European Parliament holds corporations accountable with supply chain liability

To give shape to this joint liability, the European Parliament has drafted the new 'due diligence' directive. At a minimum, companies must limit or halt as much as possible the effects on human rights and the environment. Regarding human rights, this includes issues such as slavery, child labor, and labor exploitation. Concerning the environment, it involves pollution, lost biodiversity, and the preservation of natural heritage.

The new rules will apply to companies and parent corporations within and outside the EU with more than a thousand employees and global revenue exceeding 450 million euros. These firms must develop more careful policies and make appropriate investments. 

Additionally, companies must prepare a transition plan to adjust their business model to the Paris climate agreement, which states that the Earth may warm by no more than two degrees. The goal is approximately 1.5 degrees of warming. 

Companies that violate the rules may face penalties such as public exposure ('naming and shaming') and fines of up to five percent of their global turnover. The European Commission will establish an EU network of supervisory authorities to support cooperation, among other things. 

Dutch Member of the European Parliament Lara Wolters (PvdA) was a co-drafter of the proposal. The new law is a hard-won compromise and the result of years of tough negotiations, according to Wolters. She is proud of the adopted guidelines, which she says 'constitute a milestone for responsible entrepreneurship and a significant step in the right direction to end the exploitation of people and the planet by cowboy companies.'