BRUSSELS: A new law, expected to come into force later this year, will require at least 6,000 publicly-listed companies in Europe to report on key human rights and environmental issues within their supply chains. This follows a last-minute compromise deal between the EU Council of Ministers and the European Parliament.
However the European Coalition for Corporate Justice (ECCJ) – representing NGOs, consumer groups, trade unions and academics – said it was a "timid step forward" in forcing companies to be more transparent because Germany, the UK and Poland had weakened the proposal.
Nevertheless, for the first time companies will have to explicitly report on environmental, human rights, social, corruption, and diversity issues. Reporting will now cover the policies they have in place to manage not only financial but also environmental and social risks.
The new law will also require companies to identify, prevent, mitigate and account for adverse impacts they may have on workers, communities, and the environment as they relate to the supply chain. Guidelines on how to report water and land use, greenhouse gas emissions and use of materials are expected from the European Commission in the next two years.
ECCJ coordinator Jerome Chaplier said: "This is an important step forward as it means citizens and investors will have access to meaningful information from companies – rather than the selective and often misleading data currently provided. ...This means a listed large oil company will have to report on its oil spills and the health risks from gas flaring for example, or a listed clothing retailer will have to consider risks in its supply chain."
In a related issue, Global Witness, a campaigner for the ban on conflict minerals in the supply chain, said a new proposal by the Commission on responsible sourcing of minerals will not stop companies from financing conflict or human rights abuses.
The Commission has announced voluntary measures that will only apply to companies importing processed and unprocessed minerals into the European market. The proposal covers companies involved in the tin, tantalum, tungsten and gold sectors – widely used in industrial technology and consumer products.
Sophia Pickles from Global Witness commented: "The proposal is tantamount to the EU saying that it's ok for companies to choose not to behave responsibly. This risks undermining the duty states have to protect human rights, which is well-established under international law. The proposal could even be redundant. EU governments have already endorsed voluntary due diligence guidance developed by the Organisation for Economic Co-operation and Development."
Aid and human rights organisations have also expressed disappointment that the proposal is so narrow: "By focusing only on four minerals, the Commission fails to address reports that other natural resources are also fuelling conflict," said Astrid Schrama from PAX. "Our research shows that in Colombia, coal extraction has financed the creation of armed paramilitary groups that have caused the deaths of thousands and has led to the displacement of at least 60,000 people in the mining area of Cesar region."