EU Reaches Compromise on Supply Chain Law Against Forced Labour, Environmental Damage
The European Union has reached a compromise agreement on legislation aimed at preventing forced labor and environmental damage in companies’ global supply chains. After weeks of negotiations, EU member countries approved a draft law on Friday that will require businesses to document that imported products adhere to labor and environmental standards.
The Corporate Sustainability Due Diligence Directive (CSDDD) mandates that European companies identify, prevent or mitigate potential human rights or environmental harms, and communicate their findings. However, the approved text applies only to larger firms with over 1,000 employees and €450 million or more in net annual turnover.
This represents a significant scaling back from the original proposal, which would have covered companies with 500 or more employees and €150 million in revenue. Compromises were made following objections from countries like Germany and Italy, which feared disproportionate impacts on small and medium-sized enterprises.
While hailed as a step forward in corporate accountability, the dilution of the draft text drew criticism from human rights and environmental groups. They argued that the exemptions for smaller companies significantly reduced the law’s scope and effectiveness in tackling issues like forced labor and environmental degradation.
The legislation still requires approval from the European Parliament before becoming EU law. Once enacted, companies will have a grace period to implement the new due diligence practices across their supply chains.
