A summary of recent legal and regulatory developments in products law through the lens of the 'S' in ESG - environmental, social and governance. Social factors often receive less attention than their environmental and governance counterparts, but are of growing importance for businesses and their insurers.
With increasing focus on product safety being a key component of the social aspect of ESG, accounting for its impact on consumer health and safety, we examine the European Commission’s recently published proposal to revise the EU Product Liability Directive, the legislation governing redress for defective products. In particular, we consider the potentially far reaching implications for product manufacturers, including those in the business of producing new technologies, and its interplay with other product regulatory regimes.
Globally, we consider the general ESG-type obligations imposed on businesses across the modern product supply chain, from supply chain due diligence to the impact of the proposed EU Directive on Corporate Sustainability and Due Diligence. Together with Munich Re, we also discuss the challenges faced by businesses operating in the life sciences industry when seeking to navigate, and apply, mainstay product compliance requirements that incorporate ESG requirements.
Reform of the EU Product Liability Directive (85/734/EEC) (PLD)
The PLD came into force in July 1985 and remains the law governing redress for defective products across the EU and in the UK. The legislation, which imposes strict liability for defective products which have caused injury to consumers, covers a wide range of products, from medical devices to vehicles to toys. However, after 37 years, during which time the concept of a ‘product’ has evolved considerably, it is ripe for reform.
After a lengthy consultation period and toing and froing on the need for ‘soft’ vs ‘hard’ law, the European Commission (EC) has indicated that a revision of the PLD is needed. This is, in part, due to the apparent lack of clear applicability of the existing PLD to complex emerging digital technologies such as Artificial Intelligence and Internet of Things connected devices; to the concept of a circular repair-based economy, which is a key priority for the EC under its Green Deal; and a perceived challenging burden of proof for claimants in complex cases under the existing PLD regime.
Alongside a product recall and regulator intervention, facing a civil claim or multiple claims, arising from an allegedly defective product can be amongst the most stressful and costly processes that a business can face. Understanding the risks imposed by the legal framework governing product liability can help businesses put in place appropriate systems and processes that will help them to minimise their exposure to costly product liability litigation. Given the ever-growing convergence between safety and liability regimes in the products space, such developments should also be considered in the broader context of legislative developments in product regulatory/safety and digital/technology realms.
- A brave new world for product liability?
- Compliance & Risks 'In Practice Series' - How to get ready for the new product liability laws in Europe
Diverse and inclusive products – legalities, risks and artificial intelligence
Diversity, equality and inclusion (DEI) must be taken into account at each stage of the product lifecycle including product design, product testing, and product use.
Whilst there are general overarching product safety laws in the UK, such as the Consumer Protection Act 1987 and the General Safety Product Regulations, as well as technical product standards that will be of relevance when considering DEI issues in the products sphere, there is currently a dearth of specific legislation in this area.
Pending the expected reform of the UK’s current product safety and protection laws, which is to include consideration of a diverse and inclusive product safety framework, product manufacturers should consider existing legislation and guidance when developing product lines. For example, guidance relating to AI technology published by the ICO, and anti-discriminatory legislation of a more general application, such as the Human Rights Act 1998 and the Equality Act 2010. Stakeholders can also take certain steps to improve DEI within their organisations and implement best practice to minimise any potential risks and liabilities and to improve the consumer experience.
How to be an ESG conscious product manufacturer
Environmental, social and governance (ESG)-type obligations are increasingly imposed on actors in the modern product supply chain, impacting all stages of the product lifecycle and additionally impose subject-matter specific reporting obligations on companies in respect of these matters.
Examples of existing and proposed mainstay obligations relate to supply chain due diligence, sourcing and material choice, manufacture and design, labelling and advertising, the end of life and disposal of a product, reporting obligations and ongoing due diligence. Non-compliance with these obligations can result in potentially severe penalties, as well as significant reputational harm to a company’s brand.
Contact: Sarah-Jane Dobson
The ‘responsible’ Responsible Person – the complexities of ESG product compliance obligations for the life sciences industry
ESG issues and related concepts are increasingly mainstay product compliance requirements to bring products to market in Europe. The life sciences industry continues to grapple with unique challenges when seeking to navigate, and apply, these broad-brush product compliance requirements to life sciences products, specifically:
Whilst life sciences safety regimes are ordinarily separate from the mainstay product safety regulations in order to account for the particular aspects and risks of these types of products, these ESG requirements are not similarly tailored and, in theory, apply to all product categories in a way that does not account for the specific features of the products.
More stringent product safety requirements are in place for the more highly regulated life sciences industry, that are necessary and foundational to ensure patient safety, and are sometimes at odds with newer ESG requirements. In light of the importance of these ESG requirements both from an ethical and legal standpoint, those in the life science industry in Europe will have to give additional thought to their own practice.