Nithin Coca
Published 10 hours ago.
About a 5 minute read.
Image: Brands that sell leather goods in the EU will need to prove their supply chains don’t negatively impact forests or workers. | Toni
These laws have been several years in the making — enough time for proactive companies to develop mechanisms to ensure their supply chains are free of deforestation, human rights abuses and forced labor. And while Europe is leading, other markets are likely to follow.
Selling products in the European Union (EU) is about to become a lot
harder for large brands. In addition to the recently passed Ecodesign for Sustainable Products Regulation — which sets out a series of environmental design requirements for almost all products — the world’s largest economic bloc, home to more than
600 million consumers, has passed several other regulations that will soon raise standards for due diligence around deforestation, human rights and labor.
Finalized in 2023, the EU Deforestation
Regulation
(EUDR) requires companies that import any of several high-risk tropical
commodities —
cacao,
cattle,
coffee,
palm
oil,
paper pulp,
rubber
and soy — to ensure that they’re not linked to deforestation. It was
followed by the passing of a Human Rights Due
Diligence regulation
that aims to ensure that imports linked to human rights abuses
anywhere along the supply chain aren’t allowed into Europe. And the latest, the
Forced Labor
regulation,
will ban the import of any product suspected of being made with forced
labor.
“The EU’s directive represents a landmark shift from voluntary corporate
responsibility to mandatory obligations for corporations to prevent and address
human rights abuses,” said Tirana
Hassan, executive director
at Human Rights Watch, in a press
statement.
“This groundbreaking law is a major victory for rights groups, trade unions and
civil society networks at the forefront of the fight for corporate
accountability.”
A key detail is that the burden of proof of compliance will now fall on brands,
not governments — a big shift from previous rules. And a recent
report
by the non-profit Earthsight, published in the journal Forest Policy and
Economics, finds that the use of most third-party certifications won’t be
enough to meet Europe’s new requirements.
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The report analyzed the ability of several prominent commodity certification
schemes to align with the EUDR’s definitions and requirements. The study
concluded that the
assessed certification schemes are “limited” in providing deforestation-free
products because they “fall short” in assuring production according to relevant
legislation and their “traceability systems do not fully cover EUDR
requirements;” therefore, these schemes “can support due diligence, but not
demonstrate compliance with the EUDR.”
In the worst cases, some certifications were found to have allowed bad actors —
companies linked to deforestation or human rights abuses in their supply chains
— to remain certified or have flawed mechanisms for ensuring accountability.
“All the schemes assessed had a lenient attitude towards non-compliance — with
actors being allowed to retain certification despite violating laws, increasing
the risk of non-compliance,” Earthsight explained in a
post. “Policymakers must
continue to ensure that such schemes are not relied on for implementation.”
In the past, brands could shift the blame to their certifying bodies when these
wrongdoings occurred. Now, however, the EU’s new laws will hold the brands
themselves responsible — which may result in brands facing real, financial and
legal repercussions for conditions along their supply chain for the first time.
For years, brands have pushed voluntary regulations — such as
zero-deforestation
or no-forced-labor pledges — which, unfortunately, have proved too easy to
break
and hard to
enforce.
Europe’s new laws, on the other hand, could include
penalties
of up to “4 percent of the company’s EU turnover” or “confiscation or exclusion
from public funding or contracts.”
“If companies don’t comply, they should face sanctions; and if harm occurs that
they should have avoided, then victims should be able to get justice in court,”
said
Lara Wolters, a Member of
European Parliament.
These regulations have been several years in the making — enough time for
proactive companies to develop mechanisms to ensure their supply chains are free
of deforestation, human rights abuses or forced labor; those that aren’t are
running out of time to act. And while Europe is leading, other markets are
likely to follow.
The United States already has the Uyghur Forced Labor Prevention
Act,
which restricts imports from the Chinese-controlled region where there are
well-founded and documented allegations of widespread forced labor camps and
cultural genocide. Japan, the world’s third-largest economy, is considering
making its voluntary supply chain due
diligence
guidelines mandatory.
“The new directive is groundbreaking as it makes due diligence mandatory,
EU-wide, for companies within scope,”
said
Johannes
Blankenbach, senior
Europe researcher at the Business & Human Rights Resource Centre. “We need
to ensure its potential in tangibly improving the situation for rights holders,
as well as promoting more equitable value chains and a level playing field.”
Time is running short. The EU’s deforestation regulation will be enforced from
December 30th of this year, with the human rights and forced labor regulations
to follow. A future in which supply chains are transparent, ethical and benefit
those along the entire chain is possible (and now, imperative), if brands take an
active role in shaping them.