On February 20th, 2020, the European Commission published a major study (over 500 pages) conducted within all European Union countries on companies due diligence obligations related to their supply chain. According to the study, carried out by scholars from the British Institute of International and Comparative Law and the London School of Economics, only 1 in 3 European companies would use “due diligence” in verifying the impact of their supply chain on the environment and human rights.
The study is part of the initiatives related to the so-called European Green Deal, the Commission’s policy document, which included the general concept of sustainability among the primary objectives of the Union. European sustainability is linked to the promotion of environmental and social well-being, and the innovations of the Green Deal are destined to heavily influence the life cycle of companies.
The “Study on due diligence requirements through the supply chain” was aimed at analyzing the legislation on environmental and human rights issues (such as, for example, the UN Guiding Principles on Business and Human Rights, UNGPs), also proposing to develop and propose some possible solutions on the subject.
From the beginning, the urgency and sensitivity of this issue has had a fundamental impact on public opinion and on the European institutions themselves, so much so that on March 10th the European Parliament adopted a resolution inviting the Commission to urgently adopt a law obliging companies to respect human rights and the environment, providing for liability in cases of violation. The European Commission, through a statement, has announced that the proposal will be ready by the end of the year.
The possible contents of the proposal could be an obligation for companies to monitor the activities of their suppliers and the consequences of their operations in terms of the environment and safety at work; the obligation to identify, address and resolve problems related to their value chain in terms of the environment (for example, by assessing the impact on climate change), respect for human and labor rights (by verifying the respect of trade union rights of workers) and “good governance”. The European Parliament has also proposed the adoption of mandatory measures regarding imported goods, which, if approved, would also apply to economic and free trade agreements, such as in cases where their production results from serious violations of human rights, for example in cases of exploitation of child labor.
Compliance with the obligations should be guaranteed by the provision of a responsibility of the European companies themselves which, in case of violation, would be liable to fines and restrictions.
The European Green Deal is set to transform the European business environment in all its dimensions. The professionals at D’Andrea & Partners Legal Counsel are constantly monitoring the evolution of European legislation on business and sustainability. Feel free to contact us at firstname.lastname@example.org if you have any questions or need any information regarding European due diligence activities.