EU Fails to Pass Due Diligence Law Targeting Human Rights and Environmental Abuses in Supply Chains

Efforts to implement a law in the European Union that would have required big companies to take responsibility for human rights and environmental abuses within their supply chains faced a setback as the bloc failed to secure agreement on Wednesday. The proposed rules would have mandated EU firms with over 500 employees and €150 million net turnover to conduct detailed audits of their suppliers and partners, including those in China. Three years after implementation, the rules were set to extend to non-EU companies with over €150 million in net turnover generated in Europe.

Despite the push for the law, a Wednesday vote of the bloc's 27 members in Brussels did not meet the qualified majority needed for adoption. Notably, major EU member states such as Germany and Italy abstained, alongside 10 other countries, leading to the rules falling short of the required threshold. Businesses in China would have faced challenges in meeting the information requirements on their suppliers.

The European Parliament's chief negotiator on the file, Lara Wolters, expressed outrage at the vote, citing political games at play within the European Council concerning due diligence laws. The failure to pass the law marks one of many unsuccessful attempts by the EU to enact regulations aimed at environmental issues leading up to the European Parliament elections in June.

The proposal met resistance from some EU member states and businesses concerned about the administrative burden and potential competitive disadvantages that compliance would entail. While some businesses supported the law, others, like Siemens Energy's CEO, Christian Bruch, highlighted concerns that the €150 million threshold for non-EU operators could favor Chinese competitors.

Looking ahead, negotiators from the European Council and Parliament will seek to reach a deal on a forced labor ban in the following week. The ban, which does not directly mention China but is expected to impact businesses operating there, faces challenges over the administration responsibilities.

The failure to pass the due diligence law underscores the complexity and divisions within the EU on issues of corporate responsibility and human rights violations in supply chains as negotiations continue in the coming weeks.