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International developments in supply chain regulation

This article is co-authored by: Isabella Lewis, Senior Associate, A&O Shearman and Zulema Townsend, Associate, A&O Shearman

In recent years, there has been a steady increase in regulatory developments globally aimed at enhancing corporate transparency and accountability as regards sustainability. Supply chain impacts continue to be a key focus in a number of these regulations, particularly in Europe, with many companies facing (directly or indirectly) extensive and overlapping obligations on sustainability reporting, mandatory due diligence, and supply chain risks.  As such, there is a lot of material and data for participants in the supply chain to remain on top of, and this is a continually evolving area. 

Supply chain finance is, of course, intertwined with the supply chain itself. Given the increasing focus on areas of corporate transparency and accountability as to sustainability in the supply chain, this will be of increasing relevance for providers of finance as part of the wider context in which their products are used. Whichever part of the supply chain financiers are focused on, and whichever techniques they are using, those structuring transactions in the trade and commodities finance space will need to be on top of the underlying regulatory picture. 

The regulatory landscape for supply chains is a dynamic one, with changes focused, for example, on reporting looking up and down the supply chain and based on specific products and their provenance. In this article, we summarise some of the recent developments in supply chain regulation regarding corporate sustainability reporting, human rights, and product-focused regulation that market participants will need to be aware of, and provide a snapshot of some of the key legislation we advise on regularly as a firm.

Corporate sustainability reporting and supply chains

At a global level, the International Sustainability Standards Board (ISSB) was established by the International Financial Reporting Standards Foundation with a mandate to deliver a global baseline of sustainability disclosure standards to meet the growing information needs of investors. The ISSB published its first two Sustainability Disclosure Standards (S1 and S2) (ISSB Standards) in June 2023, which require entities to make detailed disclosures relating to the current and anticipated effects of sustainability-related risks and opportunities, including specific disclosures regarding the entity’s supply chain. While the ISSB Standards are not themselves mandatory, many jurisdictions (including Australia, Malaysia, Hong Kong, and Singapore) have implemented the Standards into domestic law. The UK has also expressed its intention to adopt the ISSB Standards and is expected to commence consultation in 2025. 

In Europe, supply chain considerations are a key aspect of many pieces of legislation adopted as part of the EU Green Deal, the EU’s policy to reach climate neutrality by 2050. The EU Corporate Sustainability Reporting Directive 2022 (CSRD) came into force in January 2023, amending the Accounting Directive. Notably:

• the CSRD applies to large EU “public interest” entities and non-EU entities subject to certain thresholds; 
• entities subject to the CSRD are required to report according to the European Sustainability Reporting Standards, which impose mandatory sustainability disclosure requirements; and 
• the CSRD requires entities to report extensively on specific environmental, social, and governance-related matters, including granular information on an entity’s supply chains.

Human rights and supply chains 

Entities may also be subject to domestic laws that require mandatory reporting specifically on human rights and modern slavery-related risks – including in the UK, Australia, and more recently, California and Canada. At a high level, these regulations require entities over a certain threshold to report on how they are identifying, assessing and addressing the risk of modern slavery in their operations and supply chains. Following recent reviews of the modern slavery frameworks in the UK and Australia, reforms to include mandatory supply chain due diligence, and associated penalties for non-compliance, were recommended. These recommendations are currently under consideration by both the UK and Australian governments.  

Entities may also be impacted by a range of mandatory due diligence initiatives emerging at the EU level. Most notable is the Corporate Sustainability Due Diligence Directive (CSDDD), which entered into force in July 2024, marking a new chapter for corporate responsibility. The CSDDD applies to both EU companies and non-EU companies that meet certain thresholds, including the ultimate parent company of a group of companies that meet such thresholds on a consolidated basis. Key highlights of this legislation include:

• introducing mandatory human rights and environmental due diligence across an entity’s own operations, those of its subsidiaries, and their worldwide supply chains;  
• requiring that in-scope entities must then take steps to prevent or mitigate potential impacts, and minimise or bring to an end actual adverse impacts; and 
• providing for entities to face a range of adverse consequences for non-compliance, including regulatory investigations and enforcement, penalties and potentially civil liability claims. 

The CSDDD builds upon existing domestic-level supply chain regulation, including, notably, in France, Norway, and Switzerland. 

Product stewardship and supply chains

We are also seeing more specific, product-focused supply chain regulation across Europe and the UK, including the following:

Meanwhile, we are seeing similar moves in the US with respect to product-focused regulation, for example, the Uyghur Forced Labor Prevention Act (adopted in June 2022) which prohibits the importing of products into the US manufactured wholly or in part with forced labour in the People’s Republic of China, especially from the Xinjiang Uyghur Autonomous Region.

What next? 

Globally, we are seeing a growing trend of supply chain-linked sustainability regulation, particularly with respect to reporting, disclosure, and product regulation. However, in more recent months, we have also seen some jurisdictions scale back on sustainability-focused regulation. For example:

• the European Commission recently published its Omnibus packages which set out a range of proposals that seek to “cut red tape” by simplifying EU regulations for citizens and businesses. Notably, the Omnibus packages include specific proposals designed to scale back the supply chain impacts of the CSRD and the CSDDD, particularly to reduce the trickle-down effect of these regulations on smaller companies that may be caught as part of an in-scope entity’s supply chain. In March 2025, Member States’ representatives approved the European Council’s position to delay by two years the entry into application of the CSRD requirements for companies that meet certain thresholds, as well as a delay of one year for the transposition deadline, and the first phase of application, of the CSDDD;
• the European Commission recently announced a series of measures aimed at simplifying the EUDR, including a one-year implementation delay; and 
• in April 2025, we also saw the recent decision of the German government to abolish its Supply Chain Act, which was seen as a precursor to the CSDDD, as referenced above. 

While it is possible we may see a watering down of supply chain impacts at least at the EU-level, the overall trend in regulatory developments over the last few years suggest that supply chains will continue to be a key focus for regulators as regards corporate transparency and accountability. 

These developments are changing the regulatory environment in which participants in the supply chain operate.  It will be key for finance providers to stay on top of this moving picture, both in order to understand the needs and key concerns of their clients, and also for effective structuring of their transactions.