Emerging Compliance Directives With ESG Impact
What are some of the new rules and directives that would affect your risk, legal and sustainability departments? Contact Us to discuss further on how we can help.
New directives in the US and EU are discussed below. We should keep in mind other directives from APAC and from EU member states.
UFLPA
The Uyghur Forced Labor Prevention Act (UFLPA) was signed into law by President Biden on December 23, 2021 and went into effect on June 21, 2022. The UFLPA has charged the Forced Labor Enforcement Task Force, to develop a strategy for supporting the enforcement of Section 307 of the Tariff Act of 1930, to prevent the importation into the US of goods mined, produced, or manufactured wholly or in part with forced labor in the Xinjiang Uyghur Autonomous Region.
German Act on Corporate Due Diligence in Supply Chains
This Act, commonly referred to as the “Supply Chain Act” went into effect on January 1st, 2023. The Act imposes a duty of care for managing and addressing human rights and environmental risks that extends to the supply chain. Companies with more than 3,000 employees will be required to comply with new due diligence obligations.
SEC Climate Disclosure Proposal
On March 21, 2022 SEC proposed rule that would require registrants to include certain climate-related disclosures in their registration statements and periodic reports that are reasonably likely to have a material impact on their business. The proposed rules also would require information disclosure about direct greenhouse gas (GHG) emissions (Scope 1) and indirect emissions from purchased electricity or other forms of energy (Scope 2) and GHG emissions from upstream and downstream activities in the value chain (Scope 3), if material.
EU CSRD
On 5 January 2023 the Corporate Sustainability Reporting Directive (CSRD) entered into force. This new directive modernizes and strengthens the rules about the social and environmental information that companies have to report. A broader set of large companies, as well as listed SMEs, will now be required to report on sustainability – approximately 50 000 companies in total.
The new rules will ensure that investors and other stakeholders have access to the information they need to assess investment risks arising from climate change and other sustainability issues. The first companies will have to apply the new rules for the first time in the financial year 2024, for reports published in 2025.
Climate Disclosure Rules for Federal Contractors
DoD, GSA, and NASA are proposing to amend the Federal Acquisition Regulation (FAR) to implement a requirement to ensure certain Federal contractors disclose their greenhouse gas (GHG) emissions and climate-related financial risk and set science-based targets to reduce their GHG emissions.
Per this proposed rule, both significant contractors (received $7.5 million or more, but not exceeding $50 million) and major contractors would be subject to annual Scope 1 and Scope 2 GHG emissions disclosure requirements, while only major contractors (received more than $50 million in Federal contract obligations) would be subject to the annual climate disclosure, which includes disclosure of Scope 3 GHG emissions, and science-based target requirements.
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