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Retail & CPG: Legislations & Regulations to Watch in 2023

Retail & CPG: Legislations & Regulations to Watch in 2023

How is new legislation affecting retail & CPG sectors? Which incoming regulations do organizations need to be aware of? And how can retail and CPG businesses prepare for changing legislation in a way that enables them to see change as an opportunity, not a threat? 

For any CPG, retail or food and beverage business, the list of recent or incoming legislation is long and, on the face of it, arduous. From supply chain sustainability to the use of AI and issues of identity and productivity, the challenge for organizations is not just understanding their mandatory requirements, but understanding the risks as well as the opportunities, providing a solid foundation from which companies can work.

Key Regulations to Watch

For any organization, legal compliance is a matter of implementing existing mandatory requirements while staying abreast of a raft of incoming legislation set to place further responsibilities on the CPG and retail sectors. You can find a list of the key regulations (together with links to the relevant legislation) in our downloadable PDF, but here are some of the ones to watch right now: 

  • FCA Consumer Duty (UK only): Following a period of uncertainty due to the pandemic and financial disruption, the FCA Consumer Duty is designed to protect consumers from improper and misleading business practices. Retail and CPG companies must ensure that their products and services meet safety standards and disclose any potential risks. The Duty supports each of the following outcomes: fair value (consumers receive fair prices and quality), suitability and treatment (consumers receive suitable products and services and are treated well), confidence (consumers have strong confidence and levels of participation in markets) and access (diverse consumer needs are met).
  • EU Single Use Plastics Directive: Unless you’ve been living under a rock, you’ll know the risk to brand reputation for any company not engaging in managing the impacts of plastics (and particularly plastic packaging) on the environment. The Directive requires EU countries to take measures to reduce the consumption and use of a series of single-use plastics at EU level, including an EU-wide ban on certain single-use plastic products. As of July 3, 2021, single-use plastic plates, cutlery, straws, balloon sticks and cotton buds cannot be placed on the markets of the EU Member States. The same measure applies to cups, food and beverage containers made of expanded polystyrene, and all products made of oxo-degradable plastic. Some EU member states, like Spain and Italy, have introduced punitive tax laws for companies failing to comply with the requirements.
  • Corporate Sustainability Reporting Directive (CSRD): Designed to increase the consistency of corporate sustainability reporting, the CSRD effectively places sustainability reporting on the same footing as financial accounting, with all corporations based in the EU (or with subsidiaries in the EU) accountable for providing formal ESG reports. Inevitably, this increases cost and burden on business. The new rules will ensure that investors and other stakeholders have access to the information they need to assess investment risks arising from climate change and other sustainability issues. They will also create a culture of transparency about the impact of companies on people and the environment. Finally, reporting costs will be reduced for companies over the medium- to long-term by harmonizing the information to be provided.
  • Customs and excise: The recently enacted EU Single Window Regulation for Customs delivers a timeline for the streamlining of C&E. The implementation of the EU Single Window Environment for Customs will be phased in gradually over the coming decade. The first phase will come into effect by 2025 and will focus on enhancing intergovernmental exchanges at EU borders. A second phase, planned for 2031, will provide a business-to-government scheme to simplify clearance processes for economic operators when moving goods in and out of the EU. The UK Government is currently in consultation regarding its introduction of a UK Single Trade Window,  while  other countries have already implemented (China, Japan, Singapore) or introduced their own single window systems. India’s Ministry of Commerce and Industry, for instance, performed a soft launch of its broader single window platform in 2021 to simplify trade with the country. 

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For CPG and retail, being informed about C&E changes is essential to remaining competitive and avoiding unnecessary costs. Companies that do not stay on top of changes to legislation or new legislation in this area risk losing markets and opportunities. It is vital that innovation and strategy teams within retail organizations are encouraged to align with and benefit from the reduced red tape and growth opportunities through more extensive digitization and automated compliance. 

Whether a company is looking to manage the cultural, educational, technical or financial transition to a single window operation, delivering swift, global CSRD reporting or simplifying single use plastics compliance, a seasoned partner is recommended.

Proposed Legislation

Existing legislation presents a stern enough challenge for retail and CPG companies, but more is coming. The European Supply Chain Directive will require EU companies to carefully manage social and environmental impacts–including human rights—along their entire value chain. The Data Protection and Digital Information Bill (No. 2) intends to give data protection in the UK a post-Brexit overhaul. The UK government is consulting on regulation for the BNPL market.

As the recent headlines generated by ChatGPT have demonstrated, nothing can quite match the potential impact of AI and the proposed legislation surrounding it. No retail organization can ignore the utility, competitive viability and the productivity benefits that AI can bring. Nor can any organization fail to align their actions with forthcoming AI regulation. The EU AI Act, for example, will segment the use of AI into tiers of risk. Any organization working with AI in a “high-risk” category will need to comply with the terms of the act or risk penalties. Each Member State will need to lay down the rules on penalties, including administrative fines within the penalty sums suggested by the Commission. AI systems falling into the EU AIA definition of prohibited AI systems could be subject to a fine of up to €30,000,000 or 6% of total worldwide annual turnover, whichever is higher. The same goes for non-compliance with the EU AIA Article 10, which concerns data and data governance for high-risk AI systems. Non-compliance for all other articles could potentially be subject to fines up to €20,000,000 or 4% of total worldwide annual turnover, whichever is higher. 

In their current form, the proposals define “high risk” AI as anything that affects rights. If you’re using AI in hiring or payroll practice—perhaps something as innocuous as a CV-scanning tool— you will fall within the scope of the act.

It will be necessary to conform with AI harmonization legislation by the end of 2023 or early 2024, yet we estimate our average retail or CPG client will need two years to be ready. The message is clear: We strongly encourage businesses to take stock now, so they can benefit soonest from the cost reduction and increased customer engagement that AI will bring. 

Law as Models, Compliance as Code

As the above example of “high risk” AI demonstrates, even the most existential consequences of legislation are not always immediately clear. This is why retail and CPG businesses need a renewed focus, not only on what the law says, but on what the law (and proposed law) does. 

This is about context, about simplifying the way laws are internalized within a business or, better still, automating compliance. Crucially, understanding the law and its application can reveal benefits to end-to-end delivery.

Consider the food and beverage company that is concerned about how its brand is viewed from an environmental and social perspective. It wants to understand the emissions connected with its entire logistics operation. By creating and applying a comprehensive model of standard regulations across all the countries through which its goods travel—a model which encompasses the law surrounding carbon emissions, waste and landfill use—the company could identify the freight routes that generate the least carbon, or the countries with the most generous carbon offsets.

How to Develop a Foundation Built on Regulation

Understanding what the law says now and how that law is set to change can give your actions direction and purpose. In order for that to happen, CPG and retail businesses need to be able to: 

  • Understand existing law, by diving deep into the legislation and understanding how it specifically impacts one’s organization.
  • De-mystify change by having a horizon view of incoming legislation.
  • Create roadmaps, with milestones and accountabilities associated with any incoming any law to help drive action.
  • Frame risks and priorities in a way that helps companies understand how ready they are for legislative change and how to prepare for it.
  • Ensure dynamic compliance to enable the business to manage the interplay between local,  contractual, industrial and international law.
  • Monitor change to keep pace with any further developments.

Explore all the key legislation affecting Retail & CPG in one place. Download our infographic now.


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