ESG laws and regulations that impact the supply chain are passing in North America with greater frequency, urgency, and complexity. Your organization may be subject to several similar laws and regulations in multiple jurisdictions. Are your teams braced for impact?
North America’s Supply Chain ESG Regulatory Landscape
Newly passed laws, such as California’s SB 253, the Climate Corporate Data Accountability Act (CCDAA), and Canada’s Modern Slavery Act are broadly consistent with similar supply chain due diligence and reporting laws in the EU, UK, Australia and New Zealand; but for North American business leaders, there are key differences worth noting.
Environmental Protection/Climate Disclosure Laws and Regulations
This class of laws enacts environmental protections and climate disclosure mandates to avert catastrophic and permanent climate change.
Since the Paris Climate Agreement of 2015, many countries have passed laws and regulations curbing greenhouse gas (GHG) emissions to limit global warming to 1.5 degrees Celsius above pre-industrial levels – a key Agreement goal. In 2021, after the US rejoined the Agreement, the Biden Administration issued its 2030 Greenhouse Gas Pollution Reduction Targets to reduce US economy-wide emissions by 50-52% of 2005 levels by 2030 and adhere to the Agreement.
Meanwhile, state lawmakers and federal regulators are setting mandatory Scope 3 due diligence and reporting requirements. In 2023, California’s legislature passed SB 253, which will require companies to account for and report their Scope 3 emissions beginning in 2026. The US Securities and Exchange Commission (SEC) is considering a rule that would also require publicly traded companies to do the same, as early as 2026.
Supply Chain Human Rights Due Diligence (HRDD) and Reporting Mandates
Not all HRDD laws and regulations mandate the same requirements or impose the same penalties for non-compliance.
For example, the Conflict Minerals Provision of the 2012 Dodd-Frank Act requires publicly traded US companies to conduct due diligence on their products’ supply chains to determine whether they source conflict minerals and/or fund militant groups. Companies must report their findings to the SEC and disclose them to investors; or risk fines and penalties.
In contrast, the California Transparency in Supply Chains Act of 2012 requires companies operating in California with more than $100 million in annual global revenues to survey their operations for anti-slavery/risk-mitigation efforts and report the progress they’ve made to regulatory bodies and the public. It requires them to conduct supplier audits and surveys and solicit certifications. Non-compliance can result in government lawsuits and tarnished reputation.
More recently, Canada’s recently enacted Modern Slavery Act,(S-211) that went into effect in January 2024, requires companies to publish an annual report describing their policies and due diligence actions on forced labor and child labor, as well as an assessment of modern slavery risks within their operations and supply chain. The first reports are due by the end of May 2024. Non-compliance can result in fines and tarnished reputation.
Other HRDD laws like the US Smoot–Hawley Tariff Act of 1930, and the Uyghur Forced Labor Prevention Act, prevent companies from importing goods, materials, and products made with slave labor. They create inspection and enforcement regimes and require companies to conduct due diligence to comply. Non-compliance can lead to seized imports and operational, financial, and reputational damage.
To comply with all HRDD laws, companies must use the intelligence they gain to make more discerning sourcing decisions and actively mitigate modern slavery practices.
Comply with Confidence
Smart ESG compliance starts with maximum percent visibility, risk prevention where needed, and supplier improvement that builds value. EcoVadis’ due diligence and sustainability solutions help hundreds of customers in the US and over 500 customers in Europe impacted by new and sometimes overlapping laws and regulations via a four-step ESG compliance process.
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We quickly identify sustainability risks across 100% of your direct supplier base via IQ Plus, to give you the visibility you need to prioritize necessary due diligence steps.
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We provide IQ Plus risk- and spend-adjusted recommendations on which suppliers to assess, who then complete questionnaires and submit evidence which is validated by ESG Experts.
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We provide performance scorecards, e-learning courses, and customized recommendations to drive supplier mitigation action plans and track performance over time.
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Lastly, we provide pre-configured reports or exports for many regulations or global standards, plus customizable dashboards to meet your specific ESG program’s needs.
We’ve been helping more than a thousand companies worldwide understand their supply chain sustainability risks and comply with evermore ESG laws and regulations passing globally. We can help your company, too – click here to learn more.
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