BELGIUM, Brussels. The European Parliament is putting pressure on sustainability in supply chains. The Brussels parliamentary bill is significantly stricter than the German draft.
In a resolution passed by a large majority on March 10, the EU Commission is called upon to use a supply chain law to oblige companies to take human rights and environmental standards into account within their value chains. The resolution is not a simple statement by MEPs; but, which is very rare, a legislative resolution by Parliament, i.e. a concrete legislative text.
Both parliamentarians and Commission representatives told Agra-Europe news service that Justice Commissioner Didier Reynders is expected to present a Commission proposal for an EU supply chain law in June. Specifically, the elected representatives are calling for companies to be held accountable and liable for relevant violations in the future. The rules on due diligence for supply chains should also guarantee access to legal remedies for injured parties. According to MEPs, the law should cover activities such as direct or indirect business relationships as well as investment chains that have a potentially adverse impact on human rights.
Social, trade union and labor aspects should also be included in the due diligence requirements, the Parliament explained. Adverse environmental impacts, including contribution to climate change or deforestation, as well as corruption and bribery, would also have to be identified. Furthermore, MEPs stressed that they understood due diligence to be primarily a " preventive mechanism." According to the parliamentary proposal, the goal is for companies to exercise due diligence in their value chain that is "proportionate to the likelihood and severity of their potential or actual adverse impacts and their specific circumstances." Appropriate consideration should be given to the industry, the size and length of the relevant value chain, the size of the company, and resources, among other factors.
In their proposal, MEPs also insist that companies that want access to the EU's internal market, including those based outside the EU, should be required to provide evidence that they comply with due diligence requirements relating to the environment and human rights. MEPs also advocate additional measures, including a ban on the import of products linked to serious human rights abuses such as forced or child labor. These objectives should be included in the respective chapters on trade and sustainable development of EU trade agreements, according to the people's representatives. In addition, the Commission is urged to carefully examine whether companies from China's Xinjiang that exported to the EU were involved in human rights violations. In particular, the oppression of the Uyghurs should be examined in this context.
Companies should be held liable for damages and fined if they have not acted in accordance with their due diligence obligations and taken all reasonable measures to prevent such harm, according to the parliament. The rights of victims or stakeholders in third countries would also be better protected under the proposed legislation, as they would be able to sue companies under EU law. In addition to large corporations, the rules would also apply to listed or high-risk small and medium-sized companies. However, these are to receive technical assistance in complying with their due diligence obligations.
The bill's rapporteur, Dutchwoman Lara Wolters of the Labor Party, made it clear that she believes the Supply Chain Act will set the standard for responsible business conduct in Europe and beyond. In the future, at least, the Progressive Alliance of Social Democrats (S&D) MEP hopes, companies would have to avoid or address harm against people or the environment. According to Wolters, the new rules are intended to give victims a legal right to assistance and redress, as well as ensure fairness, a level playing field and legal clarity for all companies, workers and consumers. "We refuse to accept that deforestation or forced labor are part of global supply chains," said Dutch.
The chairman of the trade committee, SPD politician Bernd Lange, stressed that no products that were demonstrably manufactured with forced labor could be allowed onto the European market. "Chocolate must be free of child labor and Christmas tree decorations free of forced labor," Lange explained. The aim, he said, is to check supply chains for their risks in the future. This involves, for example, environmental standards, the Paris Climate Agreement and fundamental workers' rights.
The agricultural spokeswoman of the Renew Europe (RE) group, Ulrike Müller, also views the legislative initiative positively. "It is important and right that we create a uniform framework at European level for the due diligence of companies," Müller emphasized. This is also about a level playing field in the internal market, she added. She called for the mechanism to be based on international standards such as the United Nations (UN) Guiding Principles or the recommendations of the Organization for Economic Cooperation and Development (OECD). On the other hand, the law should not lead to companies withdrawing from trade relations with difficult regions, she said.
German MEP Anna Cavazzini of the Green Party stressed that the parliamentary bill was significantly tougher than the draft supply chain law recently passed by the German government. For example, due diligence should apply to all large companies operating in the internal market, as well as to small and medium-sized enterprises (SMEs) that are listed or active in high-risk sectors. It should also cover the entire value chain and not just direct suppliers, as the German draft provides. In addition, according to Cavazzini, it is planned that environmental protection must also be a central element of an EU supply chain law. A strict ban on imports of products that are associated with serious human rights violations such as forced labor is also planned.
FDP MEP Svenja Hahn welcomed the approach of the parliamentary position, which distinguishes between company size, sector and risk. Hahn criticized the German government's move in this context: "Trade policy is a European task. That's why there also needs to be a European approach to this issue." A German supply chain law would be "a mistake." Going it alone nationally would damage the internal market and mean a legal back-and-forth as soon as Germany had to implement the EU regulation.
Bertram Kawlath, vice president of the German Engineering Federation (VDMA), welcomed the legislation's goal of protecting human rights and ending child labor. This is to be supported, he said. He also said a European approach was definitely better than a patchwork of national go-it-alones. However, such legislation would have to take into account what small and medium-sized enterprises in particular could achieve and contribute, Kawlath said.