Skip to main content
BoF Logo

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.

EU Parliament Approves New Business Supply Chain Audit Law

European Union flags outside a grey building.
EU lawmakers backed the Corporate Sustainability Due Diligence Directive by 374 votes to 235 against, with 19 abstentions. (Shutterstock)

The European Parliament voted on Wednesday for a new law that will require larger companies operating in the bloc to check if their supply chains use forced labour or cause environmental damage and act to take action if they do.

EU lawmakers backed the Corporate Sustainability Due Diligence Directive by 374 votes to 235 against, with 19 abstentions.

The directive places new requirements on companies to fully audit “upstream” partners in design or manufacture, and “downstream” partners who transport, store and distribute products.

Business groups have complained that it introduces multiple new layers of regulatory burden, with potentially harsh sanctions, places European companies at a disadvantage compared to competitors and discourages investment in Europe.

ADVERTISEMENT

Penalties include fines of up to 5 percent of global turnover.

The rules were watered down to win over some EU members concerned about piling red tape on companies. Germany still failed to support it.

The rules, from 2028, will apply to companies that have more than 1,000 employees and a net worldwide turnover above 450 million euros ($480.8 million).

The initial proposal had set the thresholds for EU companies at more than 500 employees and 150 million euros turnover.

The law requires companies to prevent and end or mitigate potential or actual harm to human rights and the environment, such as child labour and biodiversity loss. It also requires remediation of actual adverse impact caused.

Financial companies will only have to consider upstream partners in their checks.

Companies will also have to prepare plans setting out how they will transition to a low carbon economy.

Reporting by Philip Blenkinsop; Editing by Chizu Nomiyama

ADVERTISEMENT

Learn more:

EU Parliament Approves Ban of Products Made With Forced Labour

The European Parliament approved rules on Tuesday to ban in the EU the sale, import and export of goods made using forced labour.

In This Article

© 2024 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions

More from Sustainability
How fashion can do better for people and the planet.

Is Fashion Serious About Sustainability?

At fashion’s annual sustainability gathering in Copenhagen, the biggest question was why, after 15 years of discussion, so little has changed and whether a coming tsunami of government regulation can force the industry to evolve its practices.


view more

Subscribe to the BoF Daily Digest

The essential daily round-up of fashion news, analysis, and breaking news alerts.

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.
CONNECT WITH US ON
© 2024 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions, Privacy Policy, Cookie Policy and Accessibility Statement.