Key legislation driving responsible business

Many governments around the world are using legislation to drive responsible business practices and positive impacts on people’s working conditions. These national laws require companies to manage their operational impacts on people and the environment, and report on their efforts to do this. It’s important for businesses to know what laws apply to them and how to comply with these.

 

Focus on responsible business practices and sustainable supply chains continues to grow around the world. Countries are increasingly adopting new legislation to support this, and build more responsible business operations in global supply chains.

The legislation a company needs to meet can vary depending on their size, turnover, sector and operating office location.

Here, we list key country laws that businesses need to be aware of, to understand what legislation is relevant to them, how it affects them and what they must do to comply with it.

Please contact us if you would like to learn more about how Sedex can help you comply with legislation that aims to improve responsible business operations.

 

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Australia

Legislation: Modern Slavery Act 2018

Who does it apply to?

All companies based in or operating in Australia with an annual revenue of more than AU$100 million.

 

What it means for businesses

Eligible companies must report annually on the risks of modern slavery in their operations and supply chains and the actions taken to address these risks.

Reports are submitted to the Ministry of Home Affairs and held in a public register – the Modern Slavery Statements Register.

 

Status: Effective from January 2019.

 

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European Union

Legislation: Conflict Minerals Regulation

Who does it apply to?

EU-based importers of tin, tantalum, tungsten, and their ores, and gold.

 

What it means for businesses

EU importers of tin, tantalum, and tungsten, and their ores and gold areas need to report on supply chain due diligence obligations.

Importers sourcing these minerals from conflict-affected and high-risk areas must provide extra information like which mine was used.

Due diligence is recognised as “an ongoing, proactive and reactive process through which economic operators [businesses] monitor and administer their purchases and sales with a view to ensuring that they do not contribute to conflict or the adverse impacts.”

Third-party auditing and public reporting are stated as actions companies can take.

Status: Effective from January 2021.

 

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Legislation: Non-Financial Reporting Directive

Who does it apply to?

Approximately 6,000 large companies and groups across the EU, including:

  • Listed companies
  • Banks
  • Insurance companies
  • Other companies designated by national authorities as public-interest entities.

 

What it means for businesses

Eligible companies must publish reports on the policies they implement in relation to:

  • Environmental protection
  • Social responsibility and treatment of employees
  • Respect for human rights
  • Anti-corruption and bribery
  • Diversity on company boards (in terms of age, gender, educational and professional background).

Companies are given flexibility on how they disclose. They can use the UN Global Compact (UNGC) framework, OCED Guidelines, or the ISO 26000 framework.

Status: Effective from January 2018.

 

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Legislation: Sustainable Finance Disclosure Regulation

Who does it apply to?

  • Fund management companies
  • Asset management companies
  • Institutional investors
  • Financial advisors
  • Certain other regulated firms in the EU.

 

What it means for businesses

Eligible companies must disclose whether they consider negative impacts on the environment and social justice of their investment decisions and advice.

Companies must publish a statement on the due diligence policies and related actions concerning principal adverse impacts of investment decisions on sustainability factors.

Status: Effective from March 2021.

 

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Legislation: Mandatory Human Rights and Environmental Due Diligence

 Who does it apply to?

All companies in the EU, or wanting to access the EU market, no matter what size or sector.

 

What it means for businesses

Upcoming legislation is expected to make human rights and environmental due diligence mandatory, where businesses must identify, prevent, mitigate and remedy human rights abuses and environmental damage. The legislation may apply to companies’ supply chains as well as their own operations.

Recommendations also state that there should be a requirement for effective monitoring via company-level obligations and national and EU-level measures.

Status: Upcoming – a draft of the legislation is expected on 8 December 2021.

 

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France

Legislation: Corporate Duty of Vigilance Law

Who does it apply to?  

Companies that are employing at least:

  • 5,000 employees (at the end of two consecutive years)
  • 10,000 employees within the company and its direct and indirect subsidiaries.

 

What it means for businesses

Companies must identify and prevent adverse human rights and environmental impacts resulting from their own activities and of their suppliers and subcontractors.

Companies are required to establish, publish and implement an annual, public vigilance plan. The plan must include measures to identify and prevent potential and actual human rights and environmental risks.

Interested parties can require judicial authorities to order a company to publish and implement a vigilance plan, or account for its absence.

Status: Effective from March 2017.

 

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Germany

Legislation: CSR Directive Implementation Act

Who does it apply to?

Companies with any of the following criteria:

  • More than 500 employees and an annual turnover above €40 million
  • A balance sheet total of more than €20 million.

 

What it means for businesses

Eligible companies must disclose information on non-financial matters, with a minimum requirement to disclose information on environment, social and employee-related matters, on respect for human rights and on anti-corruption and bribery.

Status: Effective from April 2017.

 

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Legislation: Supply Chain Due Diligence Act

 Who does it apply to?

  • 2023: Companies based in Germany, or German-registered branches of foreign companies, with more than 3,000 employees
  • 2024: Companies based in Germany, or German-registered branches of foreign companies. with more than 1,000 employees.

 

What it means for businesses

Companies must conduct supply chain due diligence activities to make sure social and environmental standards are observed in their supply chain. They include:

  • Risk analysis of business activities to assess adverse effects on human rights. Companies must monitor their own operations and their direct suppliers worldwide
  • A duty to take measures if violations are discovered or potential impacts identified, to prevent adverse effects and to provide access to remedies
  • A gradual responsibility applies to indirect suppliers beyond tier 1. A risk analysis is only required if an employee of an indirect supplier makes a complaint to the German company
  • Companies must publish an annual report outlining the steps they have taken to identify and address risks, including those in specific areas such as forced labour and environmental degradation
  • Fines for companies in cases of violations. These could be up to €800,000, or up to 2% of a company’s annual global turnover.

