September 18, 2023 Planning for 2024 Regulatory Compliance

How manufacturers can anticipate regulatory changes with a proactive compliance program.

By Cally Edgren, Senior Director, Sustainability, Assent

In the rapidly evolving regulatory landscape, supply chain compliance managers are continually challenged to do more with less. This year in particular, manufacturers have had to keep up with accelerating and increasingly complex requirements, and the trend is forecasted to continue in 2024. This includes regulations like the U.S. Environmental Protection Agency (EPA)’s per- and polyfluorinated substances (PFAS) reporting rule, the Securities and Exchange Commission (SEC)’s supply chain climate disclosure requirements, and the expansion of Uyghur Forced Labor Prevention Act (UFLPA), which has rapidly grown to focus on several key materials beyond its original scope.

Planning your compliance program has never been more crucial. Programs will need to adapt and do more, and dollars will need to go farther. Here’s how some key regulatory updates will affect your program planning for 2024.

PFAS Requirements in the U.S.

Currently pending finalization,* the EPA announcement on the Toxic Substances Control Act (TSCA) PFAS reporting rule under Section 8(a)(7) will add new requirements. Organizations will be obligated to disclose the presence of specific PFAS chemicals in their products. In addition, there are numerous state-level initiatives addressing PFAS chemicals that are even more strict than federal requirements.

Manufacturers need to start engaging suppliers on their PFAS use — not just for regulatory risk, but to ensure business continuity. Due to risks of early obsolescence, obtaining materials as well as maintenance and repair parts like PFAS-embedded gaskets will become difficult and more expensive. Customer awareness of PFAS is also growing; it will be vital to defensibly market your products as PFAS-free to stay competitive. There are also legal liability considerations: numerous businesses are facing lawsuits over health, environmental damage, or fraudulent sustainability claims while using PFAS in both manufacturing processes as well as goods, and insurers are adding PFAS exclusions to coverage.

SEC Climate Disclosures

The proposed SEC Climate Disclosure requirements seek to enhance and standardize companies’ disclosures regarding climate-related risks and impacts. This includes disclosure of companies’ direct and indirect greenhouse gas (GHG) emissions, details on climate-related risks to the business, and how the company’s leadership manages these risks.

One of the biggest challenges will be collecting indirect (or scope three) GHG emissions, as this relies on upstream supply chain data. Suppliers may not be prepared to provide data since they may not have a program in place to measure their own carbon footprints. Manufacturers may need to change suppliers for ones with stronger environmental reporting, or proactively help suppliers establish a program. In either scenario, manufacturers will face potential disruptions and investment to develop their supply chain.

UFLPA Cracks Down on Forced Labor

Forced labor regulations like the UFLPA will continue to have a profound impact on businesses. The UFLPA requires companies to take a proactive stance against the use of forced labor in their supply chains, particularly those linked to the Xinjiang region in China.

Noncompliance can result in financial penalties and severe brand damage. Businesses may also face supply chain disruptions due to customs holding imported materials, adding lead time to manufacturing and hindering market access.

To identify and reduce the risk of UFLPA-driven stoppages, manufacturers should engage suppliers to ensure they adhere to forced labor standards and collect country of origin data for all parts and materials. They should conduct due diligence on suppliers’ business relationships and beneficial owners to ensure they are not connected to sanctioned entities under the UFLPA. Having a supplier code of conduct is no longer enough to eliminate forced labor in supply chains: U.S. Customs and Border Protection (CBP) can still detain and reject products lacking defensible data.

Strategizing for 2024

A proactive compliance program doesn’t just react to regulatory changes — it anticipates them. Once a business has identified the potential impacts, the next step is to strategically allocate a budget. Here are some areas to consider for investment:

• Training: Ensuring that all employees understand their compliance responsibilities can reduce the risk of expensive mistakes.
• Technology: Compliance software automates labor-intensive supplier engagement processes and evaluates bills of material for finished product compliance status, reducing manual errors, saving time and money, and reducing supplier fatigue.
• Supplier Education: Educate suppliers on the data they need to collect for themselves and to remain in your supply chain.

For more insights on budgeting for compliance, check out Assent’s eBook, Budgeting for Compliance. This comprehensive resource offers more detailed strategies and best practices to help you become a cost-saving hero in your organization.

*Current information as of September 5, 2023, and based on the EPA proposed TSCA PFAS reporting rule from June 2021. The EPA publication of the final federal PFAS reporting requirements is pending at the time of writing.

For more information, please contact: Assent info@assent.com

Cally Edgren is a proven compliance program leader with experience developing, communicating, and executing company goals and strategies. She is a subject matter expert on product materials compliance and responsible sourcing as well as market access certifications and has a background in program and process development to support regulatory compliance requirements. Cally possesses 30 years of experience in developing and managing global compliance programs at Rockwell Automation and Kohler Co. She supports Assent’s strategic direction and guides clients through product compliance topics and issues, including PFAS.

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