Navigating Supply Chain Multiverses: The colliding worlds of ESG and Product Compliance Reporting, implications for reporting across global supply chains

Companies that place products onto the marketplace, whether they are internally manufactured or sourced from a supply chain face ever increasing requirements to provision data, wherever the products are sourced and transported from, manufactured, and distributed at applicable local, regional, and global levels. The Product Compliance world considers product safety and regulatory compliance activities. The Environmental, Social, and corporate Governance (ESG) world considers a much broader range of sustainability and social development related activities, performed at a corporate level. ESG reporting was originally developed within the financial sector by investors to aggregate a given organization reporting against ESG related topics.
The European Union (EU) has been implementing additional EU ESG reporting requirements, in the form of several directives and regulations flowing down from the EU Green Deal (EC, 2019), which aligns all it’s actions against the EU 2030 Climate Target Plan (EC, 2021a), this includes EU Capital Markets Action Plan (EC, 2020a), which includes direct intervention in the financial sector, requiring EU financial sector to adhere to the new EU ESG reporting requirements when providing financial services to industry. As a result, companies within the EU will need to adhere to these new EU ESG reporting requirements, which include reporting at economic activity and product level, to obtain investment from the EU financial sector, hence a significant additional burden of reporting will be placed against global supply chains in a significantly different manner to traditional ESG reporting, resulting in the collection of data and reporting linked to economic activities and at the product level, fusing the worlds of Product Compliance and ESG reporting. Existing systems and standards will need to be updated to reflect the granularity and accuracy of data to be reported.
This paper contributes to existing literature by identifying a research gap in understanding the emerging ESG reporting requirements globally, and their resulting implications in terms of supply chain data collection and ESG reporting requirements. The outcomes of this paper support the development of organisational action plans to implement systems and solutions to enable adherence to the new requirements.