The European Commission proposed a new law that would require large companies to ensure that their suppliers in the world comply with environmental standards.
Directors of European Union firms will also be required by the “Corporate sustainability due diligence law” to ensure that their business strategy is compatible with limiting global warming below 1.5 Celsius. Under the Paris climate agreement.
Didier Reynders, EU justice commissar, said that “we can’t turn a blindeye on what happens down the value chains.”
The proposal requires EU firms to evaluate their supply chains at minimum once a year, before making major business decisions or beginning new activities. These are the factors to be aware of:
- Forcible labour
- Child labour
- Inadequate workplace safety
- Pollution and ecosystem destruction are two of the environmental impacts.
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.
But will the proposed law be sufficient to cover all companies within the EU?
After lengthy negotiations with the European Parliament, EU governments and other parties that take longer than a year, the Commission’s 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 of more 150 million euros.
If they have more than 250 employees or a net turnover of 40 million euros, companies in high-impact areas like clothes, animals and forestry are also covered.
However, this would mean that 99 percent of Europe’s companies would be exempt.
Lara Wolters (EU lawmaker), who was part of a Parliament Report last year that called for the law, supported the proposal but warned that small businesses in high-risk industries could still be subject to abuses.
The law would also be applicable to approximately 4,000 companies located outside the EU whose operations 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.