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1、ESG POLICY GUIDETHE FUTURE OF SUSTAINABILITY LEGISLATION FOR LUXURYCONTENTSPOSITIVE LUXURYESG POLICY GUIDEINTRODUCTION LEGISLATION ROADMAPPART 1:ENVIRONMENTALEU Green DealUK Plastic Packaging TaxPART 2:SOCIALHuman Rights and Forced LabourDue Diligence and Ban on Goods in EUPART 3:GOVERNANCE Mandator
2、y Disclosure StrategyforFinancingTransitionto a Sustainable Economy EU ESG Reporting European Green BondsPART 4:GREENWASHINGCITATIONS ACKNOWLEDGEMENTS345POSITIVE LUXURY 2023“The path to reaching net-zero by 2050 may be fraught,but the reward is considerable for those taking action while t
3、he consequences of inaction are unthinkable.With more companies making sustainability a core component of their business strategy,there is hope for the future.The world is watching:now is the time to turn aspiration into action.”Alyssa Auberger,Chief Sustainability Officer,Baker McKenzie The Race to
4、 Net-ZeroThe purpose of this bulletin is to give an update and overview of key upcoming sustainability legislation the luxury sector needs to be aware of to help mitigate climate,material and financial risks to their business.Due to the urgency of the climate crisis,as highlighted by COP27 and COP15
5、,increased and vocal demand for transparency from consumers,governments and key stakeholders,it is more important than ever to ensure companies are ahead of the legislation curve and have the right frameworks in place.Action is not necessary just to meet compliance or as the right thing to do corpor
6、ations are increasingly at risk to a rising tide of transparency-related litigation.Sustainability-related legislation is here and targets are clear.Businesses must take action as the tide is changing,and all businesses must work to ensure they can ride the wave,rather than be swept up in this immin
7、ent current.To help you navigate this changing tide,we have partnered with Baker McKenzie to explain key legislative changes across sustainability,with a key focus on environment,social,governance and greenwashing,looking at near term climate-related risks,as well as what the next four years will br
8、ing as outlined in our timeline.3POSITIVE LUXURY 2023INTRODUCTION4POSITIVE LUXURY 2023LEGISLATION ROADMAP202220252023202620212024POSITIVE LUXURYESG POLICY GUIDEUK Environment Act EU Green Deal Environmental Policy Package EU Biodiversity Strategy 2030 Nationally Determined Contributions Glasgow Pact
9、 Net Zero US SEC-SRCs(Smaller reporting companies)legislation expected to come into place from 2025(prediction)EU CSRD(Corporate Sustainability Reporting Directive)2025(Reports published in 2026)large non-listed UK Plastic Packaging Tax UK TCFD Mandate(Task Force on Climate-related Financial Disclos
10、ure)European Commission Ban on Products Made with Forced Labour USA Inflation Reduction Act(Focus on energy efficient commercial buildings,workforce wages,expanded clean energy&clean energy supply chains)USA Uyghur Force Labor Prevention ActCalifornia The Garment Worker Protection Act California Env
11、ironmental Suite:AB 1279,AB 1757,SB 846,SB 905,SB 1020,SB 54,SB 1020,SB 11337 EU Corporate Sustainability Reporting Directive(CSRD)For listed companies with over 500 employees(Reports published in 2025)TCFD SWITZERLAND(Reporting requirements expected to commence in 2025)TNFD Mandate for listed Large
12、 Companies(Expectation)EU CSRD(Corporate Sustainability Reporting Directive)Listed SMEs are included through simplified reporting standards(Reports published in 2027)TNFD Mandatory for non-listed large companies(Expectation)Energy Intensive Taxes(Prediction)Increasing regulatory action is growing th
13、e need for consistent,comparable and transparent information on climate and other environmental,social and corporate governance information.EU CBAM(Carbon Border Adjustment Mechanism)EU CSRD(Corporate Sustainability Reporting Directive)requirements to be publishedUS SEC(Securities and Exchange Commi
14、ssion)required Corporate Climate Disclosures(Expectation)Water Management SBT(Science Based Targets)FLAG(Forest,Land and Agriculture)SBT and Nature Valuation SBT Mandate(Prediction)TNFD(Task Force on Nature-related Financial Disclosures)reporting framework closed by Sept 2023EU GREEN DEAL1.What is t
15、he EU Green Deal?The European Green Deal,launched in2019,is the European Unions flagshipdecarbonisation strategy.The Green Dealsets the target of a carbon-neutral Europeby 2050(-zero any residualemissions in the EU wouldbe compensated by carbon removals)andaims to mainstream climate andenvironmental
16、 objectives into all sectors ofthe economy through legislative action.The Green Deal,in itself,is neither a pieceof legislation nor a specific policy.However,the measures and regulationsintroduced as part of this strategy will betremendously impactful for consumers andcompanies throughout the EU.2.W
17、hich features of the Green Deal aremost relevant to the luxury and fashionsector?One of the Green Deals objectives is thepromotion of“longer lasting products thatcan be repaired,recycled and re-used”.Toachieve this aim,the EuropeanCommission has adopted two overarchingpolicy plans:the Circular Econo
18、my ActionPlan,which introduces a number oflegislative and non-legislative actions toimprove the circularity of products in theEU market,and the EU Strategy forSustainable and Circular Textiles,whichprovides a framework for the sustainableproduction and consumption of textiles.Under these two plans,t
19、he followinglegislative initiatives will particularly affectthe business operations of the luxury andfashion sector:1.The Ecodesign for Sustainable ProductsRegulation(already tabled as adraft);click here to view2.EU rules on green claims(i.e.“greenwashing”),including aproposal on empowering consumer
20、s inthe green transition(already tabledas a draft)and an upcoming proposal on substantiating green claims3.The Corporate Sustainability DueDiligence Directive(already tabled as adraft),notably its requirement thatcovered companies adopt a climate-neutrality plan4.A revision of the Packaging and Wast
