EU supply chain law clears final hurdle

It is intended to hold large companies accountable if they profit from child or forced labor outside the EU. After the EU Parliament gave its final approval in April, the law will now be published in the EU Official Journal and will come into force. The EU states will then have two years to implement it nationally.

The EU states were only able to agree on a common compromise in March after several attempts – despite resistance from some countries, including Austria. The law did not achieve an overwhelming majority in the EU Parliament either: 374 MPs voted for the proposal, 235 against (19 abstentions). However, the scope of application was significantly restricted. While the agreement between the EU states and the EU Parliament stipulated that the directive should apply to companies with 500 or more employees and a turnover of 150 million euros, it should now only apply to companies with 1,000 or more employees and a turnover of 450 million euros.

• Also read: Supply Chain Act affects voestalpine, KTM, Red Bull

Transition plans

A risk-based approach and transition plans are also planned. Penalties can include, for example, naming a company or imposing fines of up to 5 percent of the company’s global net sales. Larger companies must also draw up a plan to ensure that their business model and strategy are compatible with compliance with the Paris climate goals.

The German and Austrian businesses had spoken out against the regulation. Among other things, they criticized the documentation requirements that were difficult to fulfill. The German government abstained under pressure from the FDP. The Austrian Minister of Economic Affairs Martin Kocher (ÖVP) also did not agree to the proposal. After Italy gave up its opposition, the necessary majority of EU member states was achieved.