The European Parliament has voted to introduce new laws that would hold international companies accountable when their actions infringe human rights or damage the environment.
A report on corporate accountability by the parliament’s legal affairs committee called on the European Commission to draft new legislation requiring companies to address any direct and indirect activities, operations, relationships, and investments that could harm people in their supply chains or contribute to environmental damage.
Large corporations and publicly listed SMEs in Europe, as well as those wanting access to the internal market, would have to prove they had taken proportionate measures to ensure their activities do not cause damage to social, labour, or trade union rights.
An EU executive study found that only 37% of businesses conduct environmental and human rights due diligence, and only 16% cover their entire supply chain. Seven in 10 businesses were found to support the introduction of EU-wide due diligence rules.
The EU Parliament has also called for a ban on importing products linked to severe human rights violations such as forced or child labour.
We refuse to accept that deforestation or forced labour are part of global supply chains
International Labour Organization statistics show there are around 25 million victims of forced labour, 152 million victims of child labour, 2.8 million deaths due to work-related diseases, and 374 million non-fatal work-related injuries worldwide every year.
MEPs have asked the Commission to review whether companies based in Xinjiang, China exporting goods to the EU are involved in human rights abuses, especially those related to the repression of Uighurs.
Under the report’s recommendations, victims of corporate abuse in third countries will be able to seek redress under EU law, with companies fined for the harm caused unless it can be proven that the corporations acted in line with due diligence obligations.
“This new law on corporate due diligence will set the standard for responsible business conduct in Europe and beyond. We refuse to accept that deforestation or forced labour are part of global supply chains,” said Lara Wolters MEP, an author of the report.
“Companies will have to avoid and address harm done to people and [the] planet in their supply chains. The new rules will give victims a legal right to access support and to seek reparations, and will ensure fairness, a level playing field, and legal clarity for all businesses, workers, and consumers.”
France and the Netherlands have already adopted legislation to enhance corporate accountability and have introduced mandatory due diligence frameworks.
The Child Labour Due Diligence Act requires companies operating in the Dutch market to investigate whether there is a reasonable suspicion that the goods or services supplied have been produced using child labour. Companies can be subject to fines of up to €870,000 or 10% of their global revenue if found to have inadequate due diligence procedures.
France’s Corporate Duty of Vigilance Law requires large companies to identify and prevent human rights, health and safety, and environmental risks caused by their activities, subsidiaries, or suppliers, with fines for non-compliance rising as high as €30m.
The Commission has announced it will present its legislative proposal on the matter later this year.