On June 1, the European Parliament adopted a common position on new rules aimed at integrating human rights and environmental impact into corporate governance throughout the value chain. Under this text, companies will be required to identify and, where appropriate, prevent, halt or mitigate the negative impact of their activities, including those of their business partners, on human rights and the environment.
Companies will also have to monitor and assess the impact of their commercial partners (suppliers, distributors, carriers, etc.). These new rules apply to companies established within the European Union with more than 250 employees and worldwide sales in excess of 40 million euros. The rules will also apply to non-EU companies with sales in excess of €150 million, provided that at least €40 million is generated in the EU.
Companies will have to engage in dialogue with those affected by their actions, including human rights and environmental defenders, set up a grievance mechanism, and monitor the effectiveness of their due diligence policy.
Companies will have to implement a transition plan to limit global warming to 1.5°C and, in the case of large companies with over 1,000 employees, achievement of the plan’s targets will have an impact on directors’ variable compensation (e.g. through bonuses).