Regulatory due diligence: The New Norm

Why legislation requires even more checks on your suppliers

There's a growing number of importation areas attracting the attention of law makers around the world.

It highlights the need for importers to exercise due diligence when dealing with international suppliers.

Importers make careful checks to ensure that their suppliers are up to the job, but they need to check for due diligence as well.

For example, is the timber product from illegal logging? Does the imported product contain asbestos or was asbestos used in its manufacture? Is it the product of modern slavery? Is it a natural resource extracted in a conflict zone and sold to perpetuate local wars (also known as conflict minerals)?

The legislation being enacted puts the onus on the end-user company, to perform new and possibly unfamiliar regulatory due diligence on suppliers.

Failure to do so, leaves the end user facing fines or import restrictions.

Legislated due diligence requirements already exist for imported wood and wood products and for asbestos in imported products or in their manufacture. However, more due diligence-based legislative requirements for modern slavery is being introduced this year and legislation for conflict minerals is not far behind. So now would be a good time to consider how to go about regulatory due diligence.

Help is out there...

How do you respond?

For Asbestos products or targeted tariffs, certain testing certificates, laboratory reports or supply-chain documentation can provide assurances that asbestos is not in imported goods. But the trick is that only approved laboratories in Australia or overseas can be used for the testing. Clearly, approved testing before arrival is more efficient and does not involve the additional cost of sampling and testing here.

For wooden products, there are organisations that already exist which support legislation-based due diligence. Australia's Illegal Logging Prohibition Act 2012 recognises that organisations like the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification (PEFC) can meet the requirements of due diligence for this legislation.

The IRMA (spell this out) Standard for Responsible Mining program specifically addresses unsustainability mining. It also has specific clauses relating to human rights, conflict minerals and a number of other issues including modern slavery.

Just as FSC sets out due diligence processes for imported wood, IRMA could also form part of a due diligence process for modern slavery legislation as and when it comes into force in Australia.

There are a number of schemes offering supply-chain certification for one form of legislation that could provide a certain amount of protection, but there are others that do not. It's important to know which schemes can help and those that cannot.

You need to know where to look

However, all these will only ever be partial solutions. To meet every one of the due diligence requirements of impending or actual legislation will probably mean casting your net wider. It means a comprehensive process that may involve reference to the World Bank Conflict Index, The Global Slavery Index and the Transparency International Corruption index, to name only three sources. In many cases, end-user companies will need to demonstrate that they have due diligence systems (DDS) in place before they even start.

But why do it all piecemeal, when you get help from independent experts?

3DL 's partners have decades of experience in helping companies meet high-end sustainability standards and improve their social and environmental performance. If you want to develop a due diligence system to meet the requirements of actual and impending legislation - or you just want advice - give us a call.

Whatever you do, don't wait until the last minute. Doing nothing is not an option. Trying to catch up when it's almost too late - could be very, very expensive.

Contact us do discuss your due diligence obligations

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