EU Passes Due Diligence Directive To Mitigate Companies’ Adverse Impact

EU Passes Due Diligence Directive To Mitigate Companies' Adverse Impact - Carbon Herald
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The European Parliament has passed a set of new rules requiring companies within the European Union (EU) and their associates to mitigate adverse impact on human rights and the environment, covering issues like slavery, child labor, biodiversity loss, and pollution.

The so-called “due diligence” directive was passed last week with an overwhelming majority—374 votes in favor, 235 against, and 19 abstentions.

According to the new EU rules, “firms and their upstream and downstream partners, including supply, production and distribution [are required] to prevent, end or mitigate their adverse impact on human rights and the environment.”

The directive applies to EU companies with over 1,000 employees and a global turnover exceeding $480 million (€450 million), as well as non-EU firms operating in the EU market with similar financial thresholds.

Businesses must integrate due diligence into their policies, invest accordingly, and ensure compliance from their partners.

Moreover, they are required to align their operations with the goals of the Paris Agreement, aiming to limit global warming to 1.5°C.

Relevant: EU Parliament Cracks Down On Greenwashing With New Consumer Protection Laws

Member states will establish supervisory bodies to monitor compliance and impose penalties of up to 5% of a company’s net worldwide turnover for breaches, along with other punitive measures.

The European Commission will establish a European Network of Supervisory Authorities to facilitate cooperation and the exchange of best practices.

The directive is set to be formally endorsed by the Council and will take effect 20 days later, with member states given two years to enact national legislation.

The new rules will be phased in gradually, starting from 2027 for larger companies and extending to smaller firms by 2029.

Lead member of the European Parliament (MEP) Lara Wolters hailed the vote as a milestone for responsible business conduct, emphasizing the importance of swift implementation and further sustainability efforts in the EU’s economic agenda.

Read more: EU Publishes Proposals For 2040 Emission Reduction Targets And Industrial Carbon Management

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