As 13,000 EU and 4,000 Non-EU Based Firms Held Accountable Under New Corporate Sustainability Due Diligence Law
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The EU Commission released a proposal for the long-awaited Corporate Sustainability Due Diligence law. The proposed law would hold companies liable for adverse human rights or environmental impacts from their direct business activities and those of their suppliers. The law also requires companies to take active preventive measures, including conducting risk assessments at least once a year and before any major business decision.
Now if breaches in duty-of-care are found within a company’s supply chain, the company will risk sanctions and lawsuits in Europe. The proposed law puts the protection of the environment and human rights at the heart of companies’ business model. “We can no longer turn a blind eye on what happens down our value chains,” said Didier Reynders, the European Union’s commissioner for justice.
"These are critically needed incentives and will be immensely impactful for workers globally. Human rights due diligence is now becoming a prerequisite to doing business globally.”
By creating high standards, the law aims to provide EU companies with more leverage to push global suppliers to improve conditions. “These are critically needed incentives and will be immensely impactful for workers globally. Human rights due diligence is now becoming a prerequisite to doing business globally,” remarked Elena Fanjul-Debnam, Labor Solutions’ CEO. “Unfortunately, until the passage of this law and similar ones in other countries, business looked at protecting human rights as something ‘they should do,’ now it is something ‘they must do.’”
“Unfortunately, until the passage of this law and similar ones in other countries, business looked at protecting human rights as something ‘they should do,’ now it is something ‘they must do.’”
Until now, a lack of legal incentives resulted in corporations ignoring human rights violations in their supply chain or focusing on surface level risk identification and removal, not remediation or prevention. At Labor Solutions, we believe remediation and prevention must be at the center of any human rights strategy. Policing suppliers and setting up a global grievance line is simply not enough. To effectively ensure human rights, companies must partner with their suppliers to improve governance, human resource systems, hiring practices and communications with workers. We are excited to see rules and regulations that support and promote this strategy.
Photo courtesy of Labor Solutions
To meet the growing need for robust human rights due diligence, Labor Solutions has launched a Human Rights Due Diligence Program. The suite of tools and advisory services include support designing and implementing scalable human rights risk assessment and improvement systems, policies, and programs in line with pending legislation in the EU, US, and Canada. Variations of our program are now functioning at scale for over a dozen brands headquartered in Europe.
Labor Solutions' supplier ownership, empowerment and improvement approach, is not only scalable, but also allows companies to tackle the problem at the source and collect unparalleled data sets. Our solutions are designed to help your business go beyond tick-box solutions and meet the intention of these laws; creating sustainable solutions customized to your business and built around respect and trust between workers, buyers, suppliers, and brands.
According to a recent article in Reuters: “The main criterion would be that a firm employs more than 500 people and has net turnover of more than 150 million euros.” This would apply to an estimated 13,000 EU and 4,000 Non-EU Based Firms. After two years, the range would be expanded to 250 employees and 40 million turnover, including smaller businesses in so-called high-impact sectors, such as textiles, food products and mining.
Since the law demands wide-scale implementation across complex supply chains, companies liable under the law need to start preparing now or face fines later. Human Rights Due Diligence legislation + mandates are increasingly becoming common place globally; businesses of all shapes and sizes should not risk falling behind.