Environmental damage, human rights violations: the EU reached an agreement on Thursday to impose on companies a “duty of vigilance” covering their global production chain, legislation deemed “historic” despite the exemption granted to the financial sector.
Ten years after the collapse of the Rana Plaza textile factory in Bangladesh, which highlighted the lack of control over working conditions in third countries, the EU intends to force large companies to identify and correct the shortcomings which they are responsible, including via their subsidiaries and subcontractors abroad.
The agreement, concluded after a night of tough negotiations between Member States and MEPs, “constitutes historic progress”, said Dutch socialist MEP Lara Wolters, rapporteur of the text.
“Let this agreement be a tribute to the victims of Rana Plaza, and a starting point for shaping the economy of the future, placing the well-being of people and the planet before profits and the short term,” she said. wish.
Until then, only Germany and France had comparable legislation. “This major advance […] will make it possible to push globalization upwards on a social and environmental level,” added Pascal Canfin (Renew, Liberals), president of the Environment Committee in the European Parliament.
The companies concerned will be legally responsible for violations of human and social rights (child labor, forced labor, abusive expropriations, building safety, etc.) as well as environmental damage (deforestation, polluting emissions, water waste, etc.).
This mainly concerns their upstream production chain, in addition to some targeted downstream activities (distribution, recycling).
They will be required to identify breaches or risks and remedy them, through investments, contractual obligations imposed on their partners or by helping them improve — and cease problematic business relationships if necessary. .
Exempt banks
The text will apply to groups with more than 500 employees and a net global turnover of 150 million euros – or, for non-European firms, 300 million euros generated in the EU.
MEPs wanted to include companies with 250 employees or more: this will only be the case if their income exceeds 40 million euros and half comes from sectors deemed to be at risk (textiles, forests, agriculture, minerals, etc.).
In total, at least 13,000 European companies should be affected. But by failing to target SMEs, “99% of companies are spared, in sectors where the exploitation of workers is endemic,” regrets the NGO Oxfam.
Above all, contrary to what Parliament demanded, financial institutions will be “temporarily excluded” from the scope of the text, even if a review clause provides for a subsequent examination for their possible inclusion.
Some member states, led by France, defended this exemption in the name of “efficiency” and the risk of hindering credit.
During negotiations between States, Paris called for “treating the financial sector like all other sectors”, for which the duty of vigilance applies to upstream suppliers and not to their downstream customers.
Climate goals
The text also requires companies to develop a climate transition plan, with the obligation for groups exceeding 1,000 employees to link the variable remuneration of managers to compliance with CO2 emissions objectives.
Finally, the legislation provides for a civil liability mechanism linked to the “duty of vigilance” and enhanced access for victims to European justice.
In the event of breaches, the fines incurred could represent up to 5% of global net turnover, and firms will risk exclusion from European public markets.
“The EU has adopted a revolutionary text. The biggest European polluters, including the big fossil fuel groups, will have to reduce their emissions,” reacts Arianne Griffith, of the NGO Global Witness, while deeming it “shocking” that States have “scuttled” the inclusion of banks .
Same mixed reaction from Nele Meyer, of the European Coalition for Corporate Justice (ECCJ): “victims of corporate abuse will have appropriate channels to seek justice, this is a significant victory”, but banks are exempt despite “their driving role in the economy. “The road against corporate impunity is not over,” she believes.
“The only glimmer of hope: like large companies, financial players will have to adopt a climate transition plan. But there will need to be real controls on these plans and the means of implementation. On this point, everything remains to be done,” adds Olivier Guérin, from Reclaim France.