ESG Weekly Update – April 24, 2024

24 April 2024

Other Notable Developments

Emissions Policy: In an address to the Columbia Center on Global Energy Policy, top White House aide John Podesta identified global trade as a “huge contributor” to global carbon emissions, and stated that global trading rules incentivize carbon leakage, whereby manufacturing-related emissions from a country with stronger climate policies shift to a country with weaker policies.

Agriculture: The UBS Sustainability and Impact Institute published a report about the sustainable transition of the agri-food industry, identifying global sustainability goals as the most likely driving force behind how and what food is produced.

U.S.: Representatives Push for Stricter EU Stance on Forced Labor

On April 16, 2024, Representatives Raja Krishnamoorthi (D., Ill.) and Mike Gallagher (R., Wis.) sent a letter to Secretary of State Antony Blinken in their capacities as Ranking Member and Chairman of the House Select Committee on the Chinese Communist Party concerning Uyghur forced labor in the People’s Republic of China (the “PRC”). The letter asks Secretary Blinken to “expand and elevate U.S. diplomatic efforts to combat PRC state-sponsored forced labor and strengthen international coordination against this egregious violation of human rights.”

The Uyghur Forced Labor Prevention Act (Public Law No. 117-78) (the “UFLPA”) prohibits the import to the U.S. of products presumed to be made by forced labor in the PRC. The letter focuses on the proposed EU forced labor regulation, which would ban products made with forced labor from import to the EU or export from the EU (for more on the proposed EU forced labor regulation, see our previous Weekly Updates here and here).

Representatives Krishnamoorthi and Gallagher note that failure by the EU to pass the legislation would permit products made by Uyghur forced labor to continue to be sold legally in the EU, which could increase the risk of illegal import of these products to the U.S. by way of EU member states. The letter requests Secretary Blinken to “prioritize engagement” with EU governing bodies and member states—particularly Germany and Italy—to address what Representatives Krishnamoorthi and Gallagher describe as “PRC state-sponsored forced labor programs” and support the proposed EU forced labor regulation, as well as other international initiatives aimed at combatting forced labor practices. The letter’s focus on certain member states may have been a reaction to the postponement of the legislative process for another EU initiative, the Corporate Sustainability Due Diligence Directive (the “CSDDD”), following intense political debate (for more on the CSDDD, see our Weekly Updates here and here). Following an amendment of the legal text, the European Parliament passed the revised version of the CSDDD on April 24, 2024.

On April 23, 2024, the European Parliament passed the forced labor regulation. Once the text has received final approval from the EU Council, it will be published in the Official Journal and will take effect three years after publication.

European Parliament Press Release

U.S.: States Move to Limit Government Contracts with Forced Labor Supply Chains

In March 2024, several U.S. states—including Utah, Florida, and Arizona—passed legislation addressing forced labor in global supply chains. The state measures would prevent companies from being awarded government contracts if their products are made in whole or in part with forced labor.

Florida’s law, H.B. 1331, would create a list of vendors restricted from bidding on state contracts or providing commodities due to their use of forced labor. Companies not on the list would have to certify that their commodities are not produced in whole or in part by forced labor. H.B. 1331 is currently awaiting the governor’s signature.

Utah’s new law, H.B. 404, also implements procurement restrictions on forced labor products and certain services from restricted foreign entities. The law provides for an exception where there are no other sourcing options. As in Florida, companies would have to certify that their commodities are not produced in whole or in part by forced labor. Utah’s law takes effect May 1, 2024. Similar proposals have been filed in Tennessee, Michigan, and Wyoming but have not advanced.

The Arizona bill, S.B. 1341, directly refers to the federal UFLPA, which introduced a rebuttable presumption that goods mined, produced, or manufactured wholly or in part in the Xinjiang region are mined, produced, or manufactured as a result of forced labor, and prohibits their import to the U.S. due to human rights concerns. However, the Arizona bill only applies to government-purchased electric vehicles (“EVs”) or EV components. The bill prohibits a governmental entity from entering into a contract for the procurement of EVs unless the manufacturer certifies that no entity involved in the production of the EVs used forced labor or child labor. If the manufacturer provides false or misleading information about forced labor in their supply chain, they could be subject to a fine of $10,000 per statement. The Arizona bill is currently awaiting a third reading.

Utah Law (H.B. 404)
Florida Bill (H.B. 1331)
Arizona Bill (S.B. 1341)

UK: Coalition Calls for Human Rights and Environmental Due Diligence Legislation

On April 17, 2024, a coalition of businesses and investors in the United Kingdom released a statement advocating for the implementation of a Business, Human Rights & Environment Act. This proposed legislation would require businesses and the public sector to undertake human rights and environmental due diligence in their operations and value chains, aiming to prevent harm to both people and the environment.

If introduced, such an act would represent another step in the global shift toward mandatory due diligence models. The coalition’s statement emphasized the importance of aligning legislation with international standards like the United Nations Guiding Principles on Business & Human Rights and the OECD Guidelines for Multinational Enterprises.

In particular, key recommendations in the statement include mandating due diligence for all businesses, ensuring accountability and providing remedy for harms caused, holding businesses legally liable for failures to prevent adverse impacts, and implementing accountability at the board level for good corporate governance. Importantly, the letter proposes introducing a failure-to-prevent model for liability.


Australia: New Federal Environmental Watchdog Announced

On April 16, 2024, Australia announced details of its new federal environment watchdog. Known as Environment Protection Australia (“EPA”), the independent watchdog will have the power to issue injunctive “Environment Protection Orders” for breaches of federal environmental law, as well as to audit companies to ensure their compliance with relevant environmental approvals or conditions. In addition, EPA will be responsible for enforcing federal environmental laws in areas such as wildlife protection and air quality. Breaches of these laws will now result in fines of up to AUS $780 million, as well as jail sentences of up to seven years.

Australia also announced the establishment of Environment Information Australia (“EIA”), a body that will facilitate public access to environmental data by (i) developing an online database and (ii) releasing reports on progress toward national environmental goals every two years. Both EPA and EIA will be supported by an initial AUS $100 million commitment by the Australian government.

These announcements mark the next stage of the Australian government’s “Nature Positive Plan.” Further stages of the plan, including reforms to Australia’s Environment Protection and Biodiversity Conservation Act, are expected to be published for consultation before being introduced to the Australian Parliament later in 2024.

Press Release

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