Foundations of New Supply Chain ESG Practices Coming into Focus – New Laws, Guidance and Company Collaboration Published
Corey L. Norton
International Trade Partner | Guides Global Companies on Securing Market Access, Improving Returns and Supply Chain ESG Laws
Sharing information on rapidly expanding supply chain ESG law and developments.?Original content selections and comments are mine alone.
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Legal Developments
On November 21, 2022, FDA published the final rule entitled, “Requirements for Additional Traceability Records for Certain Foods” (Food Traceability Rule) (87 FR 70910)…This guidance document is intended to help small entities, including farms and small businesses, comply with the requirements of the Food Traceability Rule as established in 21 CFR part 1, subpart S. The regulations are binding and have the full force and effect of law.?Announced via Federal Register, 5/19/23.
*Even though this new FDA guide is titled as though it’s addressed to small businesses, its content is relevant to all covered businesses.?Like many FDA regulations, it follows a helpful format of posing questions industry will likely ask and then answering them.?It also breaks down questions specific to actors in different levels of supply chain.?It seems pretty clear by now traceability will be a main supply chain topic for many years to come.?As we develop a repository of supply chain ESG laws, developments and guidance, it will be helpful to have an index of different product and agency traceability laws.
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Today, the Council gave the final go-ahead to a regulation that aims to minimise the risk of deforestation and forest degradation associated with products that are placed on or exported from the EU market…The regulation sets?mandatory due diligence rules?for all operators and traders who place, make available or export the following commodities from the EU market:?palm oil, cattle, wood, coffee, cocoa, rubber and soy…The rules also apply to a number of?derived products?such as chocolate, furniture, printed paper and selected palm oil based derivates (used for example as components in personal care products)…Operators will be required to trace the commodities they are selling back to the plot of land where they were produced…The regulation sets a cut-off date…meaning that only products that have been produced on land that has not been subject to deforestation or forest degradation after 31 December 2020 will be allowed on the EU market or to be exported from the EU…Fines proportionate to the environmental damage and the value of the relevant commodities or products concerned should be set at the level of at least 4% of the operators' annual turnover in the EU and include a temporary exclusion from public procurement processes and from access to public funding.?Council of the EU, 5/16/23.
?*There is now officially a system compelling many companies to determine whether there is deforestation in their supply chains. Before long we will likely start seeing news about how due diligence is being carried out.?Success or struggles in doing so could be also instructive for supply chain coordination starting to be required in other regulatory areas, like forced labor and primary data Scope 3 emissions.?Another key factor is whether penalties will be set at a level, and enforcement is adequate, to confirm there will be a return on investment for the cost of compliance.
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Resources
领英推荐
Today, the Solar Stewardship Initiative (SSI) has opened a process for interested organisations to provide feedback on its development…The SSI was launched in October 2022, by SolarPower Europe and Solar Energy UK, with the goal of securing and demonstrating?responsibility, transparency, and sustainability across the solar value chain. The Initiative is working to establish mechanisms that gather and verify information on the environmental, social and governance (ESG) performance of operators in the solar value supply chain. The central instrument is the SSI Code, which sets out the specific ESG criteria, which will be monitored by independent auditors…The Initiative currently collaborates with over 60 organisations from across the solar industry and is supported by third-party sustainability experts and the international finance community. It is now calling on actors in the field of ESG, to submit their input to the draft SSI Code, and the further development of the SSI.?Solar Stewardship Initiative, 5/17/23.
*It’s interesting this is a European effort and doesn’t really seem to have U.S. involvement even though the effort includes many key supply chain actors that are likely the same for U.S. supply chains.?Bringing the whole supply chain together in this way to agree on standards, how testing will be done, published and incentivized is probably the best, if not only, way companies will be able to get a handle on ESG supply chain issues, at least quickly and at the lowest cost of effort possible.?While the effort articulates the building blocks that would seem required for this type of collaboration to succeed, the hard work still seems to come with respect to figuring out how to actually get companies to agree to be tested and rated, especially with China being a main supply country.?The SSI says many of these answers are coming this year, so let’s stay tuned.
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Views
Four senators — two Democratic, two Republican — plan to unveil proposals in coming weeks that would slap a tariff on carbon-intensive goods coming into the United States from abroad… Each bill will look very different in the approaches they take to establishing trade policy designed to leverage U.S. competitiveness while also addressing the climate crisis, but they’ll all have something in common: significant buy-in from the Climate Leadership Council.?E&E Daily, 5/16/23 (subscription required).
*Support for a U.S. Carbon Border Adjustment Mechanism (“CBAM”) seems to be gaining momentum.?This area, in addition to possibly having positive climate effects, will create a lot of new opportunities for those with expertise in accounting and collecting related information from supply chains in credible ways.?The domestic industries seeing protection from this type of rule will certainly be contributing views on those topics to shape the law asap.?Supply chain actors that get involved, master what’s going to be required and can organize themselves first should experience advantages over competitors.
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Chief Legal Officer (CLO) | General Counsel | Thought Leader | Founder of CURI Insights
1 年Great information Corey L. Norton! Thank you for sharing.