Pillsbury: The Rising Tide of Supply Chain Due Diligence

The regulatory landscape governing global supply chains has undergone a seismic shift over the past decade, with authorities worldwide implementing increasingly stringent measures to ensure corporate accountability.
This evolution marks a decisive move away from earlier, more limited frameworks towards comprehensive legislation that demands thorough supply chain due diligence and transparency.
The changing face of supply chain regulation
Nancy Fischer, International Trade Partner at Pillsbury Winthrop Shaw Pittman, sets out some of the early legislative frameworks relevant to supply chains.
"The EU Conflict Mineral Regulation, French Duty of Vigilance Law and UK Modern Slavery Act were among the first to impose obligations on companies to address human rights and environmental impacts within their global supply chains," she explains.
"While these laws introduced new expectations for corporate responsibility, their scope was relatively narrow, their compliance requirements less stringent and their overall impact limited."
Today's regulatory environment presents a stark contrast to these initial efforts. A new wave of legislation has emerged across major jurisdictions, including the EU, UK, US and Canada, setting unprecedented requirements for supply chain management and corporate responsibility.
Key legislative developments
The European Union stands at the forefront of this regulatory evolution with two groundbreaking pieces of legislation.
The Corporate Sustainability Due Diligence Directive (CSDDD) mandates companies to identify and address adverse human rights and environmental impacts throughout their supply chains. Meanwhile, the EU Deforestation Regulation (EUDR) introduces stringent traceability requirements for specific commodities, including soy, palm oil, wood, and cocoa.
In the US, the implementation of the Uyghur Forced Labor Prevention Act (UFLPA) has set new standards for supply chain accountability.
"The UFLPA introduces a rebuttable presumption that goods from China's Xinjiang region involve forced labour, requiring importers to provide clear and convincing evidence to the contrary," Nancy notes.
"This represents a significant shift in how authorities approach supply chain compliance, with enforcement becoming increasingly robust and technology-driven."
Complex compliance challenges
The implementation of these new regulations presents unprecedented challenges for businesses, particularly those operating intricate global supply chains.
Nancy emphasises that many supply chains "involve complex networks, with raw materials sourced from multiple countries, processed in various locations, and handled by numerous intermediaries".
The EUDR exemplifies these challenges, requiring companies to geolocate specific plots of land where raw materials are grown. For industries with multi-tiered supply chains, this necessitates granular-level tracing of inputs, including data collection from smallholder farms and subcontractors—a task that demands significant resources and technological capability.
Of course, the impact of these regulations extends far beyond directly affected companies. Non-EU suppliers providing goods to EU customers may need to supply detailed and verified information about their supply chains to ensure compliance with the EUDR or CSDDD.
Nancy highlights: "Inaccurate or incomplete reporting could result in the termination of commercial relationships or even contractual disputes, underscoring the need for transparency and proactive risk management."
Strategic approaches to compliance
To effectively navigate this evolving regulatory landscape, Nancy recommends several key strategies.
"Companies must assess their regulatory exposure early on," she advises.
This includes identifying applicable regulations, evaluating their potential impact, and mapping supply chains to identify high-risk areas. The role of technology cannot be understated, with AI-driven platforms and blockchain solutions emerging as valuable tools for ensuring compliance and traceability.
Furthermore, establishing comprehensive internal systems for managing compliance efforts is crucial. This includes appointing dedicated compliance teams, setting clear policies and procedures and implementing regular monitoring and reporting mechanisms.
A particularly critical aspect of successful compliance involves working closely with downstream suppliers.
"Companies need to provide their suppliers with the guidance and resources necessary to meet regulatory requirements," Nancy emphasises. "Treating suppliers as partners in compliance, offering training and support to help them align with regulatory standards, is essential for building robust and compliant supply chains."
Looking ahead
As regulatory requirements continue to evolve, businesses must remain agile and proactive in their approach to compliance. The future of supply chain management will likely see an even greater emphasis on transparency, accountability and sustainable practices.
Companies that invest in comprehensive compliance strategies today will be better positioned to navigate the challenges of tomorrow's regulatory landscape.
"In today's regulatory environment, compliance is not optional; it is a critical operational requirement," Nancy concludes.
This reality demands a fundamental shift in how businesses approach supply chain management, with success increasingly dependent on the ability to implement robust compliance strategies while maintaining operational efficiency.
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