The European Parliament on Thursday approved a bill that would make large companies with significant revenues from Europe liable for environmental damage and human rights violations.
Under the directive, which will be joined by measures drawn up by other EU bodies and could enter into force next year, EU-based companies with more than 250 employees and multinational companies with more than 150 million euros ($160.5 million) in turnover , of which at least 40% is generated within the EU must comply with the Corporate Sustainability Due Diligence directive.
Companies can be required to “identify, and if necessary prevent, end or mitigate the negative impacts of their activities on human rights and the environment such as on child labour, slavery, labor exploitation, pollution, environmental degradation and loss of biodiversity”;, according to a statement from Parliament.
Companies will also need to monitor and evaluate the actions of organizations in their supply chains.
Fines of at least 5% of a company’s global net sales can be applied if they fail to comply.
The directive has recently been extended to cover a wider range of companies by sector and size and European business groups, such as the Brussels-based Confederation of European Business, have expressed concern about the potential expansion of corporate and individual liability following the implementation of the directive.
Under the directive, companies would also have to implement a transition plan to limit global warming to 1.5 degrees Celsius.
Non-EU companies that do not comply with the rules will be banned from public procurement in the EU, the statement said.
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