Environment & Human Rights: EU obligations for companies are coming

Jan 21, 2022 Benn-Ibler Rechtsanwälte

At the EU level, plans are taking shape to introduce a directive to create binding corporate due diligence obligations in the areas of the environment and human rights. Compliance with "effective due diligence" is to be monitored by national supervisory authorities. In case of violations, administrative fines and civil liability are to be imposed.

The reasons for the project are violations of human rights and environmental standards observed in global supply chains. After individual countries - including France, Germany and Switzerland - have already taken action at the national level, the EU is now to follow suit with a Union-wide provision.

The publication of the Commission's legislative proposal has been postponed several times. However, a fully formulated draft directive from the Parliament from 2021 indicates how far the legislator could go:

The parliamentary draft provides for a corporate duty to "carry out effective due diligence", specifically that companies “shall in an ongoing manner make all efforts within their means to identify and assess, by means of a risk based monitoring methodology that takes into account the likelihood, severity and urgency of potential or actual impacts on human rights, the environment or good governance, the nature and context of their operations, including geographic, and whether their operations and business relationships cause or contribute to or are directly linked to any of those potential or actual adverse impact” (Art 4 of the draft).

Furthermore, it is intended to designate national supervisory authorities (Art 12 of the draft). For violations of the due diligence obligation, companies are to be threatened with "appropriate administrative sanctions" (to be developed nationally) (Art 18 of the draft). In addition, the Member States are to design their national civil liability regimes in such a way that companies can be held liable for damages due to potential or actual adverse effects, inter alia, on human rights or the environment (Art 19 of the draft).

European Parliament resolution of 10 March 2021 with recommendations to the Commission on corporate due diligence and corporate accountability (10.03.2021)