On June 1, the EU Parliament voted on its negotiating position on the EU Supply Chain Law. Trilogue negotiations between the Commission, Council and EP are now beginning. With the EU supply chain law, companies will in future be obliged to take responsibility for human rights, labor rights and the environment in global supply chains. After the Council had already defined its position at the end of last year, the vote in the EU Parliament took place on June 1st. The EP has its negotiating position by 366 votes to 225 with 38 abstentions needommm.
A total of nine EP committees dealt with the EU supply chain law. The lead legal committee has its at the end of April Message (Rapporteur Lara Wolters, S&D) passed with a large majority (19 votes to three with three abstentions) and called for ambitious rules. The position of the legal committee was largely adopted by the plenum.
Lobbying by business associations fended off
Business associations lobbied intensively in the run-up to the vote and wanted to torpedo the outcome of months of negotiations in the EP. Amendments were tabled at the last minute to water down the EP position. According to the wishes of the lobbyists, important points such as climate protection obligations, corporate liability and the scope of the EU supply chain law should have been weakened or deleted. The amendments ultimately found no majority in the EP. However, the reactions of the business side to the result of the vote leave no doubt that attempts will continue to be made to weaken the EU supply chain law.
Important hurdle overcome
From the point of view of trade unions and NGOs, the EU supply chain law is a milestone. The rights of workers along global supply chains will be better protected in the future. At the same time, it is an important measure for environmental and climate protection. In view of the upcoming EU elections in 2024, there is great time pressure in the negotiations. With the vote in the EP, an important hurdle was cleared. In terms of content, the EP has made significant improvements to the Commission’s proposal and the Council’s position. The result of the vote can be seen as a success for human rights, environmental and climate protection.
Trialogue: Negotiating positions of the Commission, Council and EP
| Commission | Rat | EP | |
| Who should the EU supply chain law apply to? | EU company with more than 500 employees and 150 million annual turnover. Non-EU companies with more than 150 million annual sales in the EU | EU company with more than 500 employees and 150 million annual turnover. Non-EU companies with more than 150 million annual sales in the EU | EU company with more than 250 employees and 40 million annual turnover. Non-EU companies with more than 150 million annual sales worldwide, of which more than 40 million in the EU |
| From when? | 2 years after entry into force | 4 years after entry into force | 4 or 5 years after entry into force |
| In high-risk sectors: companies with more than 250 employees and 40 million annual sales | In risk sectors: companies with more than 250 employees and 40 million annual turnover |
not applicable | |
| From when? | 4 years after entry into force | 5 years after entry into force | not applicable |
| financial sector covered? | And | No (only “opt in”) | And |
| What do companies need to control? | own activities, Subsidiary company, “established business relationships” (upstream and downstream value chain) |
own activities, Subsidiary company, “chain of activity” (downstream value chain only limited) |
Own activities, subsidiaries, value chain (upstream and downstream part including sales, distribution, transport, storage and waste management) |
| Do stakeholders need to be involved? | Not necessarily | Not necessarily | Yes, mandatory |
| Company civil liability? | Yes, but the rights of those affected are not regulated | Yes, but the rights of those affected are not regulated | Yes, and some of the rights of those affected are regulated: long statute of limitations (at least 10 years), class actions, injunctions |
| climate protection | Not subject to due diligence | Not subject to due diligence | subject of due diligence |
| Role of Certifiers/Auditors | Verification of contract clauses, without strict rules | Verification of contract clauses, without strict rules | Review of contract clauses, but with strict rules |
The table above gives an overview of some important negotiation points and the related regulatory approaches in the Commission proposal and in the position of the Council and the EP.
Those affected need a reversal of the burden of proof
Unfortunately, the EP position does not meet all Requirements to an effective EU supply chain law. Affected people who go to court against companies for human rights violations or environmental damage have so far in many cases no success. Reversing the burden of proof in favor of those affected is an important requirement for an effective EU supply chain law so that those affected can enforce their rights in the future. Unfortunately, this point is missing in the EP position.
However, the EP has sharpened the penalties significantly: In the event of violations of the EU supply chain law, it wants maximum financial penalties of at least 5 percent of the company’s global annual turnover and a “naming and shaming” of companies against which a fine has been imposed (publication by the authorities). Furthermore, the EP calls for the exclusion of products from the EU internal market or from export and, in certain cases, exclusion from public procurement.
outlook
The Commission, Council and EP will be negotiating the final text of the EU supply chain law in the coming months. It is an EU directive that must subsequently be implemented in Austrian law. The regulations will not apply until 2025 at the earliest.