INSIGHT by the European Parliament
〉Due diligence must be integrated into the way companies are managed
〉Addressing child labour, slavery, labour exploitation, pollution, environmental degradation and biodiversity loss
〉Fines of at least 5% of a company’s net worldwide turnover if they do not comply
On Thursday, Parliament adopted its position for negotiations with member states on rules to integrate human rights and environmental impact into companies’ governance.
Companies will be required to identify, and where necessary prevent, end or mitigate the negative impact of their activities on human rights and the environment such as on child labour, slavery, labour exploitation, pollution, environmental degradation and biodiversity loss. They will also have to monitor and assess the impact of their value-chain partners including not only suppliers but also sale, distribution, transport, storage, waste-management and other areas.
The new rules will apply to EU-based companies, regardless of their sector, including financial services, with more than 250 employees and a worldwide turnover over 40 million euro as well as to parent companies with over 500 employees and a worldwide turnover of more than 150 million euro. Non-EU companies with a turnover higher than 150 million euro, if at least 40 million was generated in the EU, will also be included.
The European Parliament has consistently called for more corporate accountability and mandatory due diligence legislation. The European Commission proposal was introduced on 23 February 2022. It complements other existing and upcoming legislative acts, such as the deforestation regulation, conflict minerals regulation and draft regulation prohibiting products made with forced labour.