EU Parliament greenlights corporate responsibility bill for human rights and environment

25 Mar 2024 --- The Legal Affairs Committee of the EU Parliament (EP) approves a bill that imposes “due diligence” rules on companies to mitigate their harmful impact on human rights and the environment.

The bill, which received 20 against four votes in support, aims to hold corporations accountable for addressing issues such as slavery, child labor, labor exploitation, biodiversity loss, pollution and destruction of natural heritage.

At the same time, Evonik says more than 4,600 of its employees set examples “against racism and for human rights” after the General Youth and Apprentice Representation, with the support of the General Works Council and the employer, launched a global survey.

“Respect for human rights is a central component of our corporate culture and reflects the responsibility that we, as Evonik, bear not only internally but also in society,” says Thomas Wessel, chief human resources officer and labor relations director at Evonik.

Previously, the Netherlands Centre for the Promotion of Imports from Developing Countries warned of the importance of the bill for cosmetics players. “The EU cosmetic industry is leading in showing sustainability in its supply chains. Companies in the industry use voluntary standards for their commitment to sustainability,” it highlighted.

Tightening diligence
The bill follows the EU Commission’s disappointment over voluntary efforts it deemed insufficient in tackling the issues.The bill will fine non-compliant companies, ensuring accountability and compensation for affected parties.

According to the EP, EU and non-EU businesses with more than 1,000 employees and a yearly revenue of more than €450 million (US$486.7 million) must incorporate human rights and environmental concerns into their governance frameworks in order to comply with the new “due diligence” regulations. Under specific requirements, the legislation also covers franchises that generate over €80 million (US$86.6 million) in turnover.

This includes averting, lessening or ending negative consequences resulting from their operations and those of their partners upstream and downstream in the design, production, transportation and supply.

Following the committee vote, lead member of EP Lara Wolters said: “I’m delighted that a clear majority of Legal Affairs Committee members backed the Due Diligence Directive today. It is high time that this legislation is adopted, to stop corporate abuse and to give companies clarity

in what is expected of them. I’m looking forward to the plenary vote and confident it will be adopted swiftly.”

Transition plan and consequences
The EP outlines that businesses covered by the bill must integrate due diligence into their risk management procedures and policies. Business models must also be aligned with the 1.5°C global warming limit specified in the Paris Agreement by adopting and implementing a transition plan. Time-bound climate change goals, important initiatives and required funding must also be included in the plan.

Businesses that violate these policies risk civil liability and must pay harmed parties in full, warns the EP. They must also set up channels for complaints and interact with people and communities negatively impacted by their operations.

Furthermore, EP says member states will appoint supervisory authorities tasked with monitoring, investigating and penalizing non-compliant companies, with penalties including fines of up to 5% of a company’s net worldwide turnover.

Labor and environmental protection
The directive will take effect twenty days after it is published in the EU Official Journal and approved by the European Parliament and member states. The bill supports upcoming and current regulations addressing related issues like deforestation, conflict minerals and forced labor, says EP.Businesses with more than 1000 employees and a yearly revenue of more than €450 million (US$486.7 million) will have to incorporate human rights and environmental concerns.

In recent industry developments, Estée Lauder Companies BASF, RSPO, Business Watch Indonesia and the Indonesian Agency for Agricultural Extension completed a sustainable palm oil farming program. We previously spoke to these players about sustainable palm oil farming, including “future-proofing supply chains” for sustainable oleochemicals.

Personal Care Insights also addressed the issue of child labor with industry organizations who gave suggestions on how to ensure personal care products are sustainably child-labor-free.

Meanwhile, Beiersdorf, Kao and L’Oréal highlighted their efforts in meeting environmental goals with a triple-A rating from the Carbon Disclosure Project.

Evonik notes that authoritarian governments and anti-democratic, racist organizations are becoming more active across a wide range of nations. On the other hand, the outcomes of the global survey conducted by Evonik reveal that 90% of workers are highly conscious of and dedicated to upholding human rights in both their personal and professional spheres.

However, only 30% of respondents think the media and politics “sufficiently address” human rights violations. Approximately 60% of the surveyed know the steps and channels for reporting discrimination.

By Venya Patel

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