EU Adopts Groundbreaking Business Value Chain Law

Human Rights

(Brussels) – The new EU directive adopted on May 24, 2024, requiring large companies to ensure human rights respect in their value chains signals a new era for corporate accountability, Human Rights Watch said today. Human Rights Watch issued a question-and-answer document about the provisions, strengths, and weaknesses of the new law.

The document describes how the EU Corporate Sustainability Due Diligence Directive (CSDDD) will require companies to conduct due diligence. Under the new law, large companies will be required to identify, mitigate, prevent, and remedy harmful human rights and environmental impacts in their operations and their value chains; that is, the company’s business partners involved in production, distribution, transport, and storage of the company’s products. It provides for regulatory oversight and the possibility of initiating civil lawsuits against corporations in European courts.

“The EU’s Due Diligence Directive represents a landmark shift from voluntary corporate responsibility to mandatory obligations for corporations to prevent and address human rights abuses,” said Tirana Hassan, executive director at Human Rights Watch. “This groundbreaking law is a major victory for rights groups, trade unions, and civil society networks at the forefront of the fight for corporate accountability. Despite fierce opposition from powerful corporate lobbyists seeking to thwart or indefinitely postpone this law, this directive is a testament to the strength and perseverance of those advocating for justice and accountability in the corporate sector.”

Industrial disasters resulting in workers’ deaths and injuries in the garment and textile industry, such as the Rana Plaza building collapse in Bangladesh, and corporate abuses of human rights, labor rights, and environmental standards in global value chains, as well as their contribution to the climate crisis, have prompted a groundswell of support for binding legislation to hold companies accountable.

Rights groups, trade unions, political leaders, and even businesses have pushed for the law, requiring companies to conduct due diligence in their own operations and in their value chains both in Europe and throughout the world. But the legislative process, which began in 2020, has been difficult, with stiff opposition and with the governments of France, Italy, and Germany leading efforts to significantly dilute provisions of the law. Corporate influence over norm-setting should be closely watched and curtailed to enable strong protection of human rights and the environment, Human Rights Watch said.

The coming years will be crucial to ensure the robust implementation and enforcement of the law. The European Commission should monitor how EU member states incorporate the directive into their national laws and legal systems and develop clear guidance on how the directive should be carried out and enforced. 

“This new law is a major step toward ensuring that corporations respect their responsibilities toward communities and the environment,” Hassan said. “The EU vote opens a new chapter for victims of harm caused by corporations.”

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