The EU Parliament has taken a definite stance on the planned supply chain law for the European Union. Companies that have a considerable impact on human rights and the environment, such as child labor, slavery, labor exploitation, environmental pollution and destruction and the loss of biological diversity are urged to recognize their negative effects and to prevent, end or mitigate them. The proposed regulations extend to partners in the value chain, with companies monitoring and evaluating suppliers, sales, distribution, transport, warehousing, waste management and more.
The rules should apply to companies based in the EU with over 250 employees and a global turnover of over 40 million euros, as well as parent companies with over 500 employees and a global turnover of over 150 million euros. Companies from third countries with a turnover of over 150 million euros would be included if at least 40 million of them are generated in the EU, and the regulations would apply regardless of the industry, including the IT sector and providers of financial services.
Large manufacturers of smartphones and other networked devices, including Apple and Samsung, have pledged improvements in their supply chains and higher standards, for example in tin mining in Africa and Southeast Asia. The MEPs are pushing for a strict European supply chain law with specifications for fair IT by 2021.
The proposed regulations would require companies to implement a transition plan to limit global warming to 1.5 degrees. Management remuneration would be affected for groups with over 1000 employees, and companies would also need to get in touch with those affected by their actions as well as human rights and environmental activists while introducing a grievance mechanism. Non-compliance makes companies liable for damages and can be sanctioned by national supervisory authorities, with proposed fines of up to at least 5 percent of worldwide net sales.
Foreign companies would face exclusion from public procurement in the EU if they don’t comply with the rules. The majority for the position was slim, with 366 to 225 votes with 38 abstentions due to concerns from the centre-right group of the European People’s Party (EPP) after strong industry lobbying. Smaller companies could postpone the application of these regulations for another year while only the few cowboy companies that did not comply with the rules would be cut off from the market.