An EU directive that requires large companies to respect human rights and environmental obligations in their supply chains has been given final approval by the Council of the EU.
The Corporate Sustainability Due Diligence directive introduces obligations for large companies with more than 1,000 employees and €450 million in turnover to monitor, prevent or remedy human rights or environmental damages caused by their activities.
Companies affected by the legislation will have to implement a risk-based system to monitor their entire supply chain, from upstream production of goods or the provision of services, to the downstream distribution, transport or storage of products.
The rules concern not only company operations, but also the activities of subsidiaries and business partners along the supply chain.
Pierre-Yves Dermagne, Belgian Deputy Prime Minister and Minister of the Economy and Employment, said that large companies "must take their responsibilities in the transition towards a greener economy and more social justice".
"The Corporate Sustainability Due Diligence directive will give us the possibility to sanction those actors that violate their obligations. It is a concrete and significant step towards a better place to live for everyone," he said.
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If companies violate their obligations under the directive, they will have to take measures to prevent, mitigate, bring to an end or minimise the adverse impacts arising from their own operations, or their subsidiaries and business partners. Companies can also be held liable for damage caused and have to provide compensation.
In addition, large companies will have to adopt and put into effect a climate transition plan to ensure their business model is compatible with the Paris Agreement objective of limiting global warming to 1.5°C.
The Council formally adopted the corporate sustainability due diligence directive on Friday. After it is signed by the Presidents of the European Parliament and Council, it will be published in the Official Journal of the European Union, and enter into force 20 days later.
The EU's 27 member states will then have two years to implement the regulations, and after three years the new laws will begin to apply to the EU's largest companies with more than 5,000 employees and €1.5 billion in turnover.
After four years the regulations expand to cover companies with more than 3,000 employees and €900 million in turnover, and after five years they will be extended to companies with more than 1,000 employees and €450 million in turnover.
As reported by Belga, the Federation of Belgian Enterprises (FBE) highlighted the "gigantic" impact of the new regulation on the business world.
"Coupled with ESG reporting and other proposed EU regulations, such as a ban on marketing products made with forced labour, this new wave of obligations contradicts the idea of reducing the administrative burden," it said.
