With new supply-chain laws aiming at profound changes in reporting requirements, the Responsible Business Hub helps suppliers in Cambodia to adapt to the new environment
As new European regulations change sustainability reporting from a voluntary measure to a legal requirement, many companies are under pressure like never before to know exactly what is going on in their supply chains – and to be able to justify why it is happening.
“Largely before this year, most companies were really considering this as voluntary,” said Jen Green, senior director for partnerships and content at Labor Solutions. “It wasn’t part of compliance, part of operations, part of how you set key performance indicators (KPIs) for executives.”
To help companies adjust to this changing landscape, EuroCham and the Responsible Business Hub (RBH) held an event earlier this month on navigating global standards in sustainability reporting. The event, RBH’s first on the issue, was designed to update EuroCham members on the changes that have come this year, and to set the stage for future events diving deeper into the issue, said Sarah Monti, senior RBH coordinator.
“It’s quite a technical topic,” Monti said. “We needed to set the scene for future events on sustainability reporting that may be even more sophisticated and technical than this one.”
New regulations, such as the German Supply Chain Due Diligence Act enforced since the start of 2023, fundamentally re-envision the extent to which companies are responsible for goings-on in their supply chains. Whereas a company’s responsibility for sustainability previously began upon receipt of a product from a supplier, European companies now will be considered accountable for addressing environmental and human rights-related conduct in their suppliers as well.
“That means, you have to kind of both discover what these risks are for yourself and then be involved in the solution,” said Green. “And you are not allowed to contract away that obligation, which is a huge kind-of-turnaround from the way that business has been done to date for most companies.”
Crucially, it also means that simply severing ties with a non-compliant supplier will no longer be an acceptable way to redress violations of sustainability norms. Buyers will be expected to work with their suppliers on environmental and human-rights issues within their operations, helping them build capacity and adopt best practices in these areas.
“This is a very different type of buyer-supplier relationship than we’ve had in the past, much more kind of engaged and proactive,” said Green.
Reshaping this relationship will require commitment, transparency and trust on both sides. In Cambodia, the process of building still has a long way to go.
“Transparency culture, disclosing culture, is not very common yet in the business ecosystem in Cambodia,” said Monti. Cambodian firms may fear that transparency could lead to their company being perceived negatively if things go wrong, causing them to lose out on current and future contracts.
If successful, however, these efforts hold the potential to generate higher-quality, more-sustainable growth for Cambodia. A committed buyer-supplier relationship could help put an end to buying practices that put pressure on suppliers to cut corners in order to meet demands for ever-lower prices. This in turn might open up opportunities for contracts that facilitate more humane, higher-paid jobs for Cambodian workers.
The sustainability ecosystem continues to evolve rapidly, and only time will tell where it will go. To keep up, said Monti, “companies here in Cambodia need to move as fast as possible.”