On 21 February, the French National Assembly adopted the law that seeks to oblige France’s largest companies to undertake due diligence in order to prevent human rights violations and environmental damage both at their subsidiaries located abroad and along their sub-contracting and supply chains. It is the first regulatory initiative that goes so far as to make multinational companies accountable for their supply chains. Along with the UK’s Modern Slavery Act, adopted in 2015, this piece of legislation, which has already caught other European governments’ attention, illustrates the growing pressure on multinational companies over respecting fundamental labor rights.
The text intends that French companies employing more than 5,000 staff in France or 10,000 globally will have to draw up ‘reasonable duty of care measures’, which ‘identify the risks and anticipate serious abuse of human rights and fundamental freedoms, personal health and safety, as well as the environment,’ that are a direct or indirect result of its own business activities or the activities of its subsidiaries, sub-contractors, and suppliers with which it has an established business relationship.
In order to comply, companies must implement a due diligence plan, which ‘should be jointly drawn up with the company’s stakeholders and if appropriate as part of the framework of multiparty initiatives within subsidiaries or at a regional level’ which maps out the different risks, and the procedures for regular assessment of subsidiaries, sub-contractors and suppliers. It should also outline relevant action to attenuate the risks and to prevent serious harm, alert mechanisms established in collaboration with the relevant union organizations’ representatives, and a risk notification procedure.
The due diligence plan and reporting on its effective implementation must be published and included in companies’ annual management reports. Firms failing to do so run the risk of up to a maximum fine of 10 million euros.
Companies in breach of their due diligence program obligations may be civilly responsible in the case of harm.
For those promoting the text, it is hoped the new law sets a precedent on a European and global scale. Switzerland is progressing towards introducing a similar law, although question marks remain over its adoption and timing.