January 27, 2022
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In February and March 2021, we published updates on global legislative developments regarding mandatory human rights due diligence and supply chain reporting (see here and here).
At that time, the European Commission (“EC) is a proposal for sustainable corporate governance (“SCGMoreThe draft directive, due for summer 2021, was hailed as a potential game changer. and how to manage it.
In comparison, the United States has seen less significant progress, with the most notable legislative change in this area in recent years being the California Transparency in Supply Chains Act of 2010. The Uyghur Forced Labor Prevention Act and pending new legislation in New York State (the Draft Fashion Sustainability and Social Accountability Act) could impose significant reporting requirements on the fashion industry.
Pan-European developments – long delays in EC legislation
As it stands, the draft EC Directive has not yet been issued and no update has been provided by the EC on its status. However, the delay is reportedly the result of a (second) rejection by the EC’s internal Regulatory Scrutiny Board, an independent body responsible for quality control and the impact assessment of the law. The latest indication from the EC is that a draft Directive is due for February 2022.
Not surprisingly, this delay has faced widespread criticism and concern from civil society. For example, on 8 December 2021, her EC President’s open letter to her Ursula von der Leyen signed by 47 civil society and trade union organizations (see here) stated:Significant new law that could help millions demand justice for human rights abuses…” to express “Dee[p] concern[n]” regarding “Complete lack of transparency on the reasons for this new delay”. The letter addressed the president,repeat publicly [the] Commitment …to make the supply chains of companies operating in the EU market sustainable through ambitious and binding human rights and environmental due diligence legislation”.
US trends – Proposed groundbreaking bill
Meanwhile, in the United States, human rights due diligence legislation has evolved with two important developments.
At the federal level, on December 23, 2021, President Biden will pass the Uyghur Forced Labor Prevention Act (“UFLPA”) to the law. The UFLPA has made the rebuttable presumption that all goods manufactured in the Xinjiang Uighur Autonomous Region of China, even in part, are the product of forced labor and are therefore ineligible for entry into U.S. ports. I’m here. The UFLPA also complements previous legislation, such as the Uyghur Human Rights Policy Act of 2020, by expanding the sanctions authorization of the Act to cover foreigners responsible for human rights abuses related to forced labor in Xinjiang. Based on UFLPA is detailed in this client alert.
At the state level, two New York senators earlier this month introduced historic legislation mandating broad sustainability in the fashion industry. The fashion industry accounts for (by some estimates) around 4-8.6% of global greenhouse gas emissions. The Fashion Sustainability and Social Accountability Act (“FSSAAThe proposal, sponsored by Senator Alessandra Biaggi and Congressman Dr. , about their websiteenvironmental and social due diligence policies, processes and outcomes;including significant actual or potential adverse environmental and social impacts” (see here). FSSAA therefore imposes obligations on many popular fashion names and brands around the world.
Disclosures under the Draft FSSAA include, among other things: (ii) a ‘sustainability report’ identifying the risks of each operation, in accordance with the principles of the United Nations and the International Labor Organization; (iii) Independently verified greenhouse gas reporting. (iv) Quantitative measures such as publishing the average wages of suppliers’ workers compared to the local minimum wage. The FSSAA requires that he make all disclosures on his website of the retailer or manufacturer within one year of enactment of the law.
As to enforcement, if the FSSAA is passed, the New York Attorney General (“AG”) to issue an annual report on the legal compliance of the company. Also, if enacted, AG would have the power to fine sellers and manufacturers up to 2% of annual revenues of $450 million or more if they fail to meet the requirements of the law. Such funds are deposited into the Community Benefit Fund, which is used for environmental projects that directly and verifiably benefit the environmental justice community.
Legislation could take years, but proponents hope the bill will pass by spring 2022, or at the latest by June, when the 2022 New York legislature ends. The bill, which he has four co-sponsors, is currently pending before the New York House Consumer Affairs and Protection Committee and the Senate Consumer Protection Committee.
Conclusion
These initiatives in the United States further illustrate the general direction of evolving expectations for due diligence. If the FSSAA were enacted, it would not only make waves in the fashion industry, but could also enact legislation requiring other industries in the US to make his ESG disclosures.
With this in mind, companies should continue to reflect their knowledge of their supply chains, human rights and environmental risks in their business, and internal due diligence processes/compliance methodologies, along with anticipated EC legislation and national developments. I have. Business expectations regarding effective management of environmental and human rights risks, and reporting obligations, continue to rise.
This alert was created by Susy Bullock, Stephanie Collins, and Ryan Butcher* from London. Roscoe Jones Jr., Howard S. Hogan, Perlette Michel Jura, and Jessica C. Benvenisti from the United States.
Gibson Dunn’s attorneys are available to answer your questions regarding these developments. Contact Gibson Dunn’s attorneys with whom you regularly work, members of the firm’s Environmental, Social and Governance (ESG) department, or the following authors in London and the United States.
Susie Bullock – London (+44 (0) 20 7071 4283, [email protected])
Stephanie Collins – London (+44 (0) 20 7071 4216, [email protected])
Roscoe Jones Jr. – Washington, DC (+1 202-887-3530, [email protected])
Howard S. Hogan – Washington, DC (+1 202-887-3640, [email protected])
Perlette M. Jura – Los Angeles (+1 213-229-7121, [email protected])
Jessica C. Benvenisty – New York (+1 212-351-2415, [email protected])
Feel free to contact any of the ESG Practice Leaders below.
Susie Bullock – London (+44 (0) 20 7071 4283, [email protected])
Elizabeth Ising – Washington, DC (+1 202-955-8287, [email protected])
Perlette M. Jura – Los Angeles (+1 213-229-7121, [email protected])
Ronald Kirk – Dallas (+1 214-698-3295, [email protected])
Michael K. Murphy – Washington, DC (+1 202-955-8238, [email protected])
Celina S. Sagayam – London (+44 (0) 20 7071 4263, [email protected])
*Ryan Butcher is an apprentice solicitor working in the London office of a law firm and has not yet been admitted to practice law.
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