After lengthy negotiations, the EU member states finally adopted the European Supply Chain Act on May 24, 2024. The EU Supply Chain Act (Corporate Sustainability Due Diligence Directive) partially goes beyond the existing German Supply Chain Due Diligence Act.
The EU Supply Chain Act aims to hold companies accountable if they profit from human rights violations such as child or forced labor. In addition, companies must draw up a plan on how to align their business model with the goal of limiting global warming to 1.5 degrees compared to the pre-industrial age.
Affected companies must obtain contractual assurances from their suppliers. If necessary, they must support small and medium-sized enterprises in fulfilling the new obligations. The regulations not only affect the activities of the companies themselves, but also those of their subsidiaries and business partners along the value chain.
Companies that violate the Supply Chain Act must expect various sanctions. Possible sanctions include fines, the amount of which can vary depending on the severity of the violation.In addition, companies can be excluded from the award of public contracts in the event of repeated or serious violations. There are also civil law claims for damages and possible reputational damage.
The text of the law only needs to be published in the EU Official Journal.The EU member states then have a good two years to transpose the new rules into national law.
Link:
Due diligence: MEPs adopt rules for firms on human rights and environment
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