Almost on the verge of derailing, and in the middle of injury time, the Member States have approved the Corporate Due Diligence Law, which will force multinationals to apply all necessary measures in respect of Human Rights and the Environment, especially in developing countries. It seemed almost impossible, but on the third attempt, the vetoes of France, Germany and Italy were overcome.
The new law will require large multinationals and their suppliers to determine and, if necessary, prevent, address or mitigate the adverse effects of their activities on human rights (for example, child labor and exploitation of workers) and in the environment, such as pollution and loss of biodiversity, even if it occurs outside the EU. The law will require monitoring throughout the entire supply chain, including transport or waste management.
Each State must have authorities that supervise compliance with the new obligations and, if not, sanctions equivalent to 5% of their annual turnover may be applied. Additionally, victims of these large companies will be able to demand accountability, take them to court and seek reparations.
The directive will affect large multinationals, around 5,500 companies, that have at least 1,000 workers (or more) with a turnover of 450 million euros per year. Significantly reducing the initial proposal that would have affected, according to Oxfam, approximately 17,000 companies, because the objective is for it to apply to those with at least 500 workers and a turnover of 150 million. This had been agreed last December in the three European institutions.
But at the beginning of the year, when the member states had to ratify the agreement, France, Germany and Italy, but also others, made reservations and blocked the pact. Once again, they called into question what was previously agreed, a movement that until just a year ago was unusual and that in recent months has been seen more frequently. In an attempt to put more pressure on the countries and obtain more compensation in their favor.
According to several countries, the new rules implied more bureaucracy for companies and required adjustments. After three attempts, Belgium, which holds the rotating presidency of the EU Council, has not given up. Finally, Italy and France have managed to balance the balance and have given their support to the law, in exchange for a reduction in the number of companies that will be forced to comply with the directive, in addition to limiting the role of unions in demanding reparations from the companies. Despite everything, several countries, up to nine, including Germany, have abstained.
Although several organizations have been happy that it has finally gone ahead, some such as Oxfam and Amnesty also regret the cost that the negotiation with the countries has had and that it has weakened the initial proposal. “At this moment, there are irresponsible companies that are burning the future of the planet and taking advantage of human rights violations (…) what's more, they have added thousands of companies to an already long list that will escape their responsibility,” he criticized in a Oxfam statement.
The new obligations will try to avoid cases such as the Rana Plaza disaster, in which more than 1,000 people, many women and children, died in 2013 due to the collapse of a building in Dhaka, the capital of Bangladesh, and that the vast majority They worked for large European companies in the textile sector in a situation without any type of job guarantee.
“This law was too important, it could not fall. This law has enormous implications around the world and prevents companies from looking the other way regarding human misery and destruction,” said European Parliament negotiator Lara Wolters. Precisely, now Parliament must ratify the new agreement so that the legislation can be definitively closed in April. The new directive will come into force from 2027.
Due diligence measures are not new, they have been tried to be applied for the last decades, especially since the Rana Plaza disaster. Although some companies had established them voluntarily (barely one in three European companies had due diligence plans), they had little impact, according to the European Parliament in a report.