21、eDirective and the Waste FrameworkDirectiveThe proposed Ecodesign for Sustainable Products Regulation(Ecodesign Regulation)will replace the existing Ecodesign framework with the aim of significantly improving the circularity and energy performance of products.It extends the scope of the existing fra
22、mework to cover the broadest possible range of products,meaning that textiles,furniture and a number of other product types are in line to become subject to ecodesign requirements in the future.To bring a product onto the EU market,manufacturers must ensure that it complies with specific criteria wh
23、ich will vary depending on the product type relating to energy efficiency,the emission of harmful substances(such as CO2),recyclability,durability and the recycled content of products(among others).These requirements will no doubt prove impactful no matter where a business is positioned in the value
24、 chain.Of particular significance,the proposed Ecodesign Regulation contains multiple measures aimed at preventing the destruction of unsold consumer goods.Large businesses discarding unsold products will have to report on the quantities discarded and the reasons why,while the Commission will also h
25、ave powers to ban the destruction of unsold consumer goods outright,where it proves to be particularly problematic for certain product categories.In March 2022,the Commission published 5PART ONE:ENVIRONMENTALPOSITIVE LUXURY 2023POSITIVE LUXURYESG POLICY GUIDEa proposal for a Directive“empowering con
26、sumers for the green transition.”The aim of this proposal is to combat greenwashing practices,by providing consumers with better information on the durability and repairability of products on the EU market.This will be followed,in early 2023,by a proposal requiring companies to substantiate claims r
27、elating to the sustainability of their products.As a result of these proposals,the luxury and fashion sector will be required to be more transparent and more cautious regarding any claims made as to the sustainability of a particular product.The Corporate Sustainability Due Diligence Directive(CSDDD
28、)requires the adoption and implementation of effective due diligence policies to identify,prevent,mitigate and bring to an end actual and potential human rights and environmental harms in companies business operations and value chains(both upstream and downstream).It also aims to impose new duties o
29、n company directors in relation to decisions they make that impact sustainability matters.The luxury and fashion sector,due to its long and complex value chains,will undoubtedly be significantly a fected by the CSDDD.Moreover,luxury and fashion companies covered by the CSDDD will be required to adop
30、t a plan to ensure that their business model and strategy is“compatible with the transition to a sustainable economy and with the limiting of global warming to 1.5C in line with the Paris Agreement”.Finally,according to the EU Strategy for Sustainable and Circular Textiles,the revision of the Waste
31、Framework Directive in 2023 will include Extended Producer Responsibility(EPR)requirements for textiles(similar to the schemes already in operation for Waste Electrical and Electronic Equipment(WEEE)and batteries),the eco-modulation of fees and measures to promote a“waste hierarchy”for textile waste
32、.3.How will these measures affect theimport of luxury product to the EU?The Green Deal will have multiple effectson EU imports of luxury products.Forexample,under the Ecodesign Regulation,importers are required to ensure that6POSITIVE LUXURY 2023any product entering the EU is compliant with ecodesig
33、n requirements and has a verified Digital Product Passport.Customs officers are empowered to refuse to allow products without Digital Product Passports into circulation in the EU market.In addition,under the CSDDD,a company must account for the environmental and human rights harms arising in its ent
34、ire value chain regardless of whether part(or all)of the value chain is located outside of the EU.4.Whats next?Most of the proposals identified(including the Ecodesign Regulation,the CSDDD and green claims legislation)have not yet been formally adopted at EU level,and therefore must go through the E
35、U legislative process before entering into force.Agreement is likely to be reached by the end of 2023,and at latest early Spring 2024.Therefore,it will be important that the luxury and fashion industry closely monitors the development of these legislative proposals,makes its voice heard,and adequate
36、ly prepares for future compliance requirements.POSITIVE LUXURYESG POLICY GUIDEFURTHER INFORMATIONEU Publishes Draft Legislation to Address Imports of Commodities Linked to Deforestation and Forest Degradation Baker McKenzieEU:European Parliament adopts report on corporate due diligence and accountab
37、ility Baker McKenzie POSITIVE LUXURY 20237POSITIVE LUXURYESG POLICY GUIDETHE PPT HAS BEEN PROMOTED BY THE UK GOVERNMENT AS A WORLD LEADING MEASURE AND OTHER JURISDICTIONS ARE ALREADY PUTTING IN PLACE SIMILAR REGIMES.WE EXPECT PLASTICS REGULATION TO CONTINUE GROWING WORLDWIDE IN COMING YEARS GIVEN TH
38、E CURRENT FOCUS ON SUSTAINABILITY.Graham Stuart,Partner,Baker McKenzie,LondonPLASTIC&CIRCULARITY UKS PLASTIC PACKAGING TAX:WHAT BUSINESSES NEED TO KNOWWhat is the plastic packaging tax?The UKs Plastic Packaging Tax(PPT)applies to plastic packaging that contains less than 30%of recycled plastic conte
39、nt and is charged at a rate of GBP 200 per metric tonne.The PPT aims to encourage the use of more sustainable plastic packaging,increase the use of recycled plastic,and help reduce plastic waste.The PPT took effect on 1 April 2022.Who does it apply to?UK manufacturers and importers of plastic packag
40、ing are required to register with the HM Revenue&Customs(HMRC)and pay the PPT if they either:Expect to import into the UK ormanufacture in the UK 10 or moretonnes of plastic packaging componentsin the next 30 days,or Have imported into the UK ormanufactured in the UK 10 or moretonnes of plastic pack
