Europe brings new rules for companies to ensure human rights 

The European Parliament has extended a final green light to new rules that would oblige firms to mitigate their negative impact on human rights and the environment.

During a voting in the parliament, the rules were approved with 374 votes in favour, while there were 235 votes in the against, in addition to 19 abstentions. 

The new “due diligence” directive requires firms and their upstream and downstream partners, including supply, production and distribution to prevent, end or mitigate their adverse impact on human rights and the environment. 

Such impact will include slavery, child labour, labour exploitation, biodiversity loss, pollution or destruction of natural heritage.

The rules will apply to EU companies and parent companies with over 1000 employees and a worldwide turnover higher than € 450 million. 

It will also apply to companies with franchising or licensing agreements in the EU ensuring a common corporate identity with worldwide turnover higher than €80 million if at least €22.5 million was generated by royalties. 

Non-EU companies, parent companies and companies with franchising or licensing agreements in the EU reaching the same turnover thresholds in the EU will also be covered by the rules. 

These firms will have to integrate due diligence into their policies, make related investments, seek contractual assurances from their partners, improve their business plan or provide support to small and medium-sized business partners to ensure they comply with new obligations. 

Companies will also have to adopt a transition plan to make their business model compatible with the Paris Agreement global warming limit of 1.5°C.

Member states of the European Parliament will be required to provide companies with detailed online information on their due diligence obligations via practical portals containing the Commission’s guidance. 

They will also have to create or designate a supervisory authority to investigate and impose penalties on non-complying firms. These will include “naming and shaming” and fines of up to 5 per cent of companies’ net worldwide turnover. 

Besides, the European Commission will establish a body – European Network of Supervisory Authorities – to support cooperation and enable exchange of best practices. 

Companies will be liable for damages caused by breaching their due diligence obligations and will have to fully compensate their victims.

The main export product of Bangladesh is readymade garments, while the European Union is its largest market. It also exports some other products to European nations.

Fazlee Shamim Ehsan, vice-president of Bangladesh Knitwear Manufacturers and Exporters Association, anticipated the rules’ both positive and negative impacts on Bangladesh.

“On the positive side, brands across the EU will focus on improved working conditions. In terms of human and labour rights, it will not be too challenging for Bangladesh to maintain a good position in comparison with China and Vietnam. However, on the downside, small and micro suppliers may go out of business,” he explained.