European Union member states have approved a new directive that will place a legal liability on big companies for any environmental damage or human rights violations within their supply chains.
In what is being seen as a landmark victory in the fight for corporate accountability, the EU 27 approved the Corporate Sustainability Due Diligence Directive (CSDDD) which aims to curb corporate abuses of human rights and the environment.
The legislation, while watered down by last-minute concessions, will cover companies with more than 1,000 employees and €450 million in turnover. It will affect about 5,000 companies across the bloc.
The CSDDD effectively establishes a corporate due diligence standard on sustainability issues for businesses operating in the EU. The due-diligence requirements will apply not only to the direct actions of the company but also to their subsidiaries and supply-chain contributors.
The landmark legislative effort hung in the balance in recent months after Germany and Italy threatened not to support the regulation amid concerns about the bureaucratic and potential legal impact it would have on companies.
However, after 45 days of closed-door negotiations, a series of false starts and a major watering down of certain provisions, a deal was reached last week.
Irish MEP Barry Andrews was one of the legislation’s co-negotiators.
“The vote is a victory for the EU, the environment and the many lives, communities and ecosystems affected by destructive business practices,” Mr Andrews said.
“Although it is far short of what I would have liked to have seen, it is an important first step in the fight against fast fashion, forced labour and a whole range of other corporate abuses,” he said.
“CSDDD is needed as voluntary action does not appear to have resulted in large-scale improvement across many sectors. We simply cannot continue to allow Irish and European companies to harm the environment and people. Human-rights and environmental abuses should not be allowed in our shopping baskets,” Mr Andrews said.
The European Parliament will vote on the legislation during the April plenary session in Strasbourg, allowing it to be signed off before the end of the parliament’s five-year mandate.
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