The European Union will soon require thousands of large companies to actively identify and reduce human rights abuses and environmental damage in their supply chains. This new EU regulation will also cover foreign businesses with operations in the region, including American companies.
The European Parliament approved a draft of the rules in June, 2023. Now EU members and the European Commission will finalise the law, expected to phase in over the next few years.
Last year, the European Commission introduced a proposal known as the Corporate Sustainability Due Diligence Directive. Since then, significant progress has been made on conducting human rights and environmental due diligence at the EU level.
Various EU member states have enacted or are enacting due diligence laws, such as Germany’s Act on Due Diligence in Supply Chains. The draft EU Supply Chain Act that is currently being negotiated is in some respects even stricter than the German act.
The EU Supply Chain Act will require covered companies to integrate due diligence into policies, identify and mitigate sustainability risks, establish complaint procedures, monitor implementation, and publicly communicate on due diligence.
Companies need to prepare and review their operations to proactively address any sustainability concerns identified to meet the new compliance standards under this sweeping regulation. With the right strategy, your business can adapt before the law’s rollout.
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