MEPs negotiated that companies will be liable for breaching their due diligence obligations and their victims will have the right to be compensated for damages. They will be able to launch inspections and investigations and impose penalties on non-compliant companies, including “naming and shaming” and fines of up to 5% of their net worldwide turnover. These bodies will exchange best practices and cooperate at EU level within the European Network of Supervisory Authorities established by the Commission. MEPs also ensured that EU governments will be required to create practical portals, dedicated to companies’ due diligence obligations, that will provide information on content and criteria, related Commission guidance and information for stakeholders.Įach EU country will designate a supervisory authority to monitor whether firms are complying with these obligations. MEPs ensured that firms will also have to meaningfully engage with those affected by their actions, introduce a complaints mechanism, communicate on their due diligence policies and regularly monitor its effectiveness. To do so, they will be required to make investments, seek contractual assurances from the partners, improve their business plan or provide support to their partners from small and medium-sized enterprises. It will also apply to non-EU companies and parent companies with equivalent turnover in the EU.Ĭompanies will have to identify, assess, prevent, mitigate, bring to an end to and remedy their negative impact and that of their upstream and downstream partners, including production, supply, transport and storage, design and distribution on people and the planet. The obligations will also apply to companies with over 250 employees and with a turnover of more than 40 million euro if at least 20 million are generated in one of the following sectors: manufacture and wholesale trade of textiles, clothing and footwear, agriculture including forestry and fisheries, manufacture of food and trade of raw agricultural materials, extraction and wholesale trade of mineral resources or manufacture of related products and construction. The legislation will apply to EU companies and parent companies over 500 employees and a worldwide turnover higher than 150 million euro. Rules applicable to big companies and those in high-risk sectors MEPs ensured that the management of companies with over 1000 employees will receive financial benefits for implementing the plan. Firms, including financial sector, will also have to adopt a plan ensuring their business model complies with limiting global warming to 1.5☌. They will have to integrate so called “ due diligence” into their policies and risk-management systems, including descriptions of their approach, processes and code of conduct. The new directive on corporate sustainability due diligence, informally agreed by EU co-legislators on Thursday, sets obligations for companies to mitigate their negative impact on human rights and the environment such as child labour, slavery, labour exploitation, pollution, deforestation, excessive water consumption or damage to ecosystems.
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