Key Responsible Business Laws

Olivia Thomson

Communications Manager

9 Oct 2022

About 1 mins

Governments around the world are using legislation to drive responsible business practices and positive impacts on people and planet. It’s essential to know what responsible business laws apply to your company and how to comply with these.

Focus on responsible business practices and sustainable supply chains continues to grow across the world. Government, investor, consumer and other stakeholders’ demand for responsible business is driving the regulatory agenda in many regions.

Countries are increasingly adopting new legislative initiatives to regulate businesses’ practices, drive more responsible operations and encourage better regulation of sustainability issues in global supply chains. These national laws require companies to manage their operational impacts on people, communities and the environment, and report on their efforts.

The legislation a company needs to follow varies depending on their size, turnover, sector and operating office locations.

Look below for the key country laws that businesses need to be aware of, to understand what legislation is relevant, how it affects companies and what they must do to comply.

Learn how Sedex can help you comply with Modern Slavery Acts, supply chain transparency laws and other laws. Ask for our Consulting team to discuss a bespoke legislation diagnostic for your business.

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Legislation: Conflict Minerals Regulation

Who does it apply to?

EU-based importers of tin, tantalum, tungsten, and their ores, and gold.

What it means for businesses

EU importers of tin, tantalum, and tungsten, and their ores and gold areas need to report on supply chain due diligence obligations.

Importers sourcing these minerals from conflict-affected and high-risk areas must provide extra information like which mine was used.

Due diligence is recognised as “an ongoing, proactive and reactive process through which economic operators [businesses] monitor and administer their purchases and sales with a view to ensuring that they do not contribute to conflict or the adverse impacts.”

Third-party auditing and public reporting are stated as actions companies can take.

Status: Effective from January 2021.

Legislation: Forced labour product ban

In September 2022 the European Commission proposed a law to ban products made with forced labour from the EU market. It won’t come into effect for at least two years, and there’s still a lot we don’t yet know, but it could be hugely significant for businesses – so we recommend starting to prepare for it.

Who will it apply to?

All products, sectors and businesses in the European Union (EU). The legislation would ban any products, including their components, made with forced labour from the EU market – even if the forced labour has taken place outside of the EU.

What it could mean for businesses

Where authorities in EU countries suspect that forced labour has been used to make a product or any of its parts, they would carry out an investigation. If they find that forced labour has been used, they can ban and seize the relevant items – causing disruption and financial loss to businesses. EU countries may also introduce fines or other penalties.

Status: In draft, expected to apply from 2025 or 2026. The European Commission’s proposal is now being reviewed by other EU governing bodies, and there will be a preparation period after the final version is signed into law.

Legislation: Non-Financial Reporting Directive

Who does it apply to?

Approximately 6,000 large companies and groups across the EU, including:

Listed companies
Banks
Insurance companies
Other companies designated by national authorities as public-interest entities.

What it means for businesses

Eligible companies must publish reports on the policies they implement in relation to:

Environmental protection
Social responsibility and treatment of employees
Respect for human rights
Anti-corruption and bribery
Diversity on company boards (in terms of age, gender, educational and professional background).

Companies are given flexibility on how they disclose. They can use the UN Global Compact (UNGC) framework, OCED Guidelines, or the ISO 26000 framework.

Status: Effective from January 2018.

Legislation: Sustainable Finance Disclosure Regulation

Who does it apply to?

Fund management companies
Asset management companies
Institutional investors
Financial advisors
Certain other regulated firms in the EU.

What it means for businesses

Eligible companies must disclose whether they consider negative impacts on the environment and social justice of their investment decisions and advice.

Companies must publish a statement on the due diligence policies and related actions concerning principal adverse impacts of investment decisions on sustainability factors.

Status: Effective from March 2021.

Legislation: Corporate Sustainability Due Diligence Directive

Who does it apply to?

EU companies with more than 1,000 employees that generate a turnover greater than EUR 450 million worldwide.
Non-EU companies that generate a turnover greater than EUR 450 million in the EU each year.