41、aging componentssince 1 April 2022.Note that thiswill change on 31 March 2023 whenbusinesses will need to look back overthe last 12 months on the last day of themonth.Why should businesses conduct due diligence of their supply chain?A crucial aspect of the PPT regime is that downstream businesses th
42、at buy plastic packaging on which the tax should have already been paid may be found jointly and severally liable for any unpaid tax.In connection with this,the HMRC published guidance on 30 December 2021 on the due diligence checks businesses should undertake in connection with the PPT.Are group re
43、gistrations allowed?Yes.Groups of companies can appoint a UK-established representative to register and pay PPT for the group.However,all members of the group will be jointly and severally liable for unpaid PPT.What records and accounts are required to be retained for purposes of PPT?Manufacturers a
44、nd importers should keep accounts and records to support the information submitted in their quarterly tax returns.To view the HMRC Guidance on record retention,click here.What are the penalties and what are the kinds of enforcement that we can expect?Non-payment of PPT may result in the imposition o
45、f criminal and civil penalties.In terms of enforcement,it is expected that HMRC will be focusing on deliberate tax evasion and will be targeting willful or grossly negligent non-compliance and also scenarios where companies deliberately evade the application of the tax,such as businesses artificiall
46、y splitting to fall below the de minimis threshold of producing or importing 10 tonnes of plastic packaging annually.POSITIVE LUXURY 20238POSITIVE LUXURYESG POLICY GUIDEOTHER RELEVANT LEGISLATIONSUS Extended Producer Responsibility forPackaging SB 54:Establishes a producer responsibilityprogram for
47、paper and plastic packagingand will require certain reductions insingle-use plastic packaging.California-specific:State Procurement Standards forRecycled Products AB 661Requires state agencies to purchaserecycled products when recycled productsare available at no more than 10%greaterthe total cost o
48、f nonrecycled products.What to do?Transitioning to a circular economy is a great strategy to avoid waste production not only on the upstream of your product but on the downstream as well.PLASTIC AND RECYCLABILITY LITIGATION:BEST PRACTICES TO MINIMIZE RISKIn a recent trend,citizen advocates and envir
49、onmental groups have been filing lawsuits asserting novel theories against major companies that use or rely on plastic,even if the companies do not produce plastic products or are not involved in the disposal of plastic products.The disruptive increase in plastic-related environmental,social,and gov
50、ernance(ESG)litigation is poised to affect companies in virtually all industries,including luxury and fashion,as environmental organisations target companies that use plastic anywhere in their supply chains,even if the use of plastic is ancillary to their actual business.The steep increase in lawsui
51、ts against companies suggests that recyclability and other plastics-related litigation is only going to continue to increase.Companies should become actively involved in overseeing and helping mitigate the litigation risks that have arisen or may arise in the future.Click here to read Baker McKenzie
52、s article discussing some notable developments around plastic litigation and some best practices that companies should consider to mitigate the risk of litigation.How will the PPT impact businesses in the luxury sector?PPT will disrupt supply chains and will challenge the operations of many business
53、es in the industry especially those in fashion who use clothes hangers,kimble tags,plastic labels,gift wrapping such as ribbon and sticky tape.Beauty businesses will also be forced to rethink primary packaging choices such as cream containers and bottles.Businesses will also have to deal with admini
54、strative reporting obligations and will have to factor in the costs associated with the implementation of the PPT,such as training employees,developing the necessary reporting framework to complete the required quarterly tax returns,and keeping the appropriate accounts and records.FURTHER INFORMATIO
55、NFor further information on the PPT,click here and hereTo view Baker McKenzies webinar on the PPT,click hereSince December 2015,the EU Commission adopted an Action Plan for a Circular Economy,identifying plastics as a key priority and committed to“prepare a strategy addressing the challenges posed b
56、y plastics throughout the value chain and taking into account their entire life-cycle”.1As part of their plan,the EU Commission has prepared toolkits and guidelines to help businesses understand circular principles and transition their business model to a closed loop one:EU Circular Economy Toolkits
57、 EU Product Environment Footprint(PEF)9POSITIVE LUXURY 2023POSITIVE LUXURYESG POLICY GUIDEBIODIVERSITY2022 was a key year for biodiversity starting with the UN establishing access to a clean,healthy and sustainable ecosystem as a human right.The resolution is not legally binding on the 193 UN Member
58、 States.But advocates are hopeful it will have a trickle-down effect,prompting countries to enshrine the right to a healthy environment in national constitutions and regional treaties,and encouraging businesses to implement those laws.1 The published first draft of the Taskforce for Nature Related F
59、inancial Disclosures(TNFD)framework sends a clear message on what companies need to prepare in relation to disclosures.Finally,the Kunming-Montreal global biodiversity framework has been adopted,encouraging public and private sectors to align their financial flows and nature related commitments.It w
