The European Parliament adopts a position on European supply chain legislation #753


On 1 June 2023, the European Parliament voted its negotiating position with the Member States on rules for integrating human rights and environmental impact into corporate governance. This step forward is in line with the project on duty of care and corporate responsibility on which the EP had already taken a position in 2021. The next stage will be negotiations with the Member States on the final text of the legislation.


The text adopted in Brussels last Thursday aims to make EU companies responsible for their environmental impact and working conditions throughout their supply chain. Companies “will be required to identify and, where appropriate, prevent, halt or mitigate negative impacts of their activities on human rights and the environment, such as child labour, slavery, labour exploitation, pollution, environmental degradation and biodiversity loss”, says the EP in a press release.

The new rules apply to companies established in the EU, whatever their sector. They must have more than 250 employees and a worldwide turnover in excess of €40 million. They also apply to parent companies with more than 500 employees and a worldwide turnover in excess of €150 million, as well as to non-EU companies with significant operations in the EU.

The text also stipulates that “the Commission should develop sector-specific guidance”, including for the textile and clothing sector and the leather goods sector (including footwear) “based on the OECD sectoral due diligence guidance”.

According to the press release, companies will have to implement a transition plan to limit global warming to 1.5 degrees, but will also be required to engage in dialogue with those affected by their actions. In large companies with more than 1,000 employees, “the achievement of the plan’s objectives will have an impact on the variable remuneration of directors (through bonuses, for example)”.

During the plenary vote, rapporteur Lara Wolters (S&D, NL) said: “Parliament’s support marks a turning point in the debate on the role of companies in society. A law on corporate responsibility must ensure that the future belongs to companies that treat people and the environment in a healthy way – not to companies that have made environmental degradation and exploitation a business model. Most companies take their duty to people and the environment seriously. We are helping these companies with this “Fair Business Act”. At the same time, we’re weeding out the few big companies that don’t play by the rules.”

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