A Step Forward on Human Rights and Environmental Due Diligence with the JURI Committee's Vote
On the 25th of April, the European Parliament’s Committee on Legal Affairs (JURI) agreed on new rules to integrate human rights and environmental impact into companies’ governance.
Companies would be obliged to identify, and where necessary prevent, end or mitigate the negative impact of their activities, including that of their business partners, on human rights and the environment. This includes child labour, slavery, labour exploitation, pollution, environmental degradation and biodiversity loss.
EXTENDED SCOPE
MEPs extended the application of the new rules, compared to the Commission proposal, to include EU-based companies with more than 250 employees and a worldwide turnover higher than 40 million euros, as well as parent companies with over 500 employees and a worldwide turnover higher than 150 million euros. The rules would also apply to non-EU companies with a turnover higher than 150 million euros if at least 40 million was generated in the EU. Companies must consider the negative impacts on human rights and the environment - including climate and corruption - throughout their value chain, both upstream and downstream.
Supervision, sanctions and detailed guidelines
Non-compliant companies should be liable for damages and EU governments would establish supervisory authorities with the power to impose sanctions. MEPs want fines to be at least 5% of the net worldwide turnover and to ban non-compliant third-country companies from public procurement.
To facilitate compliance, member states would set up a national helpdesk and the Commission would prepare detailed guidelines.
Close collaboration with trade unions and NGOs
When it comes to identifying, preventing, prioritising and remedying supply chain risks, companies must engage with stakeholders on an ongoing basis. These stakeholders can be victims but also trade unions, NGOs and human rights defenders.
DAMAGES in
Companies must remedy any damage in full dialogue with the affected persons, including compensation or rehabilitation. This is a fundamental part which was completely missing from the Commission proposal.
Obligation to introduce ambitious climate plans
In the agreement, companies must introduce ambitious climate plans, in line with the Paris Climate Agreement, including Scope 1, 2 and 3 emissions.
Directors are legally responsible for overseeing due diligence
All company directors would be obliged to implement a transition plan compatible with a global warming limit of 1.5°C. Directors of companies with over 1000 employees will be directly responsible for this step, which in turn will affect the variable parts of their pay, such as bonuses.
Next Steps
On 31st May, the European Parliament Plenary will gather to vote on a final Parliament position on the file.