60、ill influence the next decade hopefully changing our relationship with nature into the more harmonised one our planet deserves.HOW COUNTRIES ARE REACTINGUK Under the Environment Act 2021,all planning permissions granted in England(with a few exemptions)will have to deliver at least 10%biodiversity n
61、et gain(BNG)from November 2023.BNG will be measured using Defras biodiversity metric and habitats will need to be secured for at least 30 years.EU Biodiversity Strategy 2030 The European Commission has adopted the new EU Biodiversity Strategy for 2030 and an associated Action Plan(annex)a comprehens
62、ive,ambitious,long-term plan for protecting nature and reversing the degradation of ecosystems.It aims to put Europes biodiversity on a path to recovery by 2030 with benefits for people,the climate and the planet.THE KUNMING-MONTREAL GLOBAL BIODIVERSITY FRAMEWORK HAS BEEN ADOPTED,ENCOURAGING PUBLIC
63、AND PRIVATE SECTORS TO ALIGN THEIR FINANCIAL FLOWS AND NATURE RELATED COMMITMENTS.IT WILL INFLUENCE THE NEXT DECADE.Elka Schrader Sustainability Lead,Positive Luxury,LondonUSCaliforniaspecific Nature-Based Climate Solutions AB1757:Requires the state to set targetsfor 2030,2038,and 2045 to removegree
64、nhouse gas emissions from theatmosphere with nature-based methodssuch as planting trees and restoringwetlands Neonicotinoid Pesticides AB 2146:Prohibits the sale,possession,or use ofneonicotinoid pesticides for most non-agricultural uses10POSITIVE LUXURY 2023POSITIVE LUXURYESG POLICY GUIDERenata Ama
65、ral,Partner at Baker McKenzie,Sao Paulo attended both COP27 and COP15 conferences.She reports that COP27 saw a flurry of alliances taking place,with companies aligning with banks and financial institutions to respond to the call of various stakeholders to decarbonise operations and engage in forest
66、conservation and restoration as part of the global response to the interlinked climate and biodiversity crises.The private sector has also been exerting pressure on governments and regulators to develop laws and regulations to set standards across industries and establish a level playing field.Havin
67、g the appropriate law and regulations in place will facilitate action and compliance by businesses and avoid greenwashing claims.At the UN biodiversity conference,CBD COP15,the summit for the Convention on Biological Diversity,which is a sister Rio convention of the UNFCCC,pressure from NGOs and oth
68、er stakeholders including more than 330 businesses and finance institution that have signed the Business for Nature statement is mounting for companies to report and disclose their impacts and dependencies on biodiversity.There is likewise a strong call for businesses to leverage technology,e.g.impl
69、ementing tracking systems to demonstrate efforts to protect biodiversity.All in all,it is clear that the stakes are high and a lot remains to be done.A global concerted effort is necessary if we are to achieve the goal of stemming and reversing the negative ramifications of climate change and loss i
70、n biodiversity.FURTHER INFORead about the biodiversity pledge here:https:/www.financeforbiodiversity.org/publications/CBD Global biodiversity framework:https:/www.cbd.int/doc/c/179e/aecb/592f67904bf07dca7d0971da/cop-15-l-26-en.pdfALL IN ALL,IT IS CLEAR THAT THE STAKES ARE HIGH AND A LOT REMAINS TO B
71、E DONE.A GLOBAL CONCERTED EFFORT IS NECESSARY IF WE ARE TO ACHIEVE THE GOAL OF STEMMING AND REVERSING THE NEGATIVE RAMIFICATIONS OF CLIMATE CHANGE AND LOSS IN BIODIVERSITY.Renata Amaral Partner,Trench Rossi Watanabe*,Sao Paulo*Trench Rossi Watanabe and Baker McKenzie have executed a strategic cooper
72、ation agreement for consulting on foreign law.11POSITIVE LUXURY 2023HUMAN RIGHTS AND FORCED LABOURNew and developing legislation around the world is forcing organisations to more closely address issues of human rights and forced labour in both their own businesses and supply chains.Whilst the initia
73、l legislative framework in this area was primarily focussed on reporting requirements,which is an area that continues to develop,new and proposed legislation is now placing more substantive obligations on organisations in terms of human rights due diligence and supply chain accountability.Continued
74、development of reporting obligationsThe Modern Slavery Act 2015 requires certain commercial organisations to publish an annual modern slavery statement setting out the steps they have taken to ensure that their business and supply chains are slavery free,or a statement that they have taken no steps
75、to do this.The legislation in the UK is set to be updated and reformed and this will have a major impact on the way the UKs modern slavery legislation works.In particular,the updated legislation will,amongst other things:Mandate specific reporting topics that modern slavery statements must cover Set
76、 a single reporting deadline for the publication of statements and introduce a central registry for statements Introduce financial penalties for organisations that fail to meet their obligationsSimilar modern slavery reporting obligations are continuing to develop across the globe.The California Tra
77、nsparency in Supply Chains Act 2010 is now well established and preceded the UK Act.However,we have now seen similar reporting obligations in Australia,with the Modern Slavery Act 2018,and Canada is in the process of approving similar legislation.ActionsThis growing trend of reporting requirements a
78、cross the globe has forced organisations to think about how best to deal with the requirements given their global nature and complex corporate structures.In particular,organisations have to consider the following:Which of their legal entities are caughtby which reporting requirement,bearingin mind m
79、ost legislative requirementscan apply to non-local legal entities Is it plausible and efficient to deal withthe reporting obligations at a global level(i.e.report on a global basis)and stillcomply with local requirements How should policies,training and duediligence be approached to ensure localcomp
