“After two and a half years of political negotiation, the European Union has finally adopted the EU Due Diligence legislation,” Whiteley announced. This landmark legislation represents a significant advancement in corporate social responsibility (CSR), transitioning from voluntary initiatives to mandatory, comprehensive due diligence requirements for European companies and their international partners.
Speaking at the second Bangladesh Circular Economy Summit, Ambassador Whiteley explained that the new legislation aims to promote social and environmental justice throughout global supply chains. It applies to EU companies with more than 1,000 employees and an annual global turnover exceeding €450 million, as well as non-EU companies with similar turnover levels within the EU.
“Companies will now be legally accountable for any human rights and environmental violations within their operations, subsidiaries, and supply chains,” he said. The directive must be implemented into the national laws of EU member states and will be enforced in stages, starting in 2027. Companies that fail to comply could face reputational harm through ‘naming and shaming’ and fines up to 5% of their net global turnover.
Additionally, victims or their representatives, such as civil society organizations and trade unions, will be able to file civil liability claims in member state courts to seek compensation. Whiteley highlighted two aspects of the legislation particularly relevant to Bangladesh: the requirement for EU companies to adopt policies addressing human rights and environmental violations in their supply chains, and the inclusion of a comprehensive list of international standards on human rights and the environment that companies must adhere to.
For many companies, CSR is already a core component of their business operations. The new directive reassures these companies that their practices for addressing environmental and human rights issues are adequate. In Bangladesh, companies have been implementing due diligence measures on factory safety since the Rana Plaza incident, through initiatives like the Accord and the RMG Sustainability Council. The EU directive will now require these efforts to extend to broader human rights and environmental standards.
The due diligence directive will also indirectly foster a better compliance environment for national social and environmental regulations. Another significant aspect of the EU legislation is the requirement for companies to develop a climate transition plan. This plan should align their business models with the Paris Agreement’s target of limiting global warming to 1.5 degrees Celsius, including specific targets for reducing greenhouse gas emissions and strategies for decarbonizing the value chain.
“This requirement will have a considerable impact on the supply chains of EU companies operating in Bangladesh, compelling local factories to align with their buyers’ climate mitigation strategies,” Whiteley noted.
