Regulatory Enforcement in Action
The penalties associated with non-compliance are steep: fines, brand damage, and even contract loss. A proactive compliance strategy, powered by Assent, helps protect your business and reputation against these risks.
Enforcement Is on the Rise
Regulators and consumers are increasingly holding manufacturers accountable, and scrutiny on compliance reporting and sustainability claims is on the rise. Here are some recent enforcement actions that demonstrate why proactive compliance is a business must.
Notable Enforcement Actions
This page contains insights into notable product compliance and supply chain sustainability enforcement actions. Assent will update this page periodically. Information on this page is current as of September 1, 2023.
Thousands of Chromebooks Delayed Over Sanctions
A shipment of nearly 14,000 Chromebooks was detained by U.S. customs because the manufacturer bought parts from an entity sanctioned due to alleged human rights violations. The manufacturer faced canceled orders, major brand damage, and had to find alternate suppliers.
Proactive supplier due diligence could have significantly mitigated this risk.
REACH Non-Compliance Costs a National Contract
One defense manufacturer lost a contract valued at approximately €50 million with the Swedish Ministry of Defence due to their lack of a compliance program for the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) Regulation.
A proactive compliance program is now a baseline requirement for winning contracts and growing your business.
Major Manufacturers Named in SCDDA Lawsuit
Non-governmental organizations (NGOs) have filed the first lawsuit under the German Supply Chain Due Diligence Act (SCDDA). The suit accuses IKEA and Amazon of failing to meet their human rights due diligence obligations.
Under the SCDDA, companies can face significant penalties. The number of cases is expected to grow as companies publish their first reports in 2024.
The time to gather supply chain sustainability data is now. An ESG solution gives you a foundation for SCDDA compliance along with many other EU directives and regulations.
Shipments to All EU Member States Halted
The Danish Environmental Protection Agency (EPA) detected medium-chain chlorinated paraffins (MCCP), a restricted substance, in O-rings produced by an EU-based HVAC equipment manufacturer. As a result, all products containing the O-rings have been quarantined, and shipments going to other EU member states have been paused. The manufacturer was required to replace O-rings in all existing products during their scheduled maintenance cycle for a total cost of €715,000.
Enforcement for EU product compliance is on the rise. One mistake can cost you millions in lost revenue.
Upcoming Enforcement Risks
The regulatory landscape is continuously evolving, and requirements often change between a regulation’s initial proposal and the final ruling. The following are current forecasted enforcement risks based on available public information at the time of publication.
Coming Soon: The EU Corporate Sustainability Reporting Directive
New European Sustainability Reporting Standards (ESRS) underwent public commentary in July 2023, and are expected to come into effect January 2024.
The ESRS requires general disclosures and, in some cases, materiality assessments. It will impact 50,000 EU companies and 10,000 non-EU companies, with an immediate impact on EU subsidiaries
Companies will need significant time to perform materiality assessments and collect supply chain data.
U.S. Securities & Exchange Commission Climate Disclosure Rule
The Securities & Exchange Commission (SEC) has proposed requirements for standardized climate-related disclosures, including greenhouse gas emissions, material scope three emissions, and climate-related risks.
The draft’s material scope three emissions reporting requirements in particular are prompting companies to start proactively engaging their supply chain.
New Substances Added to Proposition 65 List
1-bromo-3-chloropropane, 1-butyl glycidyl ether, and glycidyl methacrylate have been added to the Proposition 65 list of chemicals. Additional revisions to short-form warnings that include chemical identification are still pending.
Settlements on Proposition 65 lawsuits range from $20,000–$150,000 USD, with a median of $50,000 USD.
Uyghur Forced Labor Enforcement Action Expands
Two entities with more than 50 subsidiaries between them were added to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List, and detentions under UFLPA are increasing.
U.S. Customs and Border Protection (CBP) has been issuing detention notices against lithium-ion battery producers.
Failure to conduct forced labor due diligence, including awareness of beneficial owners and subsidiaries, is proving to have significant market access risks and fines.