EU Parliament approves corporate sustainability due diligence law: Is this a new era for accountability?
The law is now subject to final approval by EU countries, after which it will be transposed into national law.
It seeks to introduce legal obligations for large corporations to conduct human rights and environmental due diligence in their global supply chains.
Both EU-based firms and non-EU entities engaging in a certain threshold of business within the EU could find themselves accountable for the conduct of their suppliers.
The biggest EU companies – with over 5,000 employees and €1.5bn in turnover – will need to be compliant by 2027, followed by companies with more than 3,000 employees and €900m (US$962m) in turnover in 2028, and companies with at least 1,000 employees and €450m in turnover in 2029.
Reaction: ‘A new chapter is about to begin’
Beate Beller, corporate accountability campaigner at Global Witness, said: “It was only a few weeks ago that EU member states nearly killed this law off completely, so today’s vote to pass the final law is something to celebrate.”
While national governments weakened it at the last minute, a new chapter is about to begin for corporate accountability, she continued.
“The biggest companies operating in the EU will be obliged to respect human rights and the environment, and the law gives people who are at risk from dangerous business practices a chance to fight back.”
The legislative process, which began in 2020, has been protracted and difficult, noted Human Rights Watch.
“The governments of France, Italy, and Germany vastly curtailed the scope of the legislation, limiting its application to very large corporations, excluding certain sectors, and extending the time it would take before the directive comes into force.”
On March 15, a majority of ambassadors of EU member states approved the draft law, but only after significantly weakening a text that had been previously approved. On March 18, the European Parliament’s Legal Affairs Committee approved the text.
Call for agriculture specific guidance
A joint stated from industry organizations, FEFAC, FEDIOL and COCERAL, asserts that the revised text aligns closely with international due diligence frameworks like the OECD and UN guidelines. This enables companies to focus on addressing severe risks promptly, maximizing impact, claim the trade groups.
To ensure successful and timely compliance, they urged the EU Commission to provide “practical and easy-to-understand guidance” and best practices well ahead of the date of application, namely on how to conduct due diligence, including on prioritization of impacts, appropriate measures to adapt purchasing practices, information on responsible disengagement, appropriate measures for remediation, and on how to identify and engage with stakeholders.
“Given the specificities of bulk agricultural supply chains, we also urge the Commission to issue agriculture-specific guidance.”
