chains, and report on all these activities annually.
NEW ZEALAND
Modern Slavery Legislation
TL;DR
Currently in the legislation phase, this bill would require in-scope groups to identify and/or take action to address:
- Modern slavery in their domestic and international operations and supply chains; and
- Worker exploitation in their domestic operations and supply chains
Who will it affect?
The proposal would affect the supply chains of all types of organizations in New Zealand, with greater responsibilities for larger companies.
How will companies comply?
Under the proposal:
- In-scope companies would be required to act if they find modern slavery or worker exploitation in their supply chains or domestic operations
- Medium and large organizations would be required to report on the specific steps they are taking to mitigate such modern slavery
- Large organizations and those New Zealand employees would also be required to undertake periodic supply chain due diligence
NORWAY
Transparency Act
TL;DR
Norway’s Transparency Act - in effect as of July 2022 - requires in-scope companies to conduct due diligence throughout their entire supply chain to ensure human rights are being upheld. The Act is enforced by the Norwegian Consumer Authority. Companies must begin reporting on their due diligence on June 30th, 2023, and continue reporting on an annual basis.
Who does it affect?
Companies registered in Norway - whether foreign or Norwegian, that meet at least two of the following must comply, otherwise they risk business-limiting fines and injunctions:
- At least 50 full-time employees
- An annual turnover of at least NOK 70 million (£5.9 million, or US $7.94 million)
- A balance sheet sum of at least NOK 35 million (£2.95 million, or US $3.97 million)
How can companies comply?
Companies will have to take steps to identify, address, prevent, and limit violations of human rights throughout their business operations and supply chain. In-scope companies will also have to publicly report on all of their activities and host this report on their corporate websites to promote transparency.
SOUTH AFRICA
Extended Producer Responsibility (EPR)
TL;DR
Extended Producer Responsibility (EPR) means that producers of packaged goods are responsible for both the health and safety associated with their products, as well as the post-consumer packaging waste. The regulation came under effect in South Africa in May 2021.
Who does it affect?
Producers, brand owners, retailers, and importers of paper/paper packaging or plastic/plastic packaging in or into South Africa. Noncompliance can result in a fine, legal action, or both.
How can companies comply?
Companies must register with the Department of Forestry, Fisheries, and the Environment (DFFE) with all required documentation to prove compliance.
UNITED KINGDOM (UK)
Modern Slavery Act
TL;DR
The UK Modern Slavery Act has been in effect since March 2015 and requires in-scope businesses to annually disclose what action they have taken to ensure there is no modern slavery in their business or supply chains
Who does it affect?
In-scope companies must fulfill the following four conditions:
- Commercial organization
- Global turnover of over £36m
- Conducts entire or part of business in any part of the UK
- Supplies goods or services
How can companies comply?
Each financial year, in-scope companies must publish a “slavery and human trafficking statement” that outlines the steps they have taken to ensure slavery and human trafficking are not taking place in their operations or supply chains.
Extended Producer Responsibility
TL;DR
Extended Producer Responsibility (EPR) is a piece of UK legislation — coming into force in 2023 — that requires producers to report on packaging types and recyclability every 6 months starting October 2023.
Who does it affect?
The regulations apply to all UK organizations that import or supply packaging and meet the following:
- An individual business, subsidiary, or group (but not a charity)
- Annual turnover of £1 million or more (based on your most recent annual accounts)
- Responsible for more than 25 tons of packaging in 2022
- And carry out any of these packaging activities:
- Supply packaged goods to the UK market under your own brand
- Place goods into packaging that’s unbranded when it’s supplied
- Import products in packaging
- Own an online marketplace
- Hire or loan out reusable packaging
- Supply empty packaging
How can companies comply?
At a high-level, companies can comply by collecting and reporting data on the packaging they supply or import. Depending on the size of your organization, you may also need to pay additional registration fees and report on packaging sourcing specifics.
Conclusion: Future-proofing your business requires immediate regulatory compliance
In sum, regardless of where you conduct business, you’ll likely need to comply with a sustainability regulation sooner rather than later. Traceability — i.e., the ability to trace and track the data in your value chain from source to shelf — is a strategy top companies are relying on to get a handle on their sourcing, sustainability, and compliance.
BanQu is a traceability solution that captures the source-level data necessary to multi-achieve compliance, procurement, and sustainability goals at scale — on a single operating system. Our partners include leading companies across multiple industries who are leaders in driving for-profit, for-purpose business and backing their efforts with reliable, compliant data.
To learn more about our software, check out our platform page!
Ready to see if BanQu is right for your business? Schedule a call with our team!
Sustainability regulations that affect global businesses are on the rise. Here's a quick overview of what you need to know to comply.
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