In recent years, driven by factors such as overcapacity, rising costs, the potential of emerging overseas markets, and the empowerment of new technologies, Chinese companies have taken globalization as the second curve of their growth. Cross border business and overseas expansion have become important strategic directions for enterprise development.However, with the deepening of global sustainable development concepts, companies face a new challenge in the process of "going global": ESG compliance. In addition to traditional legal and regulatory risks and cultural conflicts, companies also need to pay attention to the requirements of sustainable development, which has become a key factor for companies to go global.Compared to the past, global government regulatory agencies and international organizations have introduced stricter and higher ESG standards, with an increased breadth and depth of attention to issues, and stricter regulation of "greenwashing". European UnionIn November 2022, the European Council adopted the Corporate Sustainability Reporting Directive (CSRD), which will come into effect on January 5, 2023 and gradually apply to large listed and non listed companies conducting business activities in the EU. Enterprises included in the scope of application are required to publish an annual sustainability report, which provides detailed disclosure of the risks and opportunities brought by social and environmental issues to the enterprise, as well as the impact of enterprise activities on humans and the environment.On May 17, 2023, the European Parliament passed the Carbon Border Adjustment Mechanism (CBAM), imposing carbon tariffs on carbon intensive products imported by the EU, mainly involving six major industries: cement, steel, aluminum, fertilizers, hydrogen, and electricity.On January 17, 2024, the European Parliament passed the "Empowering Consumers for a Green Transition Directive", which prohibits statements based on offsetting greenhouse gas emissions, claiming that products/services/activities have a neutral, reduced or positive environmental impact in terms of greenhouse gas emissions; It is prohibited to make the following general environmental statements without supporting documents.The EU's "New Battery Law" will officially come into effect on February 18, 2024. Starting from July 2024, power batteries and industrial batteries must declare their product carbon footprint, providing information such as battery manufacturer, battery model, raw materials (including renewable parts), total battery carbon footprint, carbon footprint of different battery life cycles, and carbon footprint; To meet the relevant carbon footprint limit requirements by July 2027. Starting from 2027, power batteries exported to Europe must hold a "battery passport" that meets the requirements, recording information such as battery manufacturer, material composition, recyclables, carbon footprint, and supply chain. For domestic enterprises, whether they are battery manufacturers or exporters of new energy vehicles, they will face significant challenges.On April 23, 2024, the European Parliament passed a draft of the EU Market Regulation on the Prohibition of the Use of Forced Labor Products, which will investigate products suspected of using forced labor. If the evidence is conclusive, the sale of such products in the EU market will be prohibited.On May 24, 2024, the European Council approved the Corporate Sustainability Due Diligence Directive (CSDDD). This directive will gradually apply to EU enterprises and non EU enterprises that meet the same turnover threshold within the EU. CSDDD requires businesses and their upstream and downstream partners to prevent, terminate, or mitigate negative impacts on human rights and the environment. Enterprises need to incorporate due diligence procedures into their management system, continuously track and publicly disclose the effectiveness of the due diligence process. Chinese companies with a certain scale and layout in the EU market will be directly included in the non EU enterprise list of CSDDD and must comply with the due diligence requirements of the directive. These companies include EU companies and their parent companies with a certain number of employees (such as 500 people) or global turnover exceeding a certain amount (such as 150 million euros). In addition, companies that have business dealings with EU companies also face the risk of being investigated, such as the textile and clothing industry, agriculture and food industry, and mineral industry. If due diligence fails, these companies may be excluded from the supply chain by EU clients, resulting in significant business losses.
America
On December 23, 2021, the Uyghur Forced Labor Prevention Act (UFLPA) officially came into effect in the United States.
Germany
On January 1, 2023, the German Due Diligence Act for Supply Chain Enterprises came into effect. According to the bill, German companies are required to regularly fulfill their due diligence obligations on direct and indirect suppliers in areas such as human rights and environmental protection.
Canada
On May 3, 2023, the Canadian Parliament passed the Anti Forced Labor and Child Labor in the Supply Chain Act, aimed at increasing transparency in the supply chain and reducing the occurrence of forced labor and child labor in the supply chain.面对日益严格的全球ESG法规，出海企业亟需建立全球ESG合规和风险控制体系，推动自身及供应链的ESG管理。1. Respect and understand the culture and laws and regulations of the target marketProactively understanding local laws, regulations, and multiculturalism when conducting overseas investments and market development, to avoid violating labor, environmental, and other laws and regulations of the host country due to neglect or lack of understanding, and facing government penalties, protests from non-governmental organizations, and public complaints.2. Integrate ESG into corporate strategy and development planning, and establish a sound ESG governance systemDevelop and implement a comprehensive ESG compliance system, covering environmental protection, social responsibility, and corporate governance, including policy formulation, institutional design, execution supervision, and continuous improvement, to ensure ESG compliance within the company and upstream and downstream of the supply chain. By carrying out ESG practices, overseas enterprises can gain recognition from local governments and consumers, reduce legal risks, enhance brand image and market competitiveness.3. Implement due diligence and reporting mechanismImplement due diligence procedures in supply chain management, conduct comprehensive audits and evaluations of all links in the supply chain, and provide supplier codes of conduct to ensure that suppliers and partners meet the company's ESG standards. Regularly release ESG reports that provide detailed disclosure of performance in environmental protection, social responsibility, and corporate governance. Only by collaborating with suppliers that meet ESG standards can companies ensure product quality and sustainable development.
