EU Countries Push for More Favorable Supply Chain Law Conditions
Countries in the EU advocate for a more lenient approach to the regulations governing supply chains - EU nations push for loosened restrictions in supply chain regulations
You heard it right! The European Union (EU), in its quest to uphold human rights and environmental standards, is proposing significant updates to supply chain rules for corporations, but certain EU countries want to make things less strenuous for businesses.
The EU's planned law aims to bring companies with over 1,000 employees and an annual turnover of at least 450 million euros to account for any human rights abuses and environmental pollution occurring in their productions lines. But, the EU countries are pushing to raise these thresholds to at least 5,000 employees and a turnover of at least 1.5 billion euros.
This proposed revision appears to resemble the existing supply chain law already in force in France. The German government, as originally planned at the EU level, had rules for companies with over 1,000 employees, but they are now considering abolishing it.
Heike Drillisch, the coordinator of the Initiative Supply Chain Law, finds this proposal cynical. She claims that these changes undermine the core due diligence obligations and weaken the effectiveness of the regulations, as only a fraction of previously affected companies would fall under the proposed council draft.
Many EU countries are in favor of these easements. Under the new rules, companies wouldn't be required to ensure compliance with human rights and environmental standards throughout their entire supply chain, but only among their direct suppliers. National governments also wish to demand less detailed information from companies and impose strict requirements only for high-risk supply chains.
Notably, the EU countries also aim to abolish the previously planned EU-wide civil law liability for the regulations, making legal proceedings against companies for violations more challenging. The outcome of legal proceedings would now depend on the jurisdiction in the respective EU country.
Moreover, there are proposed modifications regarding the sustainability reporting of companies. The relevant EU law should no longer apply from 500 employees, but only from 1,000 employees and an annual turnover of at least 450 million euros. Approximately 80% of the affected companies would no longer fall under the law under these new stipulations.
With the Council of the 27 Member States and European Parliament having to negotiate on these easements, a delay in the law has already been decided. The first rules will now apply starting 26 July 2028, one year later than initially planned. Notably, German Chancellor Friedrich Merz and French President Emmanuel Macron have recently called for the supply chain law to be abolished altogether, causing tensions in Berlin.
Keywords: EU, Supply Chain Law, France, Brussels, Federal Government
Insights
- The European Commission has suggested increasing the employee threshold for companies subject to certain supply chain rules, notably under the Corporate Sustainability Due Diligence Directive (CSDDD) and related frameworks [3].
- This change is part of efforts to simplify and reduce the compliance burden on smaller companies while focusing resources on larger enterprises with more extensive and complex supply chains.
- The Corporate Sustainability Due Diligence Directive requires companies to perform due diligence on their supply chains to identify, prevent, and mitigate adverse human rights and environmental impacts [5].
- The ongoing EU legislative efforts aim to balance robust human rights and environmental protections in supply chains with practical considerations for business compliance burdens [1][3][4][5].
- Member States will need to update their national laws accordingly [1][3][5].
The European Commission's proposed modifications to the Corporate Sustainability Due Diligence Directive aim to raise the employee threshold for companies subject to supply chain rules, with a focus on relieving smaller companies from compliance burdens while targeting larger enterprises with more intricate supply chains. The reshaped regulations also intend to preserve the core due diligence obligations and maintain the effectiveness of the regulations, keeping a significant number of companies accountable.
The suggested changes in supply chain policies have raised questions about the diligence of certain EU countries, as these alterations seem to undermine the robust human rights and environmental protection objectives that initially inspired the regulations. As a result, the outcome of legal proceedings against companies for violations may now vary depending on the jurisdiction within the respective EU country.
