EU commits to mandatory environmental and human rights due diligence

In continuation of the discussion about the European Green Deal, Didier Reynders, the European Commissioner for Justice, announced the introduction of a legislation on mandatory sustainable due diligence for companies in 2021. This new legislation aims to identify, prevent, mitigate and account for human rights abuses and environmental damages linked to corporate operations, subsidiaries or value chains. Reynders states that it is modelled on the French “duty of vigilance” law which not only requires companies to show a ‘duty of care’ in their operations, investments and supply chains, but also offer access to remedy for victims and strong enforcement mechanisms.

Voluntary measures are not enough
Until now, the EU has not worked on a mandatory due diligence law but has asked for voluntary codes by companies. However, a study published by the EU indicates that only one out of three companies surveyed is currently undertaking due diligence measures, showing that voluntary measures are not effective enough. After Reynders presented this study in a high-level webinar last week, he announced his plans for the new EU legislation on due diligence as it would “provide legal certainty and a harmonized standard for businesses’ duty to respect people and the planet”.

The COVID-19 crisis underlines the importance of robust and sustainable supply chains
Not only the climate crisis, but now additionally Covid-19 and the resulting health as well as the economic and social crises have reinforced the need to build more resilient and sustainable supply chains. According to the Commissioner, the crisis shows that those businesses that have environmental, social and governance measures in place, are better able to deal with the current situation and outperform others. Therefore, acting sustainably and responsibly as a company pays off. The law is stated to be part of the EU’s Covid-19 recovery package.

What a European Supply Chain Act means for companies
The new law will require companies to carry out checks on their supply chains and look at the resulting social and environmental risks. By publicly reporting on these risks and on what they have done to deal with them, companies can demonstrate to investors, consumers and local communities that they are committed to responsible and sustainable business practices.

These requirements mean that companies must be able to pro-actively manage sustainability risks of their supply chains. At sustainabill, we help companies to assure compliance and take action for improvements through collaboration along the supply chain. Contact us or watch our webinars to understand how we can help you prepare for the new European legislation.