National legislation on supply chain due diligence regarding labour rights
Alongside the global trend of promoting green transition and sustainable business, supply chain due diligence has emerged as a new legal framework in several countries, particularly in developed nations with high concern for environmental and human rights issues.
Below is a brief summary of key national regulations on supply chain due diligence, particularly in European markets, which are important destinations for many Vietnamese products.
1. Norwegian Transparency and Human Rights Act
Norway adopted and began implementing the Transparency and Human Rights Act on corporate supply chain due diligence for large enterprises in July 2022.
Scope of application: The Act targets large enterprises (meeting 2 out of the following 3 criteria: annual revenue of NOK 70 million, total profit of NOK 35 million, or at least 50 full-time employees – figures include parent companies and subsidiaries) established in Norway, or foreign enterprises providing goods/services in the Norwegian market.
Content: The Act limits due diligence criteria to human rights, particularly fundamental labour rights, with the due diligence process designed based on the OECD Due Diligence Guidance model.
Specifically, the Act requires large enterprises (as determined under relevant Norwegian law) to:
- Comply with supply chain due diligence requirements under the OECD Due Diligence Guidance; and
- Report on corporate social responsibility due diligence efforts (with reporting content as prescribed) through their business account in the National Supply Chain Due Diligence System (with reports updated before 30 June each year).
Non-compliant enterprises may face penalties, with fines determined based on the severity of the violation.
2. The Netherlands’ Child Labour Due Diligence Act
The Netherlands adopted the Child Labour Due Diligence Act at the end of 2019, regulating corporate supply chain due diligence related to child labour, a specific branch of labour rights.
Scope of application: Unlike most supply chain due diligence regulations worldwide, this Act applies to all enterprises placing goods or services on the Dutch market (i.e., both Dutch and foreign enterprises), regardless of enterprise size.
Content: The Act requires enterprises to make efforts to prevent goods or services produced by child labour from entering the Dutch market by:
- Developing an Action Plan to identify and remove child labour from the supply chain; and
- Issuing a public Due Diligence Statement reporting the Action Plan and its results.
Enterprises violating these obligations may face administrative fines or criminal sanctions.
3. The UK Modern Slavery Act and other countries
* The UK:
The UK Modern Slavery Act, enacted in 2015, imposes due diligence obligations on large enterprises regarding forced labour (slavery), a branch of labour rights.
The Act requires large enterprises (with an annual global turnover of GBP 36 million or more) operating wholly or partly in the UK to produce an annual statement detailing actions, if any, taken to prevent forced labour, slavery, and human trafficking in their supply chains.
Although considered an important first step by the UK in supply chain due diligence, the Act is still at a very preliminary stage:
- It only requires reporting on enterprise due diligence activities without specifying the content to report;
- Enterprises are obliged only to report, not to conduct due diligence, meaning they may report that no due diligence activities have been undertaken.
* Australia and other countries:
Australia enacted the Modern Slavery Act in 2018, largely modeled on the UK legislation but with a broader scope:
- It requires reporting on supply chain due diligence concerning forced labour for both large enterprises (with consolidated annual revenue of at least AUD 100 million) and government agencies;
- Covered entities must report on actions taken to mitigate risks of forced labour in the supply chain.
Other jurisdictions (e.g., New Zealand, Hong Kong, China) have similarly enacted laws based on the UK model.
* The United States:
The US does not have a standalone federal supply chain due diligence law. However, the US Trade Facilitation Act allows US Customs to seize imported shipments if the importer cannot provide evidence/certification that reasonable due diligence has been conducted to ensure goods were produced without forced labour.
4. Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act
Canada adopted the Fighting Against Forced Labour and Child Labour in Supply Chains Act, effective from early 2024.
Scope of application: The Act applies to two groups, including (i) government institutions engaged in production, sale, or distribution of goods domestically or abroad; and (ii) enterprises engaged in producing, selling, or distributing goods in or outside Canada, importing foreign goods for sale in Canada, or controlling other enterprises.
Content: Covered entities are required to produce an annual report on efforts to eliminate forced labour and child labour from the supply chain. Reports must include prescribed content (distinguishing between types of entities) and be submitted to the Canadian Ministry of Public Safety and Emergency Preparedness, and disclosed publicly (for enterprises, also to shareholders if applicable).
Source: Compiled by the TTWTO-VCCI Research Group