The European Commission has proposed a law that would hold large companies operating in the European Union for environmental violations or human rights abuses committed by businesses in their supply chains, reports The New York Times.
“This proposal is a real game-changer in the way companies operate their business activities throughout their global supply chain,” said Didier Reynders, Commissioner for Justice, in a statement. “With these rules, we want to stand up for human rights and lead the green transition. We can no longer turn a blind eye on what happens down our value chains.”
Under the legislation, businesses would need to establish mechanisms to detect, prevent and mitigate breaches of human rights, such as child labor, as well as environmental hazards in their supply chains. National governments would define the financial penalties for violators.
Victims could sue for compensation in domestic courts of EU member nations, even if the harm occurred outside the bloc.
According to the European Commission, the new rules will bring legal certainty and a level playing field. “For consumers and investors they will provide more transparency,” the Commission wrote on its website. “The new EU rules will advance the green transition and protect human rights in Europe and beyond.”
The proposal would initially apply to companies with more than 500 employees and annual revenue over €150 million ($170 million). Around 2,000 companies based outside the bloc but doing business in the European Union, amounting to an annual revenue of more than €150 million, would also be covered.
After two years, the range would be expanded to include smaller businesses in so-called high-impact sectors, such as textiles, food products and mining.
The legislation will now be discussed by the European Parliament and the 27 national governments, with all parties able to modify the language. The final draft will require passage by the EU lawmakers and member nations. The whole process could take a year or more.