European Parliament calls for legislation addressing environment and human rights in supply chains
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European Parliament calls for legislation addressing environment and human rights in supply chains

The European Parliament Wednesday adopted a legislative initiative report calling on the European Commission to create a “binding EU law that ensures companies are held accountable and liable when they harm—or contribute to harming—human rights, the environment, and good governance.”

Despite the global nature of many European companies’ operations, there are currently no EU-wide laws requiring companies to have a mandatory EU system of due diligence in place for victims of human rights and environmental violations.

Binding EU diligence rules would obligate companies to identify, address, and remedy aspects of their value chain (all operations, direct or indirect business relations, investment chains) that could or do infringe on human rights (including social, trade union, and labor rights), the environment (contributing to climate change or deforestation, for example) and good governance (such as corruption and bribery).

In a 504-79 vote, members of the European Parliament emphasized that any such legislation must provide victims with legal remedies.

According to the European Parliamentary Research Service, “the idea that multinational companies should make efforts to increase their positive impact and minimize their negative effects on host communities and their sustainable development has been around for several decades.” The 180-page report, however, emphasized that “just a little over a third of business respondents indicated that their companies undertake due diligence.”

“Companies will have to avoid and address harm(s) done to people and (the) planet in their supply chains,” said Lara Wolters, the lead lawmaker on the report. “The new rules will give victims a legal right to access support and to seek reparations, and will ensure fairness, a level playing field and legal clarity for all businesses, workers, and consumers.” 

The report also highlights that the new rules should apply to all companies operating in EU internal markets, including those outside the EU. Finally, the rules would mandate sanctions for non-compliance and legal support for victims of corporations in third countries.

The Parliament also concluded that the current “preferred approach” of encouraging multinational companies to step into the role of preventing harmful direct and indirect harms through voluntary action is flawed: “companies must no longer cause harm to people and the planet with impunity.”