Commission sets out new rules to respect human rights and the environment in global value chains

Today (23 February), the European Commission has adopted a proposal for a Directive on corporate sustainability due diligence. The proposal aims to make supply chains more sustainable and respectful of worker’s rights. 

It is hoped that by taking action at an EU level, companies will not have to adhere to a “spaghetti” of different rules in different states fragmenting the Single Market. Some companies have already taken action to quell consumer pressure and negative publicity, some countries have introduced some form of due diligence.

Companies will be required to identify and, where necessary, prevent, end or mitigate adverse impacts of their activities on human rights, such as child labour and exploitation of workers, and on the environment, for example pollution and biodiversity loss. The Commission hopes that the new rules will bring legal certainty and a level playing field. It is also hoped that the measures will have an impact beyond the EU. 

The new rules will apply to large limited companies with a turnover of over €150 million worldwide and 500+ employees or companies in “high impact sectors” with a turnover of €40 million and 250+ employees. Non-EU companies active in the EU are included. Small and medium enterprises (SMEs) are not directly in the scope of this proposal.

National administrative authorities appointed by Member States will be responsible for supervising these new rules and may impose fines in case of non-compliance. In addition, victims will have the opportunity to take legal action for damages that could have been avoided with appropriate due diligence measures.

Large companies will need to have a plan to ensure that their business strategy is compatible with limiting global warming to 1.5 °C in line with the Paris Agreement. Particular responsibility will be shouldered by company directors, who should be given specific responsibility to set up and oversee the implementation of due diligence and to integrate it into the corporate strategy. 

The Commission proposal also includes accompanying measures,  to help companies, particularly small companies, or ones in third countries, adapt to the new rules. 

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