Fran Gourdie, Managing Associate, Disputes & Investigations team, Simmons & Simmons
Delivering sustainable global value chains is a lofty and challenging goal. However, a helping hand is possibly being extended in the from of legislation and regulation, on the basis that transparency and disclosure will change behaviour. In particular, the European Union (EU) has in recent years endeavored to weave the issues of primary raw materials, product recyclability and sustainable resources into its legislative ESG agenda.
Much of the EU’s impetus for change derives from a desire to accelerate the transition away from ‘take, make and waste’, i.e. from a linear consumption model, to a circular economy. The circular economy model aims to benefit society and the environment by keeping materials in use for longer. The proposed goal is that by reusing, repairing, recycling and refurbishing existing materials, economic growth can still be achieved but with far less resource consumption.
Taking textiles as an example, following the European Commission’s 2021 report “Circular Economy Perspectives in the EU Textile sector”, the European Commission presented an “EU strategy for sustainable and circular textiles” in March 2022, which forms part of its overall Strategy for Textiles. The European Commission’s ultimate goal is to create a new sustainable product framework that includes:
- ensuring that textile products are fit for circularity;
- ensuring the uptake of secondary raw materials (i.e. recycled materials);
- tackling the presence of hazardous chemicals; and
- empowering business and private consumers to choose sustainable textiles and get easy access to reuse and repair services.
On the back of the EU’s vision, individual countries have implemented their own laws. Most notably, in April 2022, France introduced a law (Décret n° 2022-748) requiring companies to inform consumers about the environmental characteristics of waste-generating products. It will require apparel and footwear products (with some exceptions) to include a label disclosing:
- the recycled material content (i.e. contains X% recycled materials);
- the product’s recyclability;
- whether there are any harmful substances (of which the EU has so far listed 235);
- information on microplastic shedding if the product is more than 50% synthetic fibres by weight; and
- traceability information to disclose the location of manufacturing steps for garments and shoes.
In relarion to batteries, the EU Sustainable Batteries Regulation of July 2023 (part of the EU’s wider European Green Deal) introduced requirements for companies to ensure that batteries maintain a low carbon footprint, use minimal harmful substances, require fewer raw materials and are collected, reused and recycled to as high a degree as possible. The regulation sets out that:
- companies selling batteries on the EU market must develop and implement a due diligence policy regarding the raw and secondary materials in battery production;
- portable batteries incorporated into products must be made to be ‘readily removable’;
- certain chemicals must be excluded from batteries; and
- battery waste management must be maximised and producers must take on extended responsibility for increased recycled content in batteries.
Companies should take these ESG related laws seriously. In relation to another piece of legislation, ClientEarth filed a case in January 2023 against Danone in France aiming to force the company to disclose more information on its plastics use and to reduce plastic pollution across its supply chain. The claim (which as of September 2023 was moving into the mediation phase) was brought under a French law requirement (Corporate Duty of Vigilance Law, 2017) for businesses headquartered in France to publish certain annual plans relating to the environmental and social risks and impacts from their operations, suppliers and subcontractors.
The UK fashion industry has also seen scrutiny. A factory producing Tesco’s F&F jeans was investigated in Thailand following an expose by the Guardian into forced labour and there was the recent (unsuccessful) claim by the World Uyghur Congress in the High Court relating to cotton products manufactured by forced labour. In June 2023, the World Uyghur Congress also supported a case brought by non-profit ECCHR under the German Supply Chain Due Diligence Act (passed in July 2021) against car manufacturers Volkswagen, BMW and Mercedes-Benz for alleged human rights violations in their supply chains in the Xinjiang Uygur Autonomous Region.
Whether or not this increased disclosure and transparency, and the resulting litigation, will deliver more sustainable value chains, is yet to be seen. However, like the tide of other ESG related legislation and regulation, these supply chain laws will, either directly or indirectly, effect many companies. We can only hope that this increased legislative and regulatory burden will have the desired effect.