The importance of environmental, social and governance (ESG) initiatives to supply chain business strategy has never been more pronounced. As companies face growing pressure from governments, stakeholders and consumers, ESG reporting and compliance are at the forefront of corporate responsibility.
At the same time, the role of testing, inspection and certification (TIC) services has become indispensable. By verifying compliance and ensuring product integrity, TIC services enable businesses to meet stringent ESG regulations while maintaining trust with consumers and stakeholders.
One of the most significant challenges facing global supply chains today is the need to stay compliant with increasingly stringent sustainability-related regulations. The European Union has been at the forefront of introducing new legislation designed to promote corporate accountability in environmental and social governance. The key pieces of legislation that will have far-reaching effects include:
- Corporate Sustainability Reporting Directive (CSRD): Expanding the scope of mandatory sustainability reporting to include thousands more companies, it requires businesses to disclose detailed information on how they manage social and environmental challenges.
- Corporate Sustainability Due Diligence Directive (CSDDD): Perhaps the most significant of all, it requires companies to identify, prevent and mitigate human rights and environmental risks in their operations and supply chains. The legislation focuses on ensuring that companies are taking proactive steps to assess their impact on people and the planet.
- EU Deforestation Regulation (EUDR): It aims to prevent deforestation caused by agricultural commodities such as soy, palm oil and coffee. Companies will need to prove that their supply chains are free from deforestation activities, which adds another layer of due diligence and compliance.
- Eco-design for Sustainable Products Regulation (ESPR): It will impose stricter requirements on product sustainability, including energy efficiency, material reuse and environmental impact across the product lifecycle.
- EU Forced Labor Regulation: It enables the EU to prohibit the sale, import and export of goods made using forced labor. Member state authorities and the European Commission can investigate suspicious goods and supply chains. Non-compliant companies will be required to withdraw these goods and may face penalties. The regulation is a key step in combating forced labor worldwide and promoting human rights in global supply chains.
Regulatory frameworks are imposing requirements on businesses to monitor, assess and disclose their environmental and social impacts. TIC services are essential in navigating these complexities, by verifying compliance and providing independent validation of the necessary data disclosures.
Regulations like the CSRD and CSDDD in the EU, along with climate disclosure rules in an increasing number of countries, have pushed ESG compliance to the top of the corporate agenda. These frameworks are designed to promote transparency in environmental impacts, ethical labor practices, and corporate governance, providing stakeholders with the information needed to evaluate a company’s sustainability efforts.
Today, companies must gather, analyze and disclose extensive ESG data — covering carbon emissions, energy consumption, waste management, human rights and labor practices — while managing their existing data. For instance, retailers are now required to provide transparency in sourcing, emissions and ethical production, making compliance increasingly challenging.
In addition to EU legislation, companies in other countries and jurisdictions are facing increased pressure to comply with proposed climate rules. In the U.S., California’s Climate Corporate Accountability Act (SB 260) aims to further increase transparency by requiring large companies doing business in the state to publicly disclose their carbon emissions. While this is a positive step forward, opposition has stalled the Securities and Exchange Commission’s climate disclosure rules. Several Republican-led states have expressed concerns about the implementation and future of climate disclosure in the U.S., particularly regarding risk mitigation, cost and plans for addressing climate-related challenges
Global companies must navigate diverse regulatory environments and ensure compliance with both local and international standards through objective third-party assessments. Through TIC services, they can avoid legal penalties, mitigate risks and protect their reputation in a highly regulated global market.
Pressure continues to mount as ESG standards continue to increase, and consumers become more eco-conscious. This also brings rise to the risk of companies engaging in “greenwashing” — the practice of misleading consumers by falsely claiming that a product or service is environmentally friendly.
Once again, TIC services play a vital role in verifying the accuracy of sustainability claims through comprehensive inspection, certification and audit services. They help businesses meet stringent environmental and ethical standards through certifications such as Rainforest Alliance, Better Cotton Initiative (BCI), Programme for the Endorsement of Forest Certification (PEFC), International Sustainability & Carbon Certification (ISCC), and the Roundtable on Sustainable Palm Oil (RSPO).
By using TIC services from highly reputable organizations to verify their claims, companies can safeguard against these risks and promote transparency in their ESG efforts.
Anouschka Jansen is director of sustainability solutions at QIMA.