What it means for businesses

The Directive outlines responsibilities for businesses regarding the social and environmental impact of their own operations, their subsidiaries’ operations, and their suppliers’ operations. It sets out companies’ responsibility to identify risks, prevent adverse impacts in their supply chains and operations, communicate progress, and provide remedy where appropriate.

Companies will be legally responsible for respecting workers’ rights, through tackling issues such as child or forced labour and discrimination. Companies of a certain size will also have to adopt a plan to ensure that their business strategy is compatible with limiting global warming to 1.5°C, in line with the Paris Agreement.

Status: Adopted at EU-level in July 2024. EU countries (Member States) have until July 2026 to translate the Directive into national laws, with these laws being enforced from July 2027.

Legislation: CSR Directive Implementation Act

Who does it apply to?

Companies with any of the following criteria:

More than 500 employees and an annual turnover above €40 million
A balance sheet total of more than €20 million.

What it means for businesses

Eligible companies must disclose information on non-financial matters, with a minimum requirement to disclose information on environment, social and employee-related matters, on respect for human rights and on anti-corruption and bribery.

Status: Effective from April 2017.

Legislation: Supply Chain Due Diligence Act

Who does it apply to?

2023: Companies based in Germany, or German-registered branches of foreign companies, with more than 3,000 employees
2024: Companies based in Germany, or German-registered branches of foreign companies. with more than 1,000 employees.

What it means for businesses

Companies must conduct supply chain due diligence activities to make sure social and environmental standards are observed in their supply chain. They include:

Risk analysis of business activities to assess adverse effects on human rights. Companies must monitor their own operations and their direct suppliers worldwide
A duty to take measures if violations are discovered or potential impacts identified, to prevent adverse effects and to provide access to remedies
A gradual responsibility applies to indirect suppliers beyond tier 1. A risk analysis is only required if an employee of an indirect supplier makes a complaint to the German company
Companies must publish an annual report outlining the steps they have taken to identify and address risks, including those in specific areas such as forced labour and environmental degradation
Fines for companies in cases of violations. These could be up to €800,000, or up to 2% of a company’s annual global turnover.

Status: Effective from January 2023.

Legislation: Transparency in Supply Chains Act 2010 (State of California)

Who does it apply to?

Retailers and manufacturers doing business in California with annual gross receipts (all revenue before costs) exceeding US $100 million.

What it means for businesses

Eligible retailers and manufacturers must publish annual reports detailing their efforts to eradicate human trafficking in their direct supply chains.

They must include the areas of verification, audits, certification, internal accountability, and training.

Status: Effective from January 2012.

Legislation: Section 307 of the Tariff Act 1930 (Federal)

Who does it apply to?

Any business in any country outside of the USA.

What it means for businesses

This Section prohibits the importing of merchandise mined, produced or manufactured, wholly or in part, in any foreign country by forced or indentured labour, including forced child labour.

The US Customs and Border Patrol can take action against any companies or products where there is reasonable evidence to suspect forced labour has been used. This can include blocking or seizing goods at customs, preventing them from being sold or distributed through the USA (a “withhold release order”).

Status: Effective from 1930, with an amendment in February 2016 to close a legal loophole.

Legislation: Uyghur Forced Labor Prevention Act

Who does it apply to?

Any company importing items into the USA from the Xinjiang region in China.

What it means for businesses

The Act aims to prevent any goods made with forced labor from entering the USA.

The Act presumes that any goods or merchandise “produced, or manufactured wholly or in part” in Xinjiang, China, were made with forced labor by Uyghurs or other persecuted groups. The law requires any company wanting to import goods from this region into the USA to provide “clear and convincing” evidence that items were made without forced labor.

The US government’s guidance lists evidence that importers can rely on, including supply chain mapping indicating sites where goods are produced; information on workers at the site, including wage and recruitment practices; and audits to identify and remediate forced labor.

Status: Effective from June 2022.