80、liance but also be ready for theother changes in the pipeline(see morebelow)Whether to go through an independentcertification,like Positive LuxurysButterfly MarkDUE DILIGENCE REQUIREMENTS AND BAN ON GOODS IN THE EUA number of jurisdictions across Europe have already introduced mandatory due diligenc
81、e requirements.For example,Frances Duty of Vigilance law places the onus on large companies in France to identify and prevent risks to human rights and the environment.In the Netherlands,the Dutch Child Labour Due Diligence Law obliges companies to investigate whether their goods or services have be
82、en produced utilising child labour.Germanys Supply Chain Due Diligence Act 2021 imposes due diligence obligations on PART TWO:SOCIALPOSITIVE LUXURYESG POLICY GUIDE12POSITIVE LUXURY 2023companies with a footprint in Germany.Alongside these,there are two significant legislative proposals in Europe,whi
83、ch will significantly impact how organisation approach human rights and forced labour issues within their businesses and supply chains.The first is the EU Directive on Corporate Sustainability Due Diligence.The CSDDD will impose a number of obligations relating to corporate supply chain due diligenc
84、e regarding environmental and human rights issues.Second,the European Commission has recently proposed a ban from the EU market on goods that have been made with forced labour.Both of these changes mark a significant ramping up of human rights-related requirements for businesses,both in Europe and b
85、eyond.Although these new requirements are not yet in force and may take some time to be implemented,the changes are significant and all organisations potentially impacted by these changes will need to start thinking now about what changes they need to make and implement to ensure they are ready to c
86、omply.CURRENT LEGISLATION EVERY COMPANY SHOULD TAKE INTO ACCOUNTUK Human rights due diligence There is also increased scrutiny on the supply chains of businesses.The Modern Slavery Act 2015 requires certain commercial organisations to publish an annual modern slavery statement setting out the steps
87、they have taken to ensure that their business and supply chains are slavery free,or a statement that they have taken no steps to do this.Actions There are several legal and practical issues employers should consider,including:Carry out health and safety riskassessments for both office and homebased
88、staff in light of the ongoing impactof the pandemic,to reflect changing working practices Ensure robust policies are in place totackle any cases of discrimination andsafeguard whistle-blowers Review pay and payroll practices toensure compliance with equal pay andNMW laws.The National MinimumWage(NMW
89、)Act 1998 sets out themandatory minimum hourly rate of paythat employers must legally pay to theirworkers The legal framework is highly technicaland has resulted in several high-profileemployers inadvertently falling foul of therules and receiving hefty penalties aswell as being publicly“named andsh
90、amed”Employers should review current payrollpractices to ensure that all workersreceive at,or above,the minimum NMWlevelsUSLike in the EU and the UK,in the US forced labour is an area attracting legislative reform.California The Garment Worker Protection ActSenate Bill 62,also known as the Garment W
91、orker Protection Act,came into effect on 1 January 2022.The law addresses the proper payment of garment industry employees in California and the responsibility of contracting parties for garment operations performed on their behalf.Under the Act,every person engaged in the business of garment manufa
92、cturing must register with the Labor Commissioner.In addition to requiring hourly wages for garment workers,the Act also bans the practice of paying workers per garment,otherwise known as piecework.The Act focuses on establishing new precedents of accountability for brands and manufacturers,includin
93、g new recordkeeping practices,contract provisions,and licensing/registration requirements.These new accountability precedents include clarification that manufacturers,brands,and contractors that have their garments manufactured may be liable as guarantors for the unpaid wages POSITIVE LUXURYESG POLI
94、CY GUIDEand overtime of the workers,even if they are not the employer.Garment Worker Protection Act FAQs https:/www.dir.ca.gov/DLSE/GarmentFAQs/Questions Uyghur Forced Labor Prevention Act The Uyghur Forced Labor Prevention Act(UFLPA)took effect on 21 June 2022.The UFLPA establishes a rebuttable pre
95、sumption that any goods,wares,articles,and merchandise mined,produced,or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the Peoples Republic of China,are not entitled entry to the United States.Previous Withhold Release Orders(WROs)against goods from the Uyghur Region hav
96、e been in effect,however the standard of evidence under the UFLPA is higher than a WRO.Compliance with the UFLPA requires companies to provide clear and complete documentation,which traces the origin of the parts,components and materials to US Customs immediately upon detention.The UFLPA has identif
97、ied certain sectors as“high-priority”.Cotton is included in this high-priority list and therefore is relevant to any company exporting cotton or cotton items,such as clothing,to the US.Any company importing goods into the United States that originate,even in part,from the Uyghur region should consid
98、er preemptively preparing the compliance documentation to expedite the release of any detained goods.UFLPA FAQs https:/www.dhs.gov/uflpa-frequently-asked-questionsPOSITIVE LUXURY 202313POSITIVE LUXURYESG POLICY GUIDETHE UFLPA REINFORCES THE NEED FOR A BRAND TO HAVE FULL TRANSPARENCY AND EVIDENCE OVE
99、R THEIR SUPPLY CHAIN,GOING BACK TO THE ORIGINS OF RAW AND COMPONENT MATERIALS.Christine Streatfeild Partner,Baker McKenzie Washington,DCUPCOMING LEGISLATIONEU Banning Products Made with ForcedLabour NewThe EU executive does not name anycountry in its proposal,but it follows aEuropean Parliament call
