27th Sep 2023

EU plans to make supply chains greener, less abusive

  • Companies ignoring the rules would face fines and they would need to make sure victims get compensation from companies found ignoring the new rules (Photo: Sosialistisk Ungdom - SU)
Listen to article

A proposal to hold EU companies accountable for human rights abuses and environmental violations throughout their supply chains was unveiled by the EU Commission on Wednesday (23 February).

But it emerged that 99 percent of businesses may be exempt.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • Companies must check regularly their supply chains to detect and mitigate forced or child labour risks (Photo: Nick Shaw / Banana Link)

The draft law would apply to very large EU companies (500 workers and net turnover of more than €150m) and some large firms (250 workers and net turnover of more than €40m) active in high-risk industries, such as agriculture and fashion.

Non-EU companies with the same profile would also fall under the rules.

Europe could no longer turn a "blind eye" to abuses such as child labour and exploitation of workers, or pollution and biodiversity loss, said EU justice commissioner Didier Reynders.

And while all of that sounds broad-reaching — the commission estimates some 13,000 companies in the EU and 4,000 non-EU companies would be covered — it still only represents around one percent of EU companies.

Dutch socialist MEP Lara Wolters, who led the European Parliament's work on the issue last year, said that the rules should fully cover all the supply chain of high impact sectors, such as oil extraction, ministry of agriculture, in order to be effective.

She warned that leaving out of the scope small- and medium-sized businesses in risk sectors could be a "potential risk" since they can contribute to abuses.

Obliged to hit Paris targets

The proposal introduces obligations for directors to ensure their business strategy is aligned with the 2015 Paris Agreement target of limiting global warming to 1.5 Celsius. And it also requires companies to include emission-reduction objectives in their operations plans.

Those companies covered will also have to apply due-diligence policies that involve regularly assessing their supply chains to detect and mitigate, among other issues, forced labour risks and environmental impacts like deforestation or water pollution.

But they can fulfil these requirements just by signing contractual obligations with their suppliers, and that is problematic for both MEPs and civil organisations who see a big loophole.

Wolters, the lawmaker, told reporters that the scenario was likely to work against proactive due diligence since it could effectively shift company obligations onto third parties.

Claudia Saller, head of the European Coalition for Corporate Justice, said in a statement that the initiative "fails to deliver on the potential" because many companies simply hide behind their supply chains "to avoid accountability and dodge difficult questions."

In principle, companies ignoring the rules would face fines and they would need to make sure victims get compensation from companies found ignoring the new rules.

But in practice there would likely be wide variations across the bloc since enforcement is left to EU member states.

The proposal, which has previously triggered internal disputes in the commission — forcing a delay of the draft law on at least two occasions — will first be discussed by EU governments and MEPs before entering into force.


EU corporate due diligence: new rules, or businesses rule?

The Brussels rumour mill has it that the EU Commission is being pressured to put forward a weaker proposal than what civil society organisations, trade unions, and the European Economic and Social Committee say is needed.

EU seeks crisis powers to take control over supply chains

The Single Market Emergency Instrument (SMEI) introduces a staged, step-by-step, approach — providing emergency powers to the EU Commission to tackle any potential threat which could trigger disruptions or shortages of key products within the EU.

IEA says: Go green now, save €11 trillion later

The International Energy Agency finds that the clean energy investment needed to stay below 1.5 degrees Celsius warming saves $12 trillion [€11.3 trillion] in fuel expenditure — and creates double the amount of jobs lost in fossil fuel-related industries.

Latest News

  1. EU and US urge Azerbijan to allow aid access to Armenians
  2. EU warns of Russian 'mass manipulation' as elections loom
  3. Blocking minority of EU states risks derailing asylum overhaul
  4. Will Poles vote for the end of democracy?
  5. IEA says: Go green now, save €11 trillion later
  6. The failure of the Just Energy Transition Fund in South Africa
  7. EU and G7 tankers facilitating Russian oil exports, report finds
  8. EU trade chief in Beijing warns China of only 'two paths' forward

Stakeholders' Highlights

  1. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  2. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  3. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  4. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  5. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch
  6. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations

Stakeholders' Highlights

  1. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  2. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  3. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  4. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  5. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics
  6. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains

Join EUobserver

Support quality EU news

Join us