“If you don’t start preparing now, you will be late if and when the legislation kicks in,” she told the Post.

Countries including Germany, the UK, Australia and Norway already have rules in place focusing on specific environmental and social aspects, and coming EU regulations will bring these all together, Kromjong said.

“Ultimately, if some suppliers fail to show that they are fulfilling those expectations, at some point, companies sourcing from them will tell them that they are a risk to their reputation and therefore not eligible for the business relationships,” she said.

The Corporate Sustainability Reporting Directive, due to be rolled out next year, will require companies to disclose how sustainability issues, such as climate change, impact their business and how their operations in turn affect people and the planet.

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Some 50,000 companies – all large companies and listed small and medium-sized firms – will have to make such disclosures, up from 11,700 large companies and public entities with more than 500 employees mandated under existing legislation. Auditing of the disclosures will be mandatory.

These companies will in turn require their global suppliers to disclose their sustainability data, such as greenhouse-gas emissions, so that they can calculate their own environmental footprints and social risk exposure.

In addition, the EU Corporate Sustainability Due Diligence Directive, still in the legislative process, is also expected to require sustainability reporting in or around 2025.

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The European Parliament’s environment committee last Thursday backed tougher legislation that will force firms with over 250 staff and annual worldwide turnover of more than €40 million (US$42.8 million), to check and report whether their suppliers within and outside Europe use slave or child labour, or pollute the environment.

This is more encompassing than the draft law, which has reporting thresholds of 500 employees and turnover of €150 million.

They must also adopt and report their transition plans aligned with the EU’s goal to become carbon neutral by 2050, to help fight global warming and climate change.

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The proposed law will affect around 12,800 large EU firms and some 4,000 non-EU firms selling to the EU.

“Companies that are based [in Asia] and want to do business with Europe, directly or indirectly, will be impacted by this legislation,” she said. “There is no escape.”

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Kromjong was speaking during her first visit as Amfori president to Hong Kong, a hub for sourcing and logistics of branded consumer goods, since she took office a year ago.

Amfori has 2,400 members from 46 nations with combined annual sales of €1.6 trillion, of which almost 90 per cent are headquartered in Europe. The bulk of its supplier members are based in Asia.

Nearly half of the 2,400 members are either in the garment and textile sector or in non-food consumer goods industries, while two-thirds are importers, 19 per cent are brand owners and 11 per cent are retailers.

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It also helps brand owners and importers oversee the quality of work of ESG assessors employed to meet the supply chain due diligence requirement, and brings in independent investigators when necessary.

Improvement, rather than perfection, is the focus, Kromjong said.

“As long as you can prove that you have governance, processes and transparency in place … that you are focusing on continuous improvement, and are [making] your best effort to understand your risks and issues to do better on, then you will fulfil this requirement,” she said. “It is not about being perfect.”