The European Commission proposed a law at the end of February that would hold companies in the European Union (EU) accountable for environmental and human rights violations throughout their supply chains. The Corporate Due Diligence law will be discussed and modified by the EU Parliament and 27 Member governments over the next year. The draft released in February would apply to about 13,000 EU companies, those with more than 500 employees and annual revenue above approximately $170 million. Companies in designated “high-impact” sectors, including “clothes, animals, forestry, food and beverages, and the extraction of fossil fuels and metals,” would be regulated under the law if they had more than 250 employees and 40 million euros in annual revenue (Reuters). Approximately 4,000 companies outside of the EU would also be subject to the law.

The law would require companies to develop regulations to uncover, prevent, and mitigate human rights abuses and environmental violations, and to develop a business strategy in alignment with limiting warming to 1.5° Celsius as laid out in the Paris Agreement. Further, companies would be required to assess their supply chains annually and prior to starting new activities. Individual nations would set fines for violating companies, but fines are suggested to be a specified percentage of a company’s annual revenue (Bloomberg).

While some say this could be a major win for human rights and the environment, others are skeptical, saying more needs to be done. Critics say smaller companies in high-risk sectors should also be included, and there are concerns that during the review process the law will be further watered down. Initial versions of the law were more ambitious than the draft released in late February, largely due to corporate lobbying (New York Times).