Jan Strupczewski & Simon Jessop

BRUSSELS (Reuters), – Wednesday’s announcement by the European Commission is to require large European Union businesses to verify that all their foreign suppliers are not using child or slave labor. The draft law also requires that companies that operate in Europe comply with environmental regulations.

This proposal is called Corporate Sustainability Due Diligence. It will require boards of EU companies to make sure that their strategy and business models are compatible with the Paris climate agreement’s goal to limit global warming to 1.5 Celsius.

EU companies will need to ensure that suppliers do not use forced labor, child labour, insufficient workplace safety and health, exploit of workers or other environmental offenses like pollution or loss of biodiversity and/or ecosystem destruction.

Reuters has seen the Commission’s proposal. It will not become EU law until lengthy negotiations are completed with the European Parliament, EU governments, and other parties. This is likely to take over a year.

“The law could be a true game-changer for corporations’ impact on the planet, or it could be a damp squib if big business lobbies get their wishes,” non-governmental organisation Friends of the Earth Europe said in a statement.

It is estimated that it could be applied to around 13,000 EU businesses. It would require that the firm has a net turnover exceeding 150 million euros, and it must employ more than 500 workers.

For high-impact industries like clothing, footwear, animal care, food, beverages and fuels, the threshold is lower at 250 employees and 40,000,000 turnover.

This does not mean that all European companies would be exempted from the thresholds.

It would apply to about 4,000 companies operating within the EU from countries other than the EU.

The EU would require that the EU generates the 150 million net turnover, and, for high-impact industries, it must produce 40 million Euros of turnover.

EU government would monitor compliance with these goals. These goals would be enforced against companies that ignore them.

EU-based firms could be civilly responsible if their supplier commits an offence against the environment, human rights, or the natural world.

A private suit against an EU company for its supplier’s misconduct would have to prove that the offense could have been prevented, stopped, ceased, or minimized by appropriate due diligence actions taken by the EU firm.

According to the Commision draft, “It will be hard in practice to prevent all risks via global value chains,”

Aurelie Skrobik (Corporate Accountability Campaigner, Global Witness) stated that this was a significant step forward in fighting corporate abuse.

“This aside, we must ensure that law makes companies accountable for all harms in their entire supply chain and there is no loophole. “The final text should contain no contradictions – victims need to be able seek justice through EU courts.” she stated.