New EU rules mean every tech firm will want to impress Mother Earth

While it will be affected, Apple might mind less than others that the European Union has agreed to new rules to regulate corporate supply chains — in part, because the company is already moving in a similar direction.

That’s not to say it doesn’t have, hasn’t had, and likely will experience problems in its supply chain. But its annual supplier transparency, environmental responsibility, and other corporate social responsibility (CSR) initiatives do at least promise the company thinks about these things.

What the latest EU rule means is that competitors will need to be at least as responsible, too — and will be forced to include this data within their financial reporting.

“The new rules will make more businesses accountable for their impact on society and will guide them towards an economy that benefits people and the environment,” explained Jozef Síkela, Minister for Industry and Trade.

What are the nature of the new EU rules?

Mother Earth will smile at the new EU rules

In brief, the catchily-titled “Corporate Sustainability Reporting Directive” (CSRD) mean the world’s biggest companies will be obliged to report on business sustainability. They will also be required to ensure businesses and supply chain partners don’t negatively impact human rights or the environment and commit to (and prove) no forced labor, no child labor, no exploitation of workers, no pollution, no deforestation, no water waste, and no harm to ecosystems.

To some extent, the new rules reflect a conversation Apple has been engaged in for some time, culminating in the “Mother Earth” video shown at the iPhone 15 launch in September. Many critics condemned that video, in which Apple attempted to draw attention to the importance of CSR practices.

In fact, if you believed what you read, you’d imagine it was a disaster. That would be incorrect.

The video has been watched 4.4 million times on YouTube, which suggests millions more views elsewhere — and allegedly most who did watch it did so to the end. The clip drew attention to the relationship between consumer electronics and the environment. In other words, it promoted the company message and had a bigger impact than the critic’s words.

But these promises can’t simply be lip service. Apple and most big consumer electronics firms will be affected by the new EU rules, and will be forced to prove they keep their promises.

What this means for the industry

Many devices today make use of rare earths and materials, many of which are mined  at gunpoint in conflict zones, and while most manufacturers pay lip service to eradicating use of such conflict minerals, they will now be forced to prove they’ve done so. I’m in no doubt that some of tech’s biggest names will be caught out by these new rules.

For Apple, the impact may be more limited, given the company has already been engaged on some of these matters across the last decade. All the same, a move to relatively consistent reporting should motivate the industry to work harder.

The rules target around 50,000 EU and non-EU companies with more than 250 employees and turnover in excess of 40 million Euros; those who violate them can be fined up to 5% of their global net turnover, plus being named and shamed for their actions.

Given that today’s consumers are becoming increasingly concerned about the issues included within the EU law, the name and shame game may be the biggest threat. One can’t ignore the EU’s accompanying Green Claims Directive that means companies making dishonest statements in this regard can expect enforcement action.

The changes will impact supply chain partners

These rules will be applied across company supply chains, including subsidiaries and business partners. It’s going to force firms to develop and reveal transparent reporting tools and to mitigate against such abuse within their supply chains.

That’s not to say you can expect a fresh new dawn of internationalized corporate social responsibility, of course; the introduction of the new reporting requirements will take place on a staggered basis into the end of the decade, and it’s not hard to imagine those companies with the most to lose may oppose the introduction of these rules.

While there is a little time to prepare, the scope of the new EU action is wide and will cause firms to develop rigorous analysis and reporting processes. Companies, particularly those based outside the EU, will need to hustle to train up the staff and develop the tools to meet the new rules.

UK Royal Family watchers might want to know that one organization likely to help enable such reporting was established by King Charles III in 2004, but the actual impact of the application of these new rules remains to be seen.

Spotlight on corporate social responsibility

In the end, the regulations should help shed light on corporate CSR practices. If nothing else, it will enable industry watchers to better understand whether companies making public commitments to such business changes are actually delivering on those promises, or just paying lip service to keep increasingly conscious consumers on board.

Was Apple paying lip service in its promise to deliver carbon neutrality across its business by 2030? You only need to reach the end of that much-maligned Mother Nature video to get some sense of what Apple CEO, Tim Cook is thinking.

If nothing else, these new EU regulations mean his company won’t be alone in attempting to meet such targets in the future. And compared to many, it already has a head start.

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Copyright © 2023 IDG Communications, Inc.

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