EU Parliament adopts rules for firms on human rights and environment

Green Forum
The European Parliament has given its final approval to new regulations requiring companies to address their negative impacts on human rights and the environment.

With 374 votes in favor, 235 against, and 19 abstentions, the Parliament passed the new "due diligence" directive, which mandates firms and their partners to prevent, mitigate, or end their adverse effects on human rights and the environment. These impacts encompass issues such as slavery, child labor, labor exploitation, biodiversity loss, pollution, and destruction of natural heritage.

The directive will apply to EU companies with over 1000 employees and a worldwide turnover exceeding €450 million, as well as companies with franchising or licensing agreements in the EU with a worldwide turnover of over €80 million, provided that at least €22.5 million comes from royalties. Non-EU companies meeting these turnover thresholds in the EU will also be subject to the regulations. These firms must integrate due diligence into their policies, invest accordingly, obtain contractual assurances from partners, enhance their business plans, or support small and medium-sized partners to ensure compliance. Additionally, companies must develop a transition plan to align their business models with the 1.5°C global warming limit set by the Paris Agreement.

Member states will be obligated to provide detailed online information on due diligence obligations and establish supervisory authorities to investigate and penalize non-compliant firms. Penalties may include fines of up to 5% of a company's net worldwide turnover, along with liability for damages and full compensation for victims.

Lead MEP Lara Wolters emphasized the significance of the vote, describing it as a milestone for responsible business conduct and a crucial step toward ending exploitation by companies. She underscored the compromise achieved through years of negotiation and expressed determination for swift implementation and further sustainability efforts in the future.

The directive awaits formal endorsement by the Council, followed by signing and publication in the EU Official Journal. It will become effective twenty days thereafter, with member states given two years to transpose the regulations into national law. Gradual application will commence from 2027 for larger companies, extending to all covered firms by 2029.

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Green Forum  |  20 June, 2024 at 8:04 AM