European Union Steps Up: Ambassadors Back Supply Chain Human Rights Directive

European Union member state representatives endorsed a new legislation on Friday aimed at safeguarding human rights in supply chains and holding large corporations accountable for profiting from child or forced labor outside the EU, as well as causing unwarranted environmental harm.

This proposed law garnered support from 17 ambassadors representing 65% of the EU population, meeting the “qualified majority” needed for the “corporate sustainability due diligence directive,” also known as the European Supply Chain Act, to advance to its final vote in the European Parliament.

The legislation will be applicable to companies with more than 1,000 employees and annual revenues exceeding €450 million ($490 million). Its implementation will be phased in over a five-year span, beginning with companies having over 5,000 employees and annual revenues of €1.5 billion.

This development follows arduous negotiations between member states and parliamentary representatives. Italy’s backing was pivotal, having resolved its concerns regarding new regulations on packaging waste during intricate discussions.

Despite widespread support, Germany, the EU’s largest economy, abstained from the vote due to internal disagreements within its ruling coalition. While ministers from the Social Democrats (SPD) and Greens favor the legislation, the Free Democrats (FDP), a minority partner advocating for business interests, expressed apprehensions about potential bureaucratic burdens and adverse economic impacts.

Marco Buschmann, Germany’s FDP Justice Minister, emphasized the perceived risks outweighing benefits for the country’s economy, particularly dominated by small and medium-sized enterprises (SMEs). The German Chamber of Commerce and Industry (DIHK) deemed the law overly burdensome and impractical, echoing concerns raised by BusinessEurope, a lobby group highlighting potential litigation risks and competitive disadvantages for European companies on the global stage.

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