The European Commission (EC), recently adopted a proposal for a directive regarding corporate sustainability due diligence. The proposal is designed to encourage responsible and sustainable corporate behavior throughout global value chains (GVCs). Companies will have to identify and, if necessary, mitigate, prevent, or end adverse effects of their activities on human right, such as child labor and exploitation of workers, as well on the environment, such pollution and biodiversity loss.
These new rules will provide legal certainty for businesses and ensure a level playing field. These new rules will bring transparency to investors and consumers, according to a press release by the Commission.
These new rules will promote the green transition and protect human right in Europe and elsewhere.
The European Commission approved a directive regarding corporate sustainability due diligence. It aims to encourage responsible corporate behavior across global value chains. Companies will be required by the European Commission to identify and, where appropriate, stop, end or mitigate adverse effects of their activities upon the environment.
Many EU member states have already implemented national rules regarding due diligence, while some companies have taken steps on their own.
But, there is a need for larger-scale improvement that is hard to achieve with voluntary actions. According to the press release, this proposal establishes a corporate sustainability responsibility duty to address adverse human rights and environmental effects.
The new due diligence rules apply to EU companies as well as non-EU companies that are active in the EU and have a certain turnover threshold. This proposal does not cover small and medium businesses (SMEs).
This proposal is applicable to the company’s operations, their subsidiaries, and their value chains (direct or indirect established business relationships).
Companies must comply with corporate due diligence obligations by integrating due diligence into policies, identifying adverse human rights and potential environmental impacts; preventing or mitigating potential impacts; bringing to an end or minimising actual impacts; establishing and maintaining a complaint procedure; monitoring the effectiveness of the due-dilligence policy and measures; and publically communicating on due diligence.
These new rules will be supervised by national administrative authorities, which are appointed by member countries. They may also impose fines if they are not followed. Victims will also have the right to sue for damages that could be avoided if they have taken appropriate due diligence measures.
Fibre2Fashion News Desk – DS