Due diligence : international trade will no longer be the law of the jungle



A big step towards the social and environmental responsibility of companies active in international trade was taken today with the approval given by the parliamentary committee on Legal Affairs (JURI) to the interinstitutional agreement concluded on the Corporate Sustainability Due Diligence Directive. This text will help companies to frame their business decisions in terms of human rights and environmental impact. It will also encourage developing countries to adopt climate and human rights standards and help create a favourable context for respecting human and environmental rights throughout the supply chain for the European consumer, concerned about responsible and sustainable purchases.

Adrian VAZQUEZ (Ciudadanos, Spain), Renew Europe's negotiator for this text in the Legal Affairs Committee (JURI) and during last night's trilogue, said: “France and Germany already had such domestic laws. The Netherlands and other EU countries were considering introducing some too. It was high-time we gave EU-wide rules to provide legal certainty to EU businesses operating across borders. The new rules will also apply to American, Chinese or Indian companies operating in the EU market”.

The directive stipulates that a company may be held legally responsible if one of its usual suppliers does not respect labour law standards or if its activities harm the environment. Companies that fail to comply with the rules could face fines of up to 5% of their global turnover.

The directive will apply gradually and by threshold: three years after the adoption of the text, firms with more than 5,000 employees with a turnover of more than 1.5 billion euros will be concerned. These thresholds increase to 3,000 employees and 900 million turnover after four years, then to 1,000 employees and 450 million turnover after five years.

If the financial sector is excluded from the scope of the directive, it will nevertheless have to, like the others, develop transition plans towards the total absence of greenhouse gas emissions. Banks, asset managers and insurers will also be exposed to civil liability in the event of breaches by their suppliers.

Proposed by the Commission in 2022, this European due diligence is a response to the trauma caused by the collapse of the Rana Plaza in Bangladesh in 2013 which left 1,100 dead and revealed the worst flaws of globalization. This directive is also part of the Green Deal in order to integrate international trade into the objective of climate neutrality that the EU wants to achieve by 2050.


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