EU parliament passes landmark law on corporate accountability

The European Parliament (EP) voted in favour of new rules on Wednesday, obliging large companies to prevent and remedy human rights and environmental abuses in their global supply chains to ensure greater corporate accountability.
The legislation, known as the Corporate Sustainability Due Diligence Directive (CSDDD), received backing from 374 votes, with 235 against and 19 abstentions, according to the EP statement.
The Parliament's vote in Strasbourg coincided with the 11th anniversary of the Rana Plaza building collapse in Bangladesh. The tragic industrial disaster, which took place on 24 April 2013, resulted in the loss of 1,138 garment workers' lives and left over 2,000 others injured.
The proposed law mandates large companies to undertake human rights and environmental due diligence throughout their operations and global value chains.
Large companies, defined as those with more than 1,000 employees on average and a net worldwide revenue exceeding €450 million in the previous financial year, will be subject to this requirement.
The legislation empowers regulators to take action against companies that fail to fulfil these due diligence obligations. In certain circumstances, it also allows victims of corporate abuses to seek justice through European courts.
Following the plenary vote, lead MEP Lara Wolters (S&D, NL) said in a statement: "Today's vote is a milestone for responsible business conduct and a considerable step towards ending the exploitation of people and the planet by cowboy companies. This law is a hard-fought compromise and the result of many years of tough negotiations."
"I am proud of what we have achieved with our progressive allies. In Parliament's next mandate, we will fight not only for its swift implementation but also for making Europe's economy even more sustainable," Lara Wolters added.
Aruna Kashyap, associate director on corporate accountability at Human Rights Watch, said in a separate statement, "The 11th anniversary of the Rana Plaza disaster is a sombre reminder of why a due diligence law is long overdue."
"The European Parliament's vote sends a strong message that the EU should no longer let large corporations get away with human rights and environmental abuses," she added.
The Rana Plaza disaster, along with other corporate abuses of human rights, labour rights and environmental standards in global supply chains, prompted rights groups, trade unions and even some businesses to call for binding legislation to hold corporations accountable for abuses in their global supply chains.
Rights groups and social movements worldwide have campaigned for the European Union to adopt such legislation. Their efforts have been crucial in pushing back against corporate lobbying that sought to derail the proposed law.
The legislative process, which began in 2020, has been long and difficult, according to Human Rights Watch.
France, Italy and Germany vastly narrowed the scope of the legislation. They limited its application to very large corporations, excluded certain sectors, and delayed the directive's entry into force.
On 15 March, a majority of EU member state ambassadors approved the draft law, but only after it was significantly weakened from a previous version. The European Parliament's Legal Affairs Committee then approved the text on 18 March.
Following the European Parliament's vote, the law now needs final approval from EU member state ministers. The ministerial vote is expected in late May.
"The European Commission pledged to adopt a law holding corporations accountable when it took office five years ago," said Ms Kashyap.
EU member state ministers should give the text final approval, paving the way for a new chapter on corporate accountability in global supply chains, she added.
Fazlee Shamim Ehsaan, vice president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), welcomed the move by the European Parliament, saying it would create a level playing field, as some EU countries are stricter on compliance than others.
He said BKMEA members would easily comply as they are already in a better position compared to competitors.
However, he commented that small and medium-sized units in the raw materials sector (mostly third-tier suppliers) might struggle to meet compliance requirements and possibly be forced out of business.

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