100、 for such a lawin June that highlighted concerns overhuman rights in Chinas Xinjiang region.European Commission proposes Forced Labour Ban Global Supply Chain Compliance14POSITIVE LUXURY 2023The recognition of companies impacts on society and the environment has led to increased demand for sustainab
101、ility disclosure.In 2021,banks and certain companies were required to comply with climate-related financial disclosures.This trend has been adopted by governments and regulatory bodies in the UK,US and EU to set their sustainability frameworks.There are three key bodies proposing rules for ESG repor
102、ting in the US,the Securities and Exchange Commission(SEC);in the EU,the European Financial Reporting Advisory Group(EFRAG),and at a global level,the International Sustainability Standards Board(ISSB).PART THREE:GOVERNANCESTRATEGY FOR FINANCING THE TRANSITION TO A SUSTAINABLE ECONOMYThe Paris Agreem
103、ent introduced the concept of Transition Finance(TF),which is defined by the OECD as“the dynamic process of becoming sustainable or reaching net-zero,rather than for already sustainable or net-zero activities based on a point in time assessment.”In July 2021,the European Commission adopted a series
104、of measures aimed at financing the transition to a sustainable economy,including a new sustainable finance strategy(“the strategy”)proposing action in four areas:transition finance,inclusiveness,resilience and contribution to the financial system and global ambition.The strategy emphasizes the need
105、for a more supportive framework in financing interim steps in the urgent transition of activities towards the EUs climate neutrality and environmental objectives.POSITIVE LUXURYESG POLICY GUIDEMANDATORY DISCLOSURE In the United States,the Securities and Exchange Commission(SEC)chairman Gary Gensler
106、has said he wants mandatory disclosure on climate risks,and he wants the agency to move with urgency on this new rule.More recently,the G20s Sustainable Finance Working Group set the development of a TF framework as a key focus for the coming year in their 2022 Sustainable Finance Report alongside t
107、he OECDs Guidance on Transition Finance.While only a limited number of businesses have developed and published credible transition plans that allow their alignment THE KEY IMPLICATION TRANSITION FINANCE HAS FOR LUXURY AND FASHION COMPANIES IS THAT THOSE WITH CREDIBLE TRANSITION PLANS SHOULD INCREASI
108、NGLY BE ABLE TO ACCESS PRODUCTS AND SERVICES TAILORED TO LOW-CARBON BUSINESS MODELS AT LOWER COST.Nick Tostivin Partner,Baker McKenzie,London15POSITIVE LUXURY 2023with the Paris Agreement to be assessed,there are a growing number of initiatives to support those that chose to do so,including disclosu
109、re frameworks and services such as validation,assessment,data collection and analysis to support the development and disclosure of plans.Upcoming key requirements include:The EUs existing Non-FinancialReporting Directive(NFRD)The Corporate Sustainability ReportingDirective(CSRD)The EU Taxonomy The I
110、nternational Sustainability StandardsBoard(ISSB)Plans from the US Securities andExchange Commission(SEC)While many of these are still in the consultation phase,now is the time for companies to start preparing for them.What does this mean for luxury brands?Although predominantly targeted towards carb
111、on-intensive industries such as oil,gas,steel and cement for example,the key implication TF has for luxury and fashion companies is that those with credible transition plans should increasingly be able to access products and services tailored to low-carbon business models at lower cost.In contrast,c
112、ompanies that do not have credible transition plans may face higher costs and/or restricted access to financial products and services depending on the underwriting process of their lender.EU ESG REPORTINGThe EU Taxonomy Regulation,Sustainable Finance Disclosure Regulation(SFDR)and Corporate Sustaina
113、bility Reporting Directive(CSRD)are legislative instruments introduced to increase the transparency of business activities and reorient capital flows towards sustainable investments and activities in the EU.The CSRD introduces wide-ranging andmandatory sustainability(ESG)reportingrequirements for mo
114、re than 50,000 largecompanies,not only those based in theEU but also third country companies active within the EU The Taxonomy Regulation establishesthe framework for the classificationsystem which must be used to labelinvestments and economic activities as“sustainable”and introduces a yearlyreporti
115、ng exercise under whichcompanies must report the share oftheir revenues,capital and operationalexpenditure derived from sustainableactivities The SFDR introduces mandatorydisclosure requirements for financialmarket participants regarding how theirinvestments align with sustainableactivities and othe
116、r ESG objectivesThese rules will introduce more transparency regarding the sustainability of business and investments in the EU and are expected to increase the volume of sustainable finance in the EU.Luxury and fashion companies based or active in the EU will therefore be required or,at least,come
117、under increased pressure from investors and financiers to report detailed ESG information on their business and on the sustainability of their economic activities,often on a value chain basis.Over time,“unsustainable”companies should find it more difficult to access private finance.PROPOSAL FOR A ST
118、ANDARD FOR EUROPEAN GREEN BONDSGreen bonds are committed to financing or re-financing investments,projects,expenditure or assets helping to address climate and environmental issues.Both governments and companies usethem to finance the transition to a more sustainable and low-carbon economy.Since the
119、 EIB inaugurated the green bond market in 2007,the International Capital Markets Association(ICMA)has set the standard with its Green Bond Principles(GBPs),which allow market participants to determine whether a bond is green by examining:POSITIVE LUXURYESG POLICY GUIDEPOSITIVE LUXURY 2023161.Use of
