Building Awareness to Prevent Trade Disputes in Global Supply Chain Regulatory Landscape

Inroduction of amfori

amfori, a member of the ICDPASO Advisory Committee, is a member of the ICDPASO Advisory Committee. amfori is a global business association dedicated to helping companies improve their environmental, social, and governance (ESG) performance across supply chains. Our comprehensive solutions support sustainability efforts while mitigating supply chain disruptions. Our methodology enables businesses to assess and manage ESG compliance risks, covering key areas such as chemicals, climate, fair wages, worker safety, and more.

Member Contributions

Building Awareness to Prevent Trade Disputes in Global Supply Chain Regulatory Landscape

The international supply chain regulatory landscape is now shaped by a proliferation of new laws across the region that heighten disclosure and due diligence obligations.  Legislations in Europe, the Americas and Asia Pacific are embedding due diligence and disclosure obligations into law. Companies are now required to not only disclose their environmental, social and governance (ESG) performance, but also to demonstrate their ability to manage risks and build resilience within their supply chains. These new regulatory landscape aims at promoting sustainability and responsible business practices, but they create new legal and operational challenges that could arise trade disputes.

In Europe, the introduction of the Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD), and other sustainability regulations emphasises the commitments to responsible supply chains for businesses, global trading partners and stakeholders when operating in or exporting to the European Union. While the Omnibus package may have provided some relief by postponing deadlines and narrowing scope, the overall dir6yection remains clear: due diligence is here to stay. Chinese businesses that have direct business relationships with European businesses are still indirectly affected as major clients require them to provide reliable data using a risk-based approach to due diligence. In tandem with this development, the European Commission has recently introduced a Voluntary SME (VSME) reporting standard to help small and medium enterprises (SMEs) to participate without facing disproportionate businesses. At national level, France’s Duty of Vigilance Law and the Netherlands’ Child Labour Due Diligence Bill have further raised the bar for corporate accountability.

North America follows a similar path. Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act now obliges companies to report annually on their supply chain due diligence, which includes risk identification, supplier assessment, remediation measures and among others. Mexico’s Forced Labour Regulation have also demonstrated a growing commitment to embed human rights into trade law.

The Asia-Pacific region should not be overlooked, as countries here are catching up rapidly and building the momentum. While corporate sustainability has faced slowing momentum and even pushback in parts of Europe and America, countries in the Asia-Pacific region are making tangible progress Thailand and South Korea are amongst the first two Asian countries to propose their own Mandatory Human Rights and Environmental Due Diligence (mHREDD) Laws. China has also introduced the Corporate Sustainability Disclosure Standard (CSDS) that provides a unified framework to allow companies to report on sustainability performance with alignment to global norms such as the ISSB and the EU’s CSRD. By 2030, all Chinese companies have to achieve full compliance of CSDS, and it sets to transform ESG reporting for businesses operating in China. To Chinese businesses operating locally and regionally, it provides a strong signal that tougher regulations are expected to be rolled out. Asia is no longer merely responding to the due diligence requirements originating from developed economies, but actively shaping through national policies, reporting frameworks and regulatory consultations. 

In the face of these regulations, many companies, particularly SMEs struggle with the lack of resources and expertise to meet these new compliance requirements and expectations. Chinese businesses, especially those operate for exports or having global operations and businesses in various continents, are now required to navigate both local and international laws which are in this context. Misinterpretation of these laws could lead to contractual disputes, strained buyer-supplier relationships, and even penalties in export markets.

As a founding and advisory committee member of ICDPASO, amfori believes in managing risk and building resilience that places prevention as the key to success. Through long-established initiatives such as amfori BSCI (Business Social Compliance Initiative) and amfori BEPI (Business Environmental Performance Initiative), we provide Chinese businesses with clear frameworks to assess, verify, report, mitigate and remediate supply chain risks, which are now essential in international trade and exports. By doing so, businesses are not only navigating compliance requirements, but also upholding their corporate responsibilities as outlined in the United Nations Guiding Principles on Business and Human Rights, the OECD Guidelines and ILO Conventions.

Beyond dispute settlement, amfori has placed much emphasis on training and guidance to help businesses to build practical awareness on ESG risk management. amfori offers free training to amfori members and business partners to equip themselves with the necessary to understand not only what the laws require, but also how to build the due diligence systems that can prevent trade disputes before they occur. As the foundation for stability and trust in international trade, there is a genuine need for training and guidance to strengthen businesses’ capacity to meet the growing regulatory expectations. This is closely aligned with ICDPASO’s mission to foster dispute prevention and enhance resilience across global supply chains.

As regulations across Europe, the Americas and Asia Pacific continue to evolve, due diligence will remain the key to success in preventing trade disputes. At amfori, we are committed to supporting businesses across different countries in pursuing due diligence from a compliance obligation into a set of practical ESG solutions for risk management, dispute prevention and long-term competitiveness. By understanding the latest regulatory landscape and gearing up with the right knowledge and good practices, we trust that this could reduce the risk of disputes and build up the confidence in addressing challenges amidst the fast-evolving regulatory landscape.