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Zulema Townsend, Associate in the Environment and Climate Law Group at A&O Shearman, highlights the shift from voluntary sustainability reporting to mandatory, detailed disclosures, and the growing due diligence obligations companies face.
- Corporate reporting: The EU’s Corporate Sustainability Reporting Directive (CSRD) and the International Sustainability Standards Board (ISSB) standards are setting new expectations for detailed sustainability disclosures, including supply chain impacts.
- Supply chain due diligence: The EU’s Corporate Sustainability Due Diligence Directive (CSDDD) introduces obligations to identify, address, and mitigate human rights and environmental impacts across supply chains.
- Product stewardship: EU regulations on forced labour, conflict minerals, and deforestation raise potential liability for unsustainably sourced products and components entering the EU market.
As Zulema notes, this direction of travel demands that companies not only understand their regulatory exposure but also take proactive steps to embed sustainability and accountability deep into their supply chains.
🎙️ Recorded in partnership with ITFA Education Day, held in London
Key Topics
- Supply chain transparency and sustainability reporting are becoming central to how organisations operate and communicate risk.
- There is a growing emphasis on mandatory due diligence, particularly in relation to human rights and environmental impacts within supply chains.
- There is a growing emphasis on mandatory due diligence, particularly in relation to human rights and environmental impacts within supply chains.
Key Insights
Sustainability reporting is moving from voluntary to mandatory
There is a clear shift towards detailed, standardised reporting requirements. Businesses are now expected to provide more granular disclosures on sustainability risks, opportunities and supply chain impacts.
Due diligence obligations are becoming more robust
Companies are no longer only expected to identify risks. They must also take practical steps to address and mitigate human rights and environmental issues across their supply chains.
Accountability now extends to the product level
Regulation is expanding beyond operations to include the full lifecycle of products. This increases exposure where goods or components are not sourced responsibly.
Expert Analysis
Zulema Townsend, Associate in the Environment and Climate Law Group at A&O Shearman, outlines how supply chain regulation is evolving in response to growing sustainability expectations. She notes that corporate reporting has moved away from voluntary frameworks towards mandatory disclosure regimes. Initiatives such as the EU Corporate Sustainability Reporting Directive and the standards developed by the International Sustainability Standards Board are setting a more consistent global baseline, requiring companies to report in greater detail on sustainability risks, including those linked to supply chains. Townsend also highlights the increasing importance of supply chain due diligence. Under the EU Corporate Sustainability Due Diligence Directive, companies are expected not only to identify risks but to take meaningful action to prevent and address adverse human rights and environmental impacts. In addition, product stewardship measures are expanding regulatory oversight across global supply chains. Regulations relating to forced labour, conflict minerals and deforestation are placing greater responsibility on businesses for the origin and sustainability of the products they bring to market. Overall, the direction of travel is clear. Organisations must adopt a more proactive and integrated approach to managing supply chain risk, with transparency and accountability at its core.— Zulema Townsend
Key Findings
- Mandatory reporting frameworks are increasingly replacing voluntary approaches to sustainability disclosure.
- Human rights and environmental risks within supply chains are a central focus of new regulation.
- Product related rules are expanding accountability across the entire value chain.
Implications
- Organisations will need to strengthen internal systems to meet more detailed reporting and compliance requirements.
- Due diligence processes must become embedded within day to day supply chain management rather than treated as a standalone exercise.
- Global regulatory developments are likely to drive greater consistency, requiring businesses to align practices across multiple jurisdictions.
Key Takeaways
- Sustainability reporting is becoming a core regulatory requirement rather than a voluntary exercise.
- Effective oversight of supply chains is now essential for both compliance and risk management.
- Responsibility extends beyond direct operations to suppliers, partners and product inputs.
