In the future, companies will have to pay more attention to ensuring that their activities do not violate human rights or environmental regulations. The background to this is the Supply Chain Act, which has now been endorsed by the EU Parliament.
The Supply Chain Act will apply to all companies with 250 or more employees and net sales of 40 million or more.
Companies will be held more accountable for negative environmental impacts through the Supply Chain Act. (Image source: Pixabay)
Obligations of companies
Under the new regulations, companies will be responsible for ensuring that child labor does not take place along their entire supply chain. To be sure, they must conduct appropriate investigations and, if necessary, take measures to end it. In addition, negative impacts on biodiversity must be mitigated.
The companies’ suppliers or partners must also be taken into account. What are the environmental impacts here? This needs to be assessed.
Sanctions
Companies face penalties if they fail to comply with the regulations. The EU Parliament lists the following sanctions in its press release on the subject:
- Denunciation by name
- Withdrawal of goods from the market
- Fines of at least 5% of the worldwide net turnover
Companies from non-EU member states will no longer be granted access to EU public procurement in the event of a violation.
The final text of the legislation will be negotiated with EU member states in the coming months.
Source: DIHK, EU Parliament
