FINDING THE THROUGHLINE: How In House Counsel Are Managing Diverging Expectations of Business

Political and Regulatory Shifts

• Sustainability efforts are facing expected political backlash and regulatory recalibration, especially in the U.S., where deregulatory efforts at the federal level conflict with instances of more progressive initiatives at the state level.
• In the US, the issue around unaccompanied minors in areas of workforce shortage has raised concerns about gaps in labor protections and the failure of regulatory oversight, further underscoring the urgency for robust private-sector due diligence
• The EU regulatory framework has been relatively steady, with continued momentum on initiatives such as the CSDDD, CSRD, EU Forced Labor Regulation, and national laws like Norway’s Transparency Act, though political challenges to the regulatory framework is anticipated.
• In the UK, there is significant interest among government ministers in strengthening the regulatory framework, particularly around modern slavery, but concerns about economic competitiveness may temper regulatory ambition
• Multinational corporations must navigate a fragmented legal landscape with conflicting obligations across jurisdictions and tiers of their supply chains.

CSDDD and Omnibus

• Companies are prioritizing compliance with existing laws over aspirational benchmarks, especially amid legal ambiguity and fluctuating political will.
• While tier 1 suppliers remain the most resourced and accessible, the most pressing risks often reside in tier 2 and below, requiring creativity in information-gathering and engagement.
• Effective due diligence should shift from questionnaire-heavy early-stage approaches to risk-based, adaptive techniques informed by workforce and civil society voices.

Strategic Mindset for Corporate Sustainability

• Corporate leaders should refocus sustainability strategies around UNGPs, not solely regulatory demands, as the principles prove evergreen and mitigate the effect of gold plating.
• The current climate necessitates pragmatism, prioritization, and resilience, with an understanding that corporate sustainability is transforming.
• Companies should continue to build internal capacity, especially at tier 1, and streamline their due diligence programs to focus on material risks, not bureaucratic processes.
• Leadership in this space involves maintaining course amid uncertainty, aligning efforts with the UNGPs, and recognizing the reputational and commercial benefits of responsible business conduct.

Closing Remarks

• While regulatory pullback dominates the U.S., employee, investor, and civil society expectations remain firmly in support of human rights-centered business practices.
• The EU’s upcoming regulatory developments will serve as a reference point, but companies cannot rely solely on government leadership but need to be proactive and creative in their design and execution of sustainability due diligence

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