How corporate due diligence legislation could prevent disasters such as Rana Plaza
On 24th of April this year, we mark the 10-year anniversary of the Rana Plaza garment factory catastrophe.
1,134 textile workers were killed, and at least 2,000 injured, when the factory building where clothing was being made for big international brands collapsed in Dhaka, Bangladesh.
This was the deadliest garment industry disaster ever, but similar incidents are not uncommon. Such tragedies can be prevented with proper laws, holding corporations accountable. We’ve been pushing for EU legislation that would oblige companies to respect human rights and the environment in the global supply chain.
After intense negotiations on the European Commission’s proposal for a directive on Corporate Sustainability Due Diligence, the text finally includes some improvements that will benefit people.
Co-President of the Left Manon Aubry (La France Insoumise, France) commented on the negotiations: “The deal that we found on the future corporate due diligence directive is ground-breaking: it proposes strict rules against corporate human rights and environmental abuse in global value chains for all Member States and across all sectors. While the EPP and Renew strongly dearly defended the positions of corporate lobbies, in particular, to protect rogue investors, limit sanctions and deny a reversal of the burden of proof in favour of victims, we have achieved a crucial step against the impunity of multinationals and for victims to access justice and reparations.”
Positive aspects of the corporate due diligence directive:
- The scope is widened to cover all large companies (250 employees and €40 million turnover) and ultimate parent companies of very large groups (more than 500 employees and €150 million turnover) that operate in the EU;
- The text requires companies to take all appropriate measures to identify, prevent, bring to an end, and remediate adverse impacts on human rights and the environment;
- Human rights impacts include all fundamental rights, core workers’ rights, indigenous peoples’ rights, humanitarian law, and some corruption issues;
- Environmental impacts include climate change, biodiversity, pollution, degradation, deforestation, overconsumption of resources, harmful substances and waste;
- Companies shall adopt and implement a climate transition plan to align with the European objective, including climate neutrality by 2050;
- Companies will have to exercise heightened due diligence in areas affected by conflict;
- When the situation requires it, companies shall suspend and terminate business relationships with faulty business partners;
- Companies will have to exercise due diligence in a constant and fair dialogue with stakeholders (“meaningful engagement”), including workers and trade unions;
- Companies face tough sanctions, including fines of up to 5% of their net worldwide turnover (administrative liability);
- Companies are liable to repair damage resulting from a failure to respect their obligations (civil liability);
- Victims will benefit from strong access to justice measures when filing claims before EU courts, including civil society representation in court, the right to access evidence possessed by companies, the right to request injunctive measures, and 10 years minimal limitation periods.
Renew and the EPP, relaying corporate lobby positions, have weakened the text in some respects:
- Financial service providers benefit from exemptions: some are excluded from the scope, they are liable only for their clients, and have lighter obligations;
- High risk sectors are not adequately taken into account;
- Complex corporate group structures are not sufficiently accounted for, including without the automatic liability of companies for subsidiaries and entities they control;
- The burden of proof has not been reversed in favour of victims, although still possible at Member State level and compensated partially by the right to access evidence;
- Cascading timeline of enforcement: application with three waves from biggest to smallest companies in scope (3-4-5 years after entry into force of the Directive).
- 25.04.23: vote in the JURI committee
- May: vote in the European Parliament’s Plenary session
- July 2023: start of trilogues with the Spanish presidency of the Council of the European Union
- End 2023 or beginning 2024: agreement with the Council and adoption of the final Directive
Related Meps and Contact person
- La France Insoumise