On 1 June 2023, the European Parliament adopted, at first reading, a draft directive on the “corporate sustainability duty of care”, aimed at compelling companies to identify and, if necessary, prevent, end or mitigate the negative impact of their activities on, for example, human rights and the environment (such as child labour, slavery, labour exploitation and pollution). These rules would apply to (a) EU companies of more than 250 employees and a turnover of more than €40 million and (b) parent companies of EU companies of more than 500 employees and a turnover of more than €150 million. Companies based outside the EU with a turnover of more than €150 million will also be included if they have generated at least €40 million in business within the EU. Companies that do not comply with the rules will be liable for any damages and may be sanctioned by national supervisory authorities. Penalties include measures such as “naming and shaming”, withdrawal of the company's products from the market, or penalties amounting to at least 5 per cent of global net turnover. Non-EU companies that do not comply with the rules will be excluded from EU public tenders.
Originally published July 2023
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