120、proceeds(typically being tofinance or refinance“eligible greenprojects”)2.Process for project evaluation andselection3.Management of proceeds(e.g.ring-fencing or tracking);and4.Reporting(using third-party verifier orself-reporting,annually and publiclyavailable if possible)The proposed European Gree
121、n Bond Standard(EUGBS)marks the first major“competitor”to the GBPs.It is another voluntary standard,based on the recommendations of the Technical Expert Group on Sustainable Finance,but it is aimed at scaling up and raising the environmental ambitions of the green bond market to create a“gold standa
122、rd”.The EUGBS is,for example,more prescriptive than the standard set down by the GBPs,requiring issuers to allocate 100%of the proceeds of their bonds to economic activities that meet the EU Taxonomy requirements,by the time the bond matures.It will also create a more standardised,transparent system
123、 for supervision by requiring external reviewers to register with,and agree to be supervised by,ESMA,by providing a clear definition of green economic activities.If issuers elect to issue bonds with a EU GBS label,the proposed EU GBS would also impose mandatory annual reporting requirements on such
124、issuers and t a requirement(not just a recommendation per the GBPs)for an aforementioned ESMA-registered external third party reviewer to confirm,pre-and post-issuance,that the use of the Green Bonds proceeds:4.Comply with the technical criteriapublished for the relevant environmental objectivePOSIT
125、IVE LUXURYESG POLICY GUIDETHE SIMPLE PUBLIC VS PRIVATE DICHOTOMY OF COMPANIES IS OUTDATED FOR THE RISING SUSTAINABILITY-FOCUSED CORPORATE GOVERNANCE REGIMESuren Gomtsian,Financial TimesWHAT DOES THIS MEAN FOR LUXURY AND FASHION COMPANIES?The proposed EUGBS is currently in the final phases of discuss
126、ion,with adoption to be expected in the near future.While it is likely that issuers will continue to use the existing ICMA GBPs in the short term,even once the EUGBS is adopted,brands should be prepared for the possibility that the EUGBS will displace the issuance of green bonds that are only ICMA G
127、BP compliant,particularly for EU issuers,as more entities become subject to reporting requirements frames around the Taxonomy.It is possible that the ICMA GBPs will remain in place as an easier hurdle for brands to clear however,brands should be prepared to comply with the reporting requirements set
128、 out by the EUGBS to ensure they meet the“gold standard”for green bonds.USEFUL LINKS The International SustainabilityStandards Board(ISSB)Plans from the US Securities andExchange Commission(SEC)10 things you need to know aboutCSRD1.Substantially contribute to at least one ofthe six environmental obj
129、ectivesadopted by the Commission2.Do no significant harm to the others3.Comply with certain minimum social safeguards;and Europe:European Commissionadopts a proposal of Directive on Corporate Sustainability Due Diligence European Union CorporateSustainability Reporting DirectivePOSITIVE LUXURY 20231
130、7REGULATIONEUIn March 2022 a package of EU Green Deal see Green Deal section on page 5 proposals were put forward.This package includes a proposal for a Directive on empowering consumers for the green transition(Consumer Proposal),with the aim of enabling consumers to make informed and environment-f
131、riendly choices when buying their products.As part of this,consumers will have a right to be provided with information on the durability and reparability of products,enabling them to make more informed decisions when making purchasing decisions.In addition,the Consumer Proposal will strengthen consu
132、mer protection against untrustworthy or false environmental claims,banning greenwashing and practices that mislead consumers about the durability of a product.Generic and vague environmental claims such as“eco”or“green”will be prohibited where the environmental performance of the product cannot be d
133、emonstrated.The display of voluntary sustainability labels will also be prohibited where these are not based on a third-party verification scheme or established by public authorities.By ensuring that environmental claims are fair,consumers will be able to choose products that are genuinely better fo
134、r the environment than their competitors,encouraging competition toward more environmentally sustainable products.In addition,to enable consumers and other buyers to have access to reliable,comparable and verifiable information on environmental impacts of products,the European Commission intends to
135、publish a legislative proposal relating to the substantiation of environmental claims.As part of the 2020 new Circular Economy Action Plan the European Commission suggested the proposal would require environmental claims associated with products to be substantiated by using the EU Product and Organi
136、sation Environmental Footprint(PEF and PEO)methods.The two environmental footprints measure 16 environmental impacts for a number of product groups and economic sectors,throughout their life cycle.The PEF has so far been developed,for instance,for beer,dairy,dry pasta,packed water,decorative paints,
137、leather,t-shirts and thermal insulation,GREENWASHING RISKSGreenwashing is where green marketing or green reporting is deceptively or inaccurately presented and misrepresents that an organisations products,aims and policies are more environmentally or ethically friendly than is actually the case.Fuel
138、led by the fact that companies recognise the customer appeal of being a“sustainable”brand and the desire to make representations about ones ethical and green credentials,greenwashing is becoming a concern in a number of industries including luxury and fashion.In turn,this has led to increased scruti
139、ny by consumers and regulators about the authenticity and accuracy of the claims being made.In addition,the increasing demands on ESG reporting has made companies more vulnerable to scrutiny.Companies must ensure they use clear and accurate language in their marketing and be in a position to support
