EU Cracks Down on Unsustainable Supply Chains with Landmark Directive

• 16 June 2024
• Property Focus
• 1317 Views

The European Union (EU) has taken a significant step towards promoting ethical and sustainable practices in global supply chains with the adoption of a new directive on corporate due diligence. This legislation, applicable to large companies within the EU, mandates stricter accountability for environmental and human rights issues throughout their operations and supply networks, according to European Council Updated on 24 May 2024.

The New Landscape of Corporate Due Diligence

The directive compels large companies with over 1,000 employees and a global turnover exceeding €450 million to implement robust due diligence processes.  These processes will require companies to:

1. Traceability: Gain a comprehensive understanding of the origin and composition of their products.
2. Risk Assessment: Identify potential environmental and human rights violations within their supply chains.
3. Mitigation Strategies: Develop and implement measures to address and minimize identified risks.

Operational Integration for Sustainability

In the past, different departments in companies handled things like following the law (compliance), getting materials ethically (responsible sourcing), buying supplies (procurement), making sure products are good (quality), and protecting the environment (sustainability). This new law means these departments can’t work separately anymore. They all need to work together to make sure the company follows the law about its supply chain.  This will help the company avoid problems and be more efficient.

Implementation Timeline

Following a two-year transposition period for member states to incorporate the directive into national legislation, large companies will have a minimum of three years to achieve compliance. Smaller companies within the specified size range will have a five-year window for implementation.

“Large companies must take their responsibilities in the transition towards a greener economy and more social justice. The Corporate Sustainability Due Diligence directive will give us the possibility to sanction those actors that violate their obligations. It is a concrete and significant step towards a better place to live for everyone,” said Pierre-Yves Dermagne, Belgian Deputy Prime Minister and Minister of the Economy and Employment.

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