In addition to strengthening human rights, the supply chain law requires large companies to draw up a plan to ensure their business model and strategy are compatible with the Paris Agreement on climate change, as EU states have announced. .
Under the envisaged rules, companies are responsible for their business chain, including their company's business partners and, in some cases, for downstream activities such as sales and recycling. The financial sector should initially be excluded from the requirements.
Which companies are affected by the law
In principle, the rules apply to companies with more than 500 employees and at least 150 million euros in sales. Companies that are not based in the EU are subject to the law if they have a turnover of more than €300 million in the EU. The EU Commission should publish a list of affected third-country companies.
Small businesses with at least 250 employees and a turnover of €40 million must also comply with the regulation if they have a turnover of at least €20 million in the textile sector, agriculture and food production or extraction and processing of mineral raw materials. The same applies to companies that are not based in one of the Member States, but that have an equally high turnover in the EU.
IMAGO/SOPA Images Companies must be held accountable if they profit from child or forced labor outside the EU
Threatening penalties
If the supply chain law is violated, companies will face penalties of up to five percent of their global sales. National authorities should be responsible for monitoring and any investigations. It is also planned that companies can be held liable in European courts if human rights violations occur in their supply chains. The deal still has to be confirmed by Parliament and EU states, but this is normally a formality.
The chair of the Internal Market Committee in the EU Parliament, Anna Cavazzini, spoke of a good day for human rights, but would have liked even stricter rules for climate and environmental protection. The EU Supply Chain Law is a directive that has not yet been implemented into national legislation.
“The fight for a world without exploitation is far from over”
SPÖ spokeswoman for foreign policy and development cooperation, Petra Bayr, described the law as an “important step against the exploitation of people and nature”, but at the same time also criticized the exceptions for the financial sector. Sabine Jungwirth, federal spokesperson for the Green Economy, spoke of a “milestone” in a broadcast.
The commitment reached represents a “milestone”, “but the fight for a world without exploitation is far from over”, said Bettina Rosenberger, coordinator of the civil society campaign Human Rights Need Laws! “The lack of real climate commitments, as well as extensive exemptions for the financial sector, endanger the effectiveness of EU supply chain law,” she criticized.
“Important step” despite “permanent gaps”
“Despite remaining gaps, EU supply chain law has taken an important step against exploitation and in favor of fair and humane working conditions around the world,” said Stefan Grasgruber-Kerl, supply chain expert at the organization. human rights group Südwind, in a press release.
Criticism of the plans came in advance from Georg Knill, president of the Austrian Industrial Association (IV). During a press conference the previous week, he feared a “huge burden on companies” who would have to hire more and more employees just to meet regulatory requirements. It would be viable for companies to control direct suppliers. However, monitoring the entire supply chain is not feasible, especially for small and medium-sized companies.