EU proposes rules forcing companies to assess supply chain for environment, human rights issues
Only 1% of all EU companies would come under new regulation
Only 1% of all EU companies would come under new regulation
Proposed rule is a step to limit global warming to 1.5 Celsius and stop ecosystem degradation
The European Commission on Wednesday proposed a law to make large corporations operating within the EU check whether their global supply chain follows environmental standards and respects human rights.
The draft legislation, Corporate Sustainability Due Diligence, will also ensure that companies and their business strategy align with steps to limit global warming to 1.5 Celsius, as agreed under the Paris climate agreement.
“We can no longer turn a blind eye on what happens down our value chains,” EU justice commissioner Didier Reynders said.
Under the proposal, companies will have to assess their supply chains at least once a year and before taking any major business decision to evaluate risks, including forced labor, child labor, insufficient workplace safety, and environmental impacts like pollution and ecosystem degradation.
If any company identifies such issues, it must implement a corrective action plan to prevent or stop them.
99% of companies exempted
The proposed law would apply to companies with over 500 employees and a net turnover of more than 150 million euros, totaling around 13,000 EU firms and big corporations.
Companies in high-impact sectors like clothes, animals, forestry, food and beverages, and the extraction of fossil fuels and metals are also covered if their net turnover is over 40 million and employs more than 250 workers.
However, that totals around 1% of all the EU companies, and most firms would be exempted.
“Mere mandatory Human Rights and Environmental Due Diligence and a general provision on liability, applying to a minority of companies, will not be enough to halt corporate abuse,” Giuseppe Cioffo, Corporate Regulation and Extractives Officer at CIDSE, said.
The law would also apply to around 4,000 companies that are based outside the EU but have operations within the EU and meet the turnover thresholds.
The proposal will become EU law after lengthy negotiations with the European Parliament and 27 member countries and is likely to take more than a year. Governments in the member states would monitor the compliance, and companies would be charged penalties for ignoring the law.
Last October, the EU" proposed new rules for gig economy companies, forcing them to classify drivers, couriers, cleaners, and other workers as employees, with a minimum wage, holiday pay, unemployment and health benefits, and other legal protections.