Quick Insight: supply chains come under even more scrutiny

Or why companies and investors need to step up their efforts

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As public opinion leads, legislation follows, at least in Europe. The most recent legislative move is on deforestation, but it's just one of a wave of new laws and regulations. And behind legislation comes litigation.

It's important that all investors (asset owners and asset managers) prepare for the upcoming changes. But we must also understand legislative developments holistically, rather than focusing on individual measures in isolation.

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Extensive and often complex supply chains lie at the heart of our current economic system. And for some companies these supply chains go beyond just being a part of their raw material sourcing process - they are an intrinsic element of their competitive advantage. Recent engagement from investors, combined with legislation action, has brought into focus the fact that many companies have limited knowledge of what happens upstream of their direct operations.

While the recent European Union’s Deforestation Regulation has got a lot of attention, it's only the latest in a wave of legal moves, including measures relating to human rights, and moves on biodiversity and our oceans.

Increasingly, this lack of knowledge of what happens upstream, about the impacts of our supply chains, is becoming unsustainable. There are three main pressures that are forcing change - social demands, new environmental and human rights legislation, and litigation.

For today we focus on new legislation in Europe, but in a later blog we want to start to pull this all together. Looking at this as a tick box compliance process, law by law, is just inviting future additional risk.  

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