Navigating Supply Chain Regulations in Retail and Consumer Goods
Introduction
Retail and consumer goods companies increasingly rely on complex, cross-border supply chains to help drive growth satisfy key operational and financial objectives. While this model offers significant operational and financial advantages, it also introduces regulatory and geopolitical challenges.
While some issues fall outside of their immediate and direct control, regulatory compliance is one area where companies can take a proactive approach. In this blog, we explore five key areas where brands can focus their efforts to help ensure supply chain compliance, and in so doing, protecting both their reputation and profitability.
1. ESG & Sustainability Regulations
Environmental, Social, and Governance (ESG) regulations are on the rise worldwide, as governments prioritize concerns relating to responsible sourcing, ethical labor practices, and transparent reporting. Examples of these rules include the U.S. Uyghur Forced Labor Prevention Act (UFLPA) passed in 2022, which prohibits companies from importing goods made with forced labor in Xinjiang, China; and the EU's Corporate Sustainability Reporting Directive (CSRD) which imposes ESG-impact reporting requirements on U.S. companies doing business there if they meet certain thresholds.
Lack of transparency in multi-tier supply chains can exacerbate compliance efforts, increasing a company's exposure to reputational harm and liability.
Proactive risk mitigation steps include:
- Stay informed on all applicable ESG disclosure laws
- Develop robust supply chain management practices, starting with a due diligence process to vet suppliers
- Conduct third-party supplier audits to identify potential human rights, health and safety, and climate issues
- Implement sustainable sourcing policies
- Enforce your supplier code of conduct to reflect the company's ESG policies and other mandatory requirements
- Require notification from suppliers about any changes in their supply chains and expedite due diligence
- Explore cloud-based solutions for supply chain management (e.g. tracking dashboards)
2. Product Safety & Quality Regulations
Beyond ethical sourcing, brands must also ensure that their products meet stringent safety and quality regulations across multiple jurisdictions in the U.S. and abroad. If a product causes harm to consumers or other third parties resulting in legal action, the consequences can be devastating for a retailer, including financial losses and reputational harm. Laws such as the U.S. Consumer Product Safety Act, Federal Trade Commission Act, and Child Safety Protection Act, among many others, regulate thousands of consumer products by imposing requirements related to testing, safety, labeling, advertising and reporting. Similar regulations exist in the EU, Canada, Asia and Australia, adding to the complexity of the regulatory landscape in this area.
Risk mitigation steps include:
- Adopt rigorous quality control standards and processes
- Conduct regular product safety testing and require suppliers to do the same
- Maintain comprehensive compliance documentation, particularly with respect to product development and testing
- Conduct supply chain due diligence to ensure suppliers comply with safety standards
- Ensure third-party contracts include product liability protections, including clear product specifications and standards, as well as quality assurance and recall protocols
- Develop internal processes for recall management
- Train employees on the importance of identifying and reporting product safety concerns
- Ensure adequate insurance coverage for financial losses related to product liability claims
3. Trade & Tariff Regulations
Retail and consumer goods companies also must navigate the ever-changing landscape of trade and tariff regulations. Trade restrictions, tariffs, and import/export laws are critical factors shaping global supply chains. The U.S.-Mexico-Canada Agreement (USMCA) governing trade between North American partners has recently been under intense scrutiny, causing considerable angst for retail and consumer brands that source, manufacture, or distribute products there. Even amidst such uncertainty, companies risk costly disruptions and falling profits if they miscalculate the impact of increased production costs, shipping delays, blocked access to suppliers, export bans, and other issues.
A proactive strategy includes:
- Consult regulatory counsel to assess tariff risk and compliance obligations
- Stay informed about trade policy changes between the U.S. and all foreign governments impacting your supply chain
- Diversify suppliers to reduce reliance on a single national source or region
- Identify alternative, tariff-friendly sources for raw materials, vital components and outsourced manufacturing services
- Explore domestic sources to reduce exposure to tariff fluctuations
- Add protective contract provisions (e.g. force majeure and tariff) in supplier contracts to help manage unforeseen costs
4. Employment and Labor Regulations
Employment and labor regulations can also impact a brand's supply chain operations. Examples of this include wage and overtime laws such as the U.S. Fair Labor Standards Act mandating minimum wage and overtime pay for hourly workers, as well as international laws like India's Factories Actand Australia's Work Health and Safety Act which impose labor standards in manufacturing facilities. Many foreign jurisdictions also have laws requiring employers to inform and consult trade unions or employee representatives when planning major changes to their operations. Failure to comply with these regulations can lead to financial penalties and reputational harm.
Proactive compliance steps include:
- Conduct regular supplier audits to review labor practices and compliance with applicable laws and regulations
- Add labor compliance clauses in contracts with suppliers to ensure adherence with employment and human rights standards
- Reduce dependence on regions prone to labor strikes or other regulatory risks
5. Data Privacy and Security Regulations
AI and other digital solutions are helping retailers to anticipate and rectify problems in their supply chains faster and more efficiently. However, these tools are also introducing new legal challenges in the areas of data privacy and security, requiring compliance with a host of state privacy laws, federal regulatory frameworks, and international data protection regulations like GDPR.
Risk mitigation steps include:
- Identify and understand all applicable laws and regulations
- Ensure that protected data is handled in compliance with them
- Implement robust data protection measures such as encryption, access controls and regular security audits
- Train employees on compliance and breach notification protocols
Conclusion
Supply chain management and regulatory compliance are inseparable for retail and consumer goods companies. Proactively addressing legal challenges and promoting a culture of compliance throughout the company's supply chain not only helps to mitigate legal and reputational risks, but also can strengthen operational resilience.
OGC regularly supports retail and consumer goods companies in navigating the complex legal landscape of supply chain management. Leveraging deep business acumen and in-house legal experience, we work closely with legal and operational leaders to develop practical, proactive solutions that protect brand reputation, ensure regulatory adherence and build more resilient supply chains—from sourcing to shelf. With OGC's guidance, consumer brands can confidently manage regulatory challenges while aligning compliance efforts with business objectives.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