140、 any claims made.Failure to do so risks reputational damage,regulatory enforcement and potential financial penalties as well as the possibility of litigation.PART FOUR:GREENWASHINGPOSITIVE LUXURYESG POLICY GUIDEwhile the PEO exists for retail and copper production.While the proposal has since been p
141、ostponed several times,the latest provisional agenda of the College of Commissioners shows that it is currently expected as part of the Circular Economy Package II in early 2023.Find out more here.UKIn the UK the Competition and Markets Authority(CMA)are also becoming highly active in reviewing and
142、taking action against infringers.The CMA have issued a helpful checklist to consider when preparing marketing material,which you can read here and the full guidance on green claims from the CMA can be found here.The Financial Conduct Authority has also recently made proposals to clamp down on greenw
143、ashing which you can read here.USIn the US the Federal Trade Commission(FTC)are also pro-active in reviewing green claims and taking action where such claims are considered inaccurate or cannot be justified.The Securities Exchange Commission(SEC)has also began enforcement action against companies wh
144、o make false ESG statements with the imposition of large financial penalties.Class action litigationAlongside regulatory action,class action litigation is becoming increasingly prevalent in relation to ESG claims.This has been evident in the US,the EU and the UK and is a risk for companies who do no
145、t implement adequate measures to prevent greenwashing,even inadvertent greenwashing.Negative PRAction being taken by regulators on greenwashing grounds are being widely publicised.Making false or inaccurate ESG claims can have a negative effect amongst the consumer base and may undo the progress gen
146、uinely made in respect of other ESG activity.It also breeds general distrust in ESG statements across the industry as a whole.RECOMMENDATIONS Only make claims that can be evidencedin the event the claim is challenged Do not omit information that may alterthe meaning of the claims made Implement poli
147、cies around the making ofESG statements Implement realistic targets and goals Use third party verification programmesto substantiate credentials Make marketing departments aware ofgreenwashing concerns and provideadequate training Monitor the changing regulatorylandscape in relation to greenwashinga
148、nd ESG reportingPOSITIVE LUXURY 202318POSITIVE LUXURYESG POLICY GUIDECUSTOMER PREFERENCES AND EXPECTATIONS TOWARD SOCIALLY RESPONSIBLE CORPORATE BEHAVIOUR ARE SHIFTING RAPIDLYHarvard Business ReviewSTRATEGY FOR FINANCING THE TRANSITION TO A SUSTAINABLE ECONOMY EU Strategy for financing the transitio
149、n to a sustainable economy,July 2021:https:/finance.ec.europa.eu/publications/strategy-financing-transition-sustainable-economy_en G20 Sustainable Finance Working Group report,October 2022:https:/g20sfwg.org/wp-content/uploads/2022/10/2022-G20-Sustainable-Finance-Report-2.pdf OECD Guidance on Transi
150、tion Finance,October 2022:https:/www.oecd.org/environment/oecd-guidance-on-transition-finance-7c68a1ee-en.htmPROPOSAL FOR A STANDARD FOR EUROPEAN GREEN BONDS EU and ICMA at loggerheads over green bond standards(IFLR,December 2021):https:/ International:Green Bonds Growing Pains(InsightPlus,September
151、 2019):https:/ Proposed regulation,July 2021:https:/eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52021PC0391 Commission subject page:https:/finance.ec.europa.eu/sustainable-finance/tools-and-standards/european-green-bond-standard_en European green bonds:A standard for Europe,open to the world,J
152、anuary 2022:https:/www.europarl.europa.eu/RegData/etudes/BRIE/2022/698870/EPRS_BRI(2022)698870_EN.pdf(January 2022 briefing)European Green Bond Standard:new measures to reduce green washing,May 2022:https:/www.europarl.europa.eu/news/en/press-room/20220516IPR29640/european-green-bond-standard-new-me
153、asures-to-reduce-green-washing(May 2022 press release)POSITIVE LUXURY 202319POSITIVE LUXURYESG POLICY GUIDECITATIONS&FURTHER READING1https:/www.unep.org/news-and-stories/story/historic-move-un-declares-healthy-environment-human-rightRenata Amaral*Partner,Trench Rossi Watanabe,Sao Paulo Renata.AJon T
154、uckPartner,Baker McKenzie,London Jon.TGraham StuartPartner,Baker McKenzie,London Graham.SNick TostivinPartner,Baker McKenzie,LondonNick.TElke Schrader Sustainability Lead,Positive Luxury,LondonPOSITIVE LUXURY 202320POSITIVE LUXURYESG POLICY GUIDEAlyssa Auberger Chief Sustainability Officer,Baker McK
155、enzie,ParisAlyssa.AChris JonesPartner,Baker McKenzie,Brussels Christopher.JWilliam-James KettlewellAssociate,Baker McKenzie,BrusselsWilliam-James.KRachel MacLeodSenior Associate,Baker McKenzie,LondonRachel.MacLChristine StreatfeildPartner,Baker McKenzie,Washington,DC Christine.SACKNOWLEDGEMENTS*Tren
156、ch Rossi Watanabe and Baker McKenzie have executed a strategic cooperation agreement for consulting on foreign law.POSITIVE LUXURY 202321POSITIVE LUXURYESG POLICY GUIDEABOUT POSITIVE LUXURYBaker McKenzie delivers integrated solutions to complex challenges.Complex business challenges require an integ
157、rated response across different markets,sectors and areas of law.Baker McKenzies client solutions provide seamless advice,underpinned by deep practice and sector expertise,as well as first-rate local market knowledge.Across more than 70 offices globally,Baker McKenzie works alongside our clients to
158、deliver solutions for a connected To learn more about Positive Luxury and how we help luxury brands,retailers and suppliers unlock sustainability as a driver of value please visit ,where you can also demo our ESG+assessment and directly book an appointment with a member of our Development Team.Hamish Scott,Development Director +44(0)7377 098645Rosa Spinney,Junior Business Development M+44(0)7964 ABOUT BAKER MCKENZIE