Status: Passed in June 2021; becomes effective from January 2023.

 

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India

Legislation: Business Responsibility and Sustainability Reporting

 Who does it apply to?

The top 1,000 listed companies in India (by market capitalisation).

 

What it means for businesses

The top 1,000 listed companies must report on certain business responsibility and sustainability indicators.

This framework incorporates existing requirements: the National Guidelines on Responsible Business Conduct (NGRBC) and previous Business Responsibility Reporting (BRR) requirements.

Status: Effective from April 2021.

 

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Italy

Legislation: Legislative Decree no.254

 Who does it apply to?

  • Italian companies that trade on Italian or EU-regulated markets
  • Banks
  • Insurance companies with 500+ employees, a balance sheet of €20 million and a net turnover of €40 million.

 

What it means for businesses

Eligible companies must publish a non-financial statement that contains information on the impact of business activities on environmental and social matters, human rights, anti-corruption and bribery.

The statement must include identification of the principle risks and the products and services that are likely to give rise to adverse impacts in any of these areas.

Status: Effective from January 2017.

 

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The Netherlands

Legislation: Child Labour Due Diligence Act

Who does it apply to?

All companies that sell or supply goods or services to Dutch consumers, regardless of size or legal form.

 

What it means for businesses

All companies that sell or supply goods or services to Dutch end users are required to submit a statement declaring they conduct ‘due diligence’ related to child labour in their supply chains.

Due diligence involves investigating where there is suspicion that a product or service has been made with child labour and developing an action plan to address this.

There are criminal sanctions for companies that fail to produce a statement, carry out an investigation, or establish an action plan to address child labour.

Status: Effective from 2022, to allow companies time to investigate their supply chains.

 

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Norway

Legislation: Transparency Act

 Who does it apply to?

Companies registered in Norway, or foreign companies selling in Norway, that meet at least two of three criteria:

  • At least 50 full-time employees (or equivalent annual man-hours)
  • An annual turnover of at least NOK 70 million
  • A balance sheet sum of at least NOK 35 million.

 

What it means for businesses

Companies must conduct human rights due diligence assessments on their operations and their entire supply chain, including business partners. They must take steps to prevent and limit human rights violations identified through these assessments, and must provide or cooperate with efforts to remedy any violations.

Companies must report on all of these activities and make this information available on their corporate websites. Companies are also legally obliged to respond to information requests from individuals about the human rights risks in their operations, and their related due diligence activities.

If a company does not comply with this law, they could face fines or injunctions.

Status: Passed in June 2021; the law is expected to become effective in July 2022

 

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Switzerland

Legislation: Swiss Responsible Business Initiative (counter proposal)

Who does it apply to?

Publicly traded companies and regulated entities with 500+ employees and either a balance sheet sum of CHF 20 million or a turnover of CHF 40 million.

 

What it means for businesses

Eligible companies must prepare a report on non-financial matters, including environmental and social matters, respect for human rights, and anti-corruption. The report must extend to controlled entities worldwide.

The report must describe due diligence practices and processes applied in relation to these matters, the main risks associated with them, and the relevant measures taken.

The counter proposal includes specific supply chain-related due diligence duties in relation to conflict minerals and child labour. It includes criminal sanctions in the form of fines for non-compliance with the applicable annual reporting duties or for making false statements.

Status: Upcoming – a draft of the legislation is expected in 2021.

 

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United Kingdom

Legislation: Modern Slavery Act 2015

 Who does it apply to?

Currently: Commercial organisations doing business in the UK and generating a turnover of £36 million or more.

Proposed updates to the legislation will also include requiring public bodies with a budget of £36 million or more to regularly report on the steps they have taken to prevent modern slavery in their supply chains.

 

What it means for businesses

Companies must issue an annual statement setting out the steps taken to address modern slavery in their supply chain.

Proposed new measures include:

  • There are key topics that modern slavery statements must cover (e.g. risk assessment)
  • Organisations with a budget of £36 million or more in all sectors must publish their modern slavery statements on a new digital government reporting service (to be released in 2021)
  • Statements must include the date of Board approval and Director sign-off
  • Group statements must identify every entity within the Group’s remit
  • The introduction of financial penalties for organisations who fail to meet their obligations under the Act to publish annual modern slavery statements.

Status: Effective from October 2015, with proposed new measures applying soon (exact date to be confirmed).

 

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United States of America

Legislation: Transparency in Supply Chains Act 2010 (State of California)

 Who does it apply to?

Retailers and manufacturers doing business in California with annual gross receipts (all revenue before costs) exceeding US $100 million.

 

What it means for businesses

 Eligible retailers and manufacturers must publish annual reports detailing their efforts to eradicate human trafficking in their direct supply chains.

They must include the areas of verification, audits, certification, internal accountability, and training.

Status: Effective from January 2012.

 

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Legislation: Section 307 of the Tariff Act 1930 (Federal)

Who does it apply to?

Any business in any country outside of the USA.

 

What it means for businesses

This Section prohibits the importing of merchandise mined, produced or manufactured, wholly or in part, in any foreign country by forced or indentured labour, including forced child labour.

The US Customs and Border Patrol can take action against any companies or products where there is reasonable evidence to suspect forced labour has been used. This can include blocking or seizing goods at customs, preventing them from being sold or distributed through the USA (a “withhold release order”).

Status: Effective from 1930, with an amendment in February 2016 to close a legal loophole.

 

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How to meet legislative requirements

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