🌱 What new EU laws are there?
To address issues arising in the business and human rights – and more broadly the corporate sustainability – space, the European Union (EU) has put together new regulations around due diligence. Two quite notable new regulations are the Corporate Sustainability Due Diligence Directive (CSDDD) and the Forced Labour Regulation (FLR).
🌱 What does the CSDDD require?
With the CSDDD, the EU is “requiring firms to mitigate their negative impact on human rights and the environment”. Companies falling within the scope of the directive are obliged “to alleviate the adverse impact their activities have on human rights and the environment, including slavery, child labour, labour exploitation, biodiversity loss, pollution and destruction of natural heritage”. They must also set up a “transition plan making their business model compatible with the global warming limit of 1.5°C under the Paris Agreement”.[i]
🌱 What upstream effect does the CSDDD have?
The obligation to “prevent, end or mitigate their negative effects” notably also falls on “upstream partners working in design, manufacture, transport and supply, and downstream partners, including those dealing with distribution, transport and storage”. These partners could also be companies that do not fall within the scope of the directive themselves. Each EU Member State must task a national supervisory authority with “monitoring, investigating and imposing penalties”.[ii]
🌱 What is the FLR’s aim?
With the FLR, the EU aims to “ban products made with forced labour from the EU market”. Under the regulation, the European Commission will compile “a list of specific economic sectors in specific geographical areas where state-imposed forced labour exists”. The European Commission may also flag particular products or product groups to EU customs, meaning that importers and exporters would have to submit extra information on, for example, the manufacturer and suppliers to customs. The national authorities of EU Member States or the EU Commission will investigate cases of suspected use of forced labour within companies’ supply chains.[iii]
🌱 What should companies do?
Given the complexity of global supply chains, companies should be taking ongoing steps towards compliance. Concretely, this means that companies should already be assessing the potential negative impacts of their supply chains and business operations. They should also already be taking measures to prevent and mitigate these impacts. Moreover, companies should be monitoring their efforts on an ongoing basis and be ready to make necessary adjustments to their supply chains and business operations.
[i] https://www.europarl.europa.eu/news/en/press-room/20240318IPR19415/first-green-light-to-new-bill-on-firms-impact-on-human-rights-and-environment
[ii] https://www.europarl.europa.eu/news/en/press-room/20240318IPR19415/first-green-light-to-new-bill-on-firms-impact-on-human-rights-and-environment
[iii] https://www.europarl.europa.eu/news/en/press-room/20240301IPR18592/deal-on-eu-ban-on-products-made-with-forced-labour