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A few months ago, while researching the CSDDD for my thesis, I came across a story that went almost unnoticed outside international compliance circles. In April 2026, China's State Council approved a set of regulations reinforcing existing mechanisms for data protection, national security and responses to foreign measures. I filed it away as another chapter in the regulatory rivalry between China and the West. Focused on my thesis, I set the subject aside. This week, at the end of August—as Italians tend to do—I decided to return to it.
One company, several countries, several owners of the law
For decades, a multinational answered mainly to the laws of the country where it was headquartered. That has changed. A brand such as Zara, H&M, Adidas or Volkswagen may now have its headquarters on one continent, investors on another, factories in a third country and suppliers spread across dozens of jurisdictions. It operates within several legal systems at once, and those systems have begun demanding different things. Consider a fictional company, Global Shoes: design in Germany, marketing in the United States, production in China and sales in Europe. Until 2025, this arrangement was complicated but manageable. After April 2026, it became, at certain points, impossible to operate without contradiction.
What Europe and the United States began to require
Following reports involving forced labour and environmental harm in supply chains, Europe and the United States decided that “I did not know what my supplier was doing” was no longer an acceptable defence.
In the European Union, the CSDDD—the Corporate Sustainability Due Diligence Directive, Directive (EU) 2024/1760—requires large companies to investigate their supply chains in depth. Knowing the direct supplier is not enough: companies must trace who supplies that supplier, where the raw material comes from, which mine supplies the factory and which farm produced the cotton. The logic is preventive: map the risk before it becomes a scandal.
In the United States, the UFLPA starts from an even stricter presumption. If a product has any connection to Xinjiang, forced labour is presumed until proven otherwise. Saying that everything is in order is not enough. Documentation is required—and a great deal of it.
The two requirements look similar on the surface and have similar consequences: they force companies to open their entire production chain to external scrutiny.
In Brazil, we have a well-known saying: “they forgot to clear it with the Russians.” In other words, if you make an important decision without consulting those who have the power to interfere, that decision may not amount to much. We may now be seeing this happen again, this time with the Chinese.
China sees the same requirement differently
What Europe and the United States call transparency, China has begun to treat, in certain contexts, as a national-security risk.
From China's perspective, sustainability audits are not merely environmental tools. They also map strategic industries, reveal domestic suppliers, expose critical chains and create a detailed picture of the country's industrial architecture. The April 2026 decrees—the starting point for my research—tightened precisely this control. Information that once circulated as ordinary business data began, in certain circumstances, to be treated as a strategic state asset: supplier locations, production processes, logistics flows and relationships between companies.
This does not mean that every ESG audit in China is prohibited. It means that the legal risk attached to certain forms of information collection has increased, and that the line between a “sustainability audit” and the “unauthorised collection of strategic data” has become narrower and less certain.
The trap in practice
Return to Global Shoes. Its European headquarters emails the Chinese supplier: “send us the names of all your sub-suppliers.” The answer is “I cannot”—not because of unwillingness, but because complying with the request may breach Chinese rules. Headquarters insists: “we need to visit the factories and interview workers.” Again, the answer is that this could be interpreted as unauthorised information gathering.
The company is caught in the middle. Insisting may create problems in China. Backing down may mean breaching European or American legislation. The conflict has no simple solution because none of the three legal logics yields to the others; they simply collide within the same production chain.
Nor is the risk confined to the corporate level. It reaches the subsidiary director, the legal manager and the procurement director. In some scenarios, Chinese administrative measures may affect these people directly, with restrictions ranging from sanctions to limitations on movement. This is why a growing number of executives require legal advice before making any sensitive decision involving Chinese suppliers.
Why textiles feel this more than almost any other sector
Few production chains are as long as fashion's. An ordinary T-shirt passes through cotton growing, spinning, weaving, dyeing, cutting, sewing and packaging, and each stage may take place at a different company, often in a different country. Mapping the origin of every stage is exactly what the CSDDD and UFLPA require. And this same deep mapping has begun to receive greater protection on the Chinese side.
Electric vehicles face a similar problem, but with minerals instead of threads: lithium, graphite, nickel, manganese and cobalt come from different refineries and suppliers, each with its own contracts. Mapping all of this—as European and American regulators also require—means revealing a significant part of China's industrial architecture for these inputs.
How companies are adapting
The response I see emerging most often among companies in the sector is not confrontation but a redesign of information architecture. Instead of exporting complete documents, companies export consolidated results. Instead of sending the full supplier list, they send the percentage that passed the audit. Instead of submitting every invoice, they provide an already-calculated total for carbon emissions. Detailed data remains stored in China; headquarters receives an aggregated indicator, within the limits permitted by Chinese data-protection rules.
Legal departments have also changed how they justify commercial decisions. Ending a supplier contract “because American law requires it” is a statement that may create problems on the Chinese side. Many companies have therefore begun to base termination on genuine, documented commercial factors: quality, delivery times, cost and contractual performance, avoiding, where legally possible, any direct reference to foreign sanctions. This is not the same as inventing a reason, which would be unlawful. It means properly documenting the legitimate reason that, in most cases, already exists.
Allowing for the differences in scale, this dynamic closely resembles the effect Anu Bradford called the “Brussels Effect.” Like the European Union, China does not directly impose its rules on another country. Yet when it regulates its domestic market—which, in a globalised world, extends beyond local borders—those rules cross the territorial boundary where they were conceived. Players wishing to participate in that market must therefore adapt to local rules as well.
The debate behind all of this
Ultimately, this story is not about sustainability. It is about who has the authority to write the rules of global trade. The European Union says that anyone wishing to sell in its market must respect its standards. The United States combines human rights with economic security and says that anyone accessing its market must prove that no forced labour was used. China responds that no country may use its own market to impose policy within Chinese territory.
None of these arguments is absurd when considered on its own. Each reflects a legitimate priority within its legal system of origin. That is why the impasse resists quick diplomatic solutions: there is no natural hierarchy among these three logics when they meet in the same production chain.
My view on where this is heading
If I had to summarise this shift in one sentence, international trade has ceased to be primarily a matter of price and efficiency. It has also become an arena of conflict between legal and geopolitical models that were not designed to coexist.
For a long time, deciding where to produce was mainly a cost calculation. That calculation has not disappeared, but today a company must also consider the legal risks involved in every choice. Producing in a particular country may facilitate access to raw materials or reduce costs while simultaneously creating regulatory problems in another market that matters to the company.
This helps explain developments such as “China+1” and the search for more regionalised production chains. It has also changed the weight of compliance within companies. Knowing who the suppliers are, where inputs originate and which information can be verified is no longer simply a matter of internal organisation. In many sectors, this data now determines where and under what conditions a company can operate.
For those working in textiles and fashion, following these changes is no longer merely a regulatory concern. They already affect supplier selection, product traceability and even the choice of markets in which a company can operate. Understanding these rules before making supply-chain decisions is far simpler than trying to correct problems once an audit or investigation is already under way.
