In compliance, each year brings new challenges and opportunities, and while no two years are the same, certain practices can yield consistent positive returns. Requirements and trends are constantly evolving, and a steady and planned approach to supplier engagement, coupled with expert insight, often produces the best results.
The majority of regulatory requirements rely on high-quality data from the supply chain. To acquire this, Assent leverages the compliance calendar, which aligns with industry cycles to streamline data efforts. The calendar was developed with the help of a team of globally-recognized experts, including Assent’s General Counsel, Travis Miller.
His expertise goes beyond knowing when and how to ask for compliance data — he helps companies know which questions are the right ones to ask to best protect against supply chain risk. We spoke to him about what he views as the mostpressing regulatory issues for 2021.
Q: With January 5, 2021, having come and gone, what can companies expect from the European Union (EU) Waste Framework Directive (WFD) for the rest of the year?
A: From January 5, 2021, companies doing business in the EU have an obligation to report to the Substances of Concern In articles, as such or in complex objects (Products) (SCIP) database when articles contain substances of very high concern (SVHCs) above threshold. Now that the deadline has passed, companies can expect increased visibility into their supply chain compliance programs and staged enforcement to come from authorities to encourage compliance. It is currently anticipated that individuals will be able to search and find data entered into the SCIP database in February 2021. When this data becomes publicly available, an unprecedented level of transparency and scrutiny will befall Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) compliance programs.
As submissions roll in, look to the European Chemicals Agency (ECHA) — the body responsible for the SCIP database — to provide guidance allowing companies to improve their programs over time. Organizations should audit their programs and be aware of potential risks or inconsistencies, but must also expect enforcement bodies to execute audits of their own.
As the year goes on, individual member states will release their own individual criteria, although it must align with the overarching EU WFD. This may result in disparate dates for program management or other slight alterations.
The scrutiny applied to companies with regard to the EU WFD will come from more than government agencies. In February of 2021, when the data in the SCIP database becomes publicly available, the search functionality will enable non-governmental organizations (NGOs), consumers, and competitors to search corporate compliance statuses by accessing self-declared data.
Q: Now that the UK is no longer a factor in the EU, can we expect any changes to the REACH Regulation, Restriction of Hazardous Substances (RoHS) Directive, and other EU regulations in 2021?
A: Laws in the EU, particularly those regarding public health or environmental protection, will remain consistent and progressive. Now that the UK has officially separated and the transition period has ended, the country will need to implement new programs to safeguard protections that consumers have come to expect.
Regarding the REACH Regulation, companies based in the UK will receive a grace period to migrate existing products compliant with EU REACH to the UK REACH system. The UK has also established processes to address medical device regulations and corporate responsibilities under the RoHS Directive will largely remain the same.
However, the UK and EU will inevitably diverge in the practical application of all regulations, ultimately resulting in many duplicated efforts to meet regulations on either side of the English Channel.
Q: Regarding corporate social responsibility (CSR), what are the most pressing issues for companies?
A: The EU Conflict Minerals Regulation is now in full force, expanding upon due diligence and reporting requirements that publicly-traded U.S. companies are familiar with from their exposure to Dodd-Frank Wall Street Reform and Consumer Protection Act. While both regulations address the human rights risk present in the extraction of ore and the production of commercial tin, tantalum, tungsten, and gold (3TGs), the EU regulation has a global scope and requires a different level of due diligence. Accordingly, Conflict Minerals Reporting Templates (CMRTs) will serve as a baseline data point in an EU or global responsible minerals program, but will likely be insufficient to meet the respective due diligence and disclosure obligations. Companies with suppliers producing 3TGs in Conflict-Affected and High-Risk Areas (CAHRAs) face new requirements under the law. Companies with existing conflict minerals programs must ensure their programs are robust enough to adapt to the EU rules if in scope.
The fight against human trafficking in corporate supply chains has escalated, spurred by a recent flurry of activity from the U.S. Customs and Border Protection. As the U.S. and other countries enact legislation to address the rampant human rights abuses in the Xinjiang province of China, companies must be prepared to perform supply chain due diligence or risk costly operational disruptions and lasting reputational harm caused by withhold release orders (WROs).
Due to the increasing liability and risk to investments, many of the world’s largest investment firms have signalled environment, social, and governance (ESG) as a key consideration for future investment. For example, BlackRock, which manages investment portfolios worth trillions of dollars, identified sustainability as one of its top-three investment trends for 2021. Companies will be expected to produce demonstrable efforts toward ESG initiatives in order to compete for the trillions in capital. To do so, companies need to establish key metrics, identify priorities, and establish processes that align with and meet investor expectations. Failing to do so will increase the probability that organizations will be unable to maintain institutional investment and future sales.
Q:What should companies expect on the trade front?
A: The Trump years marked a departure from the largely free-trade promoting administrations that came before him. Tariffs were implemented on adversaries such as China and allies like the EU and Canada. While 2021 will likely see less capricious tariff activity, it’s unlikely a full regression in tariffs, particularly with regard to China, will take place.
This year will also be the first full calendar year under the United States, Mexico, Canada Agreement (USMCA), which replaced the North American Free Trade Agreement (NAFTA) in July of 2020. The new deal lacks a data exchange format, meaning companies will need data exchange workarounds and software to manage and track compliance effectively.
Regarding China, it’s likely that sanctions from 2020 will continue to be implemented. The Xinjiang allegations make a strong case for sanctions or outright bans on goods from the region, but numerous countries aside from the U.S. have a tense relationship with the country. As a result, a host of new bans, restrictions, and scrutiny concerning transactions is anticipated to emerge globally.
In late 2020, the U.S. laid out a plan for moving away from China as a sole or primary supplier for critical minerals, which could require companies to perform due diligence activities on a wide range of minerals commonly sourced from China. China’s dominance in the extraction and market position concerning rare earths, will make this effort a herculean task and one that will require massive public sector investment to make possible.
Over 500 companies worldwide rely on Assent to prepare for these important issues and others like them. To learn how Assent can help your company, contact our experts.
