EU proposes legislation that requires large firms to verify suppliers for human rights and environmental issues.

Flags of the European Union are visible outside the EU Commission headquarters in Brussels (Belgium), November 14, 2018. REUTERS/Francois Lenoir

BRUSSELS – Wednesday, February 23rd (Reuters) – The European Commission proposed Wednesday a law that would require large companies in the EU to ensure that suppliers from around the globe comply with environmental standards and use child labour.

Directors of European Union companies will be required to comply with the Corporate Sustainability Due Diligence Law. This law requires them to ensure that their business strategy is compatible with limiting global warming below 1.5 Celsius as per the Paris climate agreement.

Didier Reynders, EU justice commissar, said that “We cannot turn a blind eye to what happens down the value chains.”

The proposal requires EU firms to evaluate their supply chains at least once per year before making major business decisions or beginning new activities. This includes risks such as forced labour and child labor, as well as environmental impacts like pollution, ecosystem degradation, and inadequate workplace safety.

When a company recognizes these issues, it must take appropriate actions to stop or prevent them. This includes developing a corrective plan that the supplier must follow.

After lengthy negotiations with the European Parliament, EU governments and other parties that take longer than a year, the Commission proposal will become EU law.

It would apply to approximately 13,000 EU companies, including the EU’s largest companies, those with more than 500 employees and a net turnover greater than 150 million euros.

If companies are involved in high-impact industries like clothing, animals, forestry, food, and beverages, as well as the extraction of fossil fuels or metals, they are covered.

However, this means that 99% European firms would be exempt.

Lara Wolters (EU lawmaker) was the lead of a Parliament Report last year calling for the law. However, she welcomed the proposal but warned that small businesses in high-risk industries could still contribute to abuses and should therefore be covered. Read more

The law would also apply for approximately 4,000 companies that are not from the EU but have operations within the EU that meet the turnover thresholds.

Governments in all 27 EU member states would monitor compliance. Companies found to be in violation of the law will face sanctions.

EU firms may also be liable if their suppliers are guilty of an offence that could not have been prevented or stopped by the EU company’s due diligence.

Kate Abnett Reports; Editing by Andrea